First Circuit Tightens Evidentiary Bar for Economic-Loss and Consequential-Damages Awards, and Re-affirms the Narrow “Obstinacy” Standard for Fees

Introduction

In Coco Rico, LLC v. Universal Insurance Company, Nos. 24-1328 & 24-1335 (1st Cir. June 20 2025), the United States Court of Appeals for the First Circuit vacated inflated jury awards for business-interruption and consequential damages awarded after Hurricane María, while upholding a denial of attorneys’ fees and prejudgment interest sought under Puerto Rico’s “obstinacy” rules. The decision, written by Judge Rikelman, squarely addresses three often-litigated post-trial issues: (1) how much evidentiary support a jury must have to exceed a plaintiff’s own quantified economic-loss proof, (2) what quantum of evidence is required to sustain an award of consequential damages predicated on insurer bad faith, and (3) when a party’s litigation conduct in a federal diversity case will be deemed “obstinate” under Puerto Rico Rules of Civil Procedure 44.1(d) and 44.3(b). Coco Rico and Universal each partially won and lost below, leading to cross-appeals on all three issues.

Summary of the Judgment

• The jury awarded (a) $873,000 in business-income & extra-expense (BI & EE) loss (despite the plaintiff’s own expert ceiling of $686,098) and (b) $250,000 in consequential damages for bad-faith delay.
• The district court trimmed the BI & EE award to the policy cap ($750,000) but declined to reduce it further; it also let the consequential award stand and denied Coco Rico’s motion for fees and prejudgment interest.
• The First Circuit reversed:
  • BI & EE must be cut to $686,098 — the highest figure supported by actual evidence.
  • Consequential damages are wiped out completely for want of any record support.
• The court affirmed the denial of fees/interest, holding that Universal’s litigation conduct was not “obstinate.”
• The matter returns to the district court to enter judgment consistent with these directives; each side bears its own appellate costs.

Analysis

Precedents Cited and Their Influence

The panel drew heavily on established First Circuit authority governing excessive economic-damage verdicts:

• Dopp v. Pritzker, 38 F.3d 1239 (1st Cir. 1994) – supplies the “rational appraisal” test: an award must be reduced or set aside if it exceeds any rational estimate supported by record evidence. Coco Rico becomes a modern application tailored to BI & EE claims.
• Koster v. TWA, 181 F.3d 24 (1st Cir. 1999) – confirms deferential abuse-of-discretion review of a trial court’s remittitur denial, but also that deference yields when the verdict “falls outside the broad universe” of possible awards.
• Negrón-Rivera v. Rivera-Claudio, 204 F.3d 287 (1st Cir. 2000) – standard for judgment as a matter of law (Rule 50): verdict cannot stand where reasonable jurors lack an evidentiary basis.
• Correa v. Cruisers, 298 F.3d 13 (1st Cir. 2002); Mejías-Quirós v. Maxxam, 108 F.3d 425 (1st Cir. 1997) – outline Puerto Rico obstinacy doctrine, emphasizing trial-conduct focus.

No binding Puerto Rico Supreme Court precedent was offered on whether bad-faith claims are tort or contract; thus the panel relied on section 3018 as pleaded.

Key Legal Reasoning

1. Economic-Loss (BI & EE) Award
   The jury may accept the highest figure “for which there is adequate evidentiary support,” but it cannot exceed the plaintiff’s own proof. Coco Rico’s expert fixation at $686,098, plus repeated concessions by counsel and witnesses, capped the rational ceiling. Two e-mails (Exhibits U and Y) touting a $900k “claim” lacked granular financial data and could not enlarge the universe of admissible proof.
2. Consequential Damages
   To collect post-restoration losses under Puerto Rico Civil Code § 3018, the insured had to present specific evidence. The supposed testimony of a $130k/year loss existed only in counsel’s argument, not in the transcript. Hahn’s generalized belief that “it costs hundreds of thousands” was too speculative. Verdict therefore vacated under Rule 50(b).
3. Fees & Pre-Judgment Interest (“Obstinacy”)
   Puerto Rico Rules 44.1(d)/44.3(b) are substantive under Erie. “Obstinacy” centers on conduct during litigation, not claims-handling pre-suit. Examples: denying undisputed facts, raising baseless defenses, or needlessly prolonging the case. Here, Universal:
   • Had arguable factual grounds for every denial and defense (e.g., diversity citizenship, resumption of operations in Florida);
   • Presented some evidence for its “zero” position (forensic accountant Rivera);
   • Did not multiply proceedings with sanctionable tactics.
   Hence, refusal to impose fees/interest was within the court’s “ample discretion.” The appellate court could infer the lower court accepted Universal’s arguments even without express findings.

Impact of the Decision

• Damages Litigation – Plaintiffs in the First Circuit must match any dollar figure they request with concrete, record-based computations. Inflated claims, even if once asserted in an insurance proof-of-loss form, will not sustain larger verdicts.
• Insurer Bad-Faith Suits – Consequential-damage theories in Puerto Rico now demand robust proof paralleling the insured’s core loss calculations. Mere “delay” + generalized hardship rhetoric is insufficient.
• Attorneys’ Fees Strategy – The opinion re-confirms that “obstinacy” assesses only in-court behavior. Parties seeking fees must build a contemporaneous record (motions to compel, sanction requests, etc.) documenting the opponent’s obstinacy.
• Trial Practice – Counsel should beware that statements in opening/closing, or figures conjured during argument, cannot become evidence. The decision underscores the importance of transcripts matching counsel’s representations.

Complex Concepts Simplified

• Rule 50(b) (Renewed Judgment as a Matter of Law) – A post-verdict motion arguing that even viewing the evidence favorably to the winner, no reasonable jury could have reached its conclusion.
• Business Income & Extra Expense (BI & EE) – Insurance that reimburses profits the business would have earned plus extra costs incurred while operations are suspended.
• Period of Restoration – Contract-defined span from damage date until property should be repaired with “reasonable speed.” Losses after that window require a separate legal basis.
• Consequential Damages – Extra losses flowing from a breach (here, insurer’s late payment) that are not the direct contractual benefit, e.g., lost opportunities, reputational harm, extended payroll.
• Obstinacy (Puerto Rico) – A party’s unreasonable stubbornness during litigation that forces needless expense. Focuses on conduct within the lawsuit, not the underlying dispute.

Conclusion

Coco Rico solidifies three guideposts for litigants in the First Circuit: (1) juries may not step beyond the quantitative evidence offered on economic loss; (2) consequential damages require the same evidentiary rigor as primary loss claims; and (3) Puerto Rico’s fee-shifting “obstinacy” doctrine remains a narrow, conduct-based sanction focusing exclusively on courtroom behavior. For insurers, the ruling reins in exposure to speculative add-ons; for insureds, it signals an evidentiary burden they must meet with meticulous financial records and expert analysis. Future district courts now have a clarified blueprint for trimming excessive verdicts and for distinguishing between aggressive yet permissible litigation tactics and true obstinacy meriting fee awards.