## Facts

- Ferrara & DiMercurio, Inc. (F&D) owned the commercial fishing vessel F/V TWO FRIENDS.
- On July 3, 1993, the vessel was destroyed by fire while berthed in Gloucester, Massachusetts.
- F&D sought coverage under a marine hull policy issued by St. Paul Mercury Insurance Company (St. Paul).
- St. Paul denied the claim after concluding the fire was caused by arson and fell within a policy exclusion (as construed in an earlier appeal, *Ferrara I*).
- F&D sued in federal court for breach of contract and for “bad faith”/unfair practices under Massachusetts General Laws chapter 93A.
- The first trial ended in a hung jury. In the second trial, the district court entered judgment for F&D after St. Paul’s case; the First Circuit reversed and remanded for a third trial (*Ferrara I*).
- At the third trial, the cause and origin of the fire were contested largely through competing fire-investigation witnesses:
  - St. Paul presented John Malcolm, who testified the fire was deliberately set and had three points of origin.
  - F&D presented Paul Sullivan, who testified the fire began accidentally from an electrical source.
- Malcolm had investigated the vessel shortly after the fire, taking measurements and photographs and preparing a report focused on the electrical system. He also worked side-by-side at the scene with another investigator, Fred O’Donnell, who later died before the third trial.
- Preparing to testify alone at the third trial, Malcolm reviewed materials including O’Donnell’s report and a local fire department report.
- The jury returned a verdict for St. Paul, finding St. Paul proved the fire resulted from arson by either F&D or a third party.
- After trial, F&D sought sanctions based on an alleged violation of a discovery protective order and pointed to a reference to the protective order made in front of the jury; the district court struck the reference and instructed the jury to disregard it.

## Issues

1. Whether the district court abused its discretion by allowing St. Paul’s fire investigator, John Malcolm, to testify about the fire’s cause and origin when some of the information he considered came from joint work with the deceased investigator and from reviewing others’ reports, and when F&D argued St. Paul had not properly disclosed that Malcolm would offer cause-and-origin opinions.
2. Whether the district court abused its discretion by admitting evidence of F&D’s financial condition to show a motive for arson.
3. Whether the district court erred by denying a new trial or sanctions based on an alleged protective-order violation and a reference to the protective order in the jury’s presence.

## Decision

- The First Circuit affirmed the judgment for St. Paul.
- The court held the district court did not abuse its discretion in permitting Malcolm’s cause-and-origin testimony; Malcolm had firsthand involvement at the fire scene and his opinions were not merely a repetition of the deceased investigator’s conclusions.
- The court held the district court acted within its discretion in handling the disclosure and scope of Malcolm’s testimony, and any complaints about reliance on other materials went primarily to weight for the jury rather than admissibility.
- The court held the admission of evidence about F&D’s financial difficulties was permissible as proof of motive and opportunity in an arson/coverage dispute and was not unfairly prejudicial under Rule 403.
- The court upheld the denial of sanctions and trial relief related to the protective order, relying on the trial court’s prompt curative steps (striking the testimony and instructing the jury) and the lack of a showing of meaningful prejudice or intentional misconduct.

## Legal Principles

- A trial court’s evidentiary rulings, including rulings on opinion testimony and Rule 403 balancing, are reviewed for abuse of discretion; reversal generally requires a showing of prejudice affecting substantial rights.
- An expert witness may base opinions on firsthand observations and on information of a type reasonably relied upon in the field (including collaborative scene work and review of reports), so long as the witness’s testimony reflects the witness’s own analysis and is not simply a conduit for another person’s opinions.
- In civil arson insurance disputes, evidence of the insured’s financial condition may be admitted as circumstantial proof of motive and opportunity when its probative value is not substantially outweighed by unfair prejudice.
- References to discovery protections or orders do not automatically require a new trial; striking the testimony and giving a curative instruction can remedy potential harm absent a concrete showing that the jury was improperly influenced.
- After an earlier appellate decision resolves the governing policy interpretation and sufficiency questions, the later appeal focuses on whether the subsequent trial was conducted fairly and within the trial court’s discretion.

## Conclusion

The First Circuit affirmed a third-trial defense verdict for St. Paul in a marine hull fire-loss case, holding that the district court acted within its discretion in admitting St. Paul’s fire-cause testimony and F&D’s financial-motive evidence, and that no sanctions or new trial were warranted where an improper protective-order reference was promptly cured and F&D failed to show resulting prejudice.


Ferrara & DiMercurio v. St. Paul Mercury Insurance Company, 240 F.3d 1 (2001)