           IN THE UNITED STATES COURT OF APPEALS
                    FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                    Fifth Circuit

                                                 FILED
                                                                           March 11, 2009

                                     No. 08-30092                      Charles R. Fulbruge III
                                consolidated w/08-30169                        Clerk



JUDY KODRIN; MICHAEL KODRIN

                                                   Plaintiffs - Appellees
v.

STATE FARM FIRE AND CASUALTY COMPANY

                                                   Defendant - Appellant




                   Appeal from the United States District Court
                       for the Eastern District of Louisiana
                             USDC No. 2:06-CV-8180


Before KING, HIGGINBOTHAM, and WIENER, Circuit Judges.
PER CURIAM:*
       The home of Plaintiffs-Appellees Judy and Michael Kodrin in Port
Sulphur, Louisiana, was demolished in Hurricane Katrina.                      The Kodrins’
insurer, Defendant-Appellant State Farm Fire and Casualty Co. (“State Farm”),
denied coverage on their Katrina-related claim, asserting that the damage was
excluded from coverage under the policy because it was caused by flooding rather
than wind. The Kodrins sued State Farm for coverage. A jury sided with the


       *
         Pursuant to 5TH CIR . R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR .
R. 47.5.4.
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Kodrins and awarded them $356,318 in damages and penalties, plus attorneys’
fees and costs. State Farm appeals the judgment. We affirm in part and vacate
in part.
                       I. FACTS AND PROCEEDINGS
      When Judy and Michael Kodrin returned to their Port Sulphur, Louisiana,
home following Hurricane Katrina in 2005, they found nothing but a concrete
slab and debris. Their home and its contents were gone. All that remained was
their damaged roof, which lay about 1,000 feet away. Many of the homes in their
neighborhood had been separated from their foundations by floodwaters, carried
off, then collected together in one area.      These other residences had been
severely damaged, but remained relatively intact, in contrast to the Kodrins’
home, which had been reduced to rubble. Because the damage to their home
appeared different from that suffered by the other homes in the neighborhood,
the Kodrins concluded that theirs was destroyed by something other than the
massive flood that occurred when a nearby levee overtopped. They speculated
that a tornado had been spawned during the storm and had demolished their
house before the floodwaters arrived.
      The Kodrins held homeowner’s and flood insurance policies issued by State
Farm.1 The limits of coverage under the homeowner’s policy were:
             Coverage A (Building, i.e., home) – $105,000
             Coverage B (Contents) – $78,750
             Coverage C (Outbuildings) – $10,500
The coverage limit under the flood policy was $76,000.
      The Kodrins notified State Farm of their homeowner’s claim for wind
damage on September 17, 2005. A State Farm adjuster inspected the property
in mid-October and told the Kodrins that he would inform their insurer that they


      1
       The flood policy was issued through State Farm by the National Flood Insurance
Program.

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intended to make a claim for wind damage. State Farm sent a second adjuster
to the property on November 26, 2005, the day after the remaining debris had
been cleared away. In the meantime, State Farm was administering the payout
on the flood policy.2 The Kodrins settled that claim in December for the policy
limit. At about the same time, State Farm had denied the wind damage claims
that the Kodrins had submitted under the homeowner’s policy.
       The Kodrins filed suit in August 2006 claiming, inter alia, (1) breach of
contract; (2) bad faith under Louisiana Revised Statute § 22:1220 (“R.S.
22:1220”) for failure to adjust claims fairly and promptly and for failure to make
reasonable efforts to settle the claims; and (3) arbitrary and capricious failure
to make payment in violation of Louisiana Revised Statute § 22:658 (“R.S.
22:658”). State Farm removed the case to the Federal District Court for the
Eastern District of Louisiana on the basis of diversity of citizenship.3
       Following a two-day trial in November 2007, a jury found that wind was
the cause of the damage to the home and its contents. The jury awarded the
Kodrins a total of $196,581, essentially the maximum aggregate amount under
the applicable classes of homeowner’s coverage, plus $9,737 for additional living
expenses,4 $25,000 each to Judy and Michael Kodrin for State Farm’s arbitrary
and capricious failure to pay within 60 days, and $50,000 each as penalties for
that failure, finding State Farm liable under both R.S. 22:658 and 22:1220. The
district court also entered judgment in favor of the Kodrins for attorneys’ fees



       2
        Mr. Kodrin testified that State Farm tried to get him to settle the flood policy over the
phone, even before sending an adjuster to inspect the property. The Kodrins said they
hesitated to settle the flood claim for fear it would jeopardize their claim for wind damage.
       3
           State Farm is a citizen of Illinois. The Kodrins are citizens of Louisiana.
       4
        The total is slightly higher than the combined coverage limits. We have not divined
the reason for this, but as State Farm does not raise the issue, we do not quibble with it.

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and costs in the amount of $139,234 pursuant to R.S. 22:658.5 State Farm
moved for judgment as a matter of law or to alter and amend the judgments,
which motions were denied. State Farm timely filed its notice of appeal.
                                      II. ANALYSIS
      State Farm raises a number of issues on appeal, each of which falls into
either of two general claims of error: (1) The district court improperly instructed
the jury, and (2) the Kodrins failed to offer legally sufficient evidence for a jury
to find that State Farm acted in bad faith. In a diversity suit, we apply the
substantive law of the forum state, in this case, Louisiana.6
A. Jury Instructions
      State Farm contends that the jury instructions on the question of wind
damage were erroneous because the district court failed to instruct the jury that
(1) the Kodrins could recover only if their damage was caused exclusively by
wind, and (2) the Kodrins had the burden of proving that the damage to the
contents of their home was caused by wind.
      1. Standard of Review
      We review for abuse of discretion whether a jury was properly instructed.7
“In diversity actions, a federal court’s jury instructions must accurately describe
the applicable state substantive law, but the district court has wide discretion
in formulating the charge.”8 We will reverse “only if the charge as a whole
creates a substantial doubt as to whether the jury has been properly guided in




      5
          The $150,000 in damages and penalties were awarded under R.S. 22:1220.
      6
          Hyde v. Hoffman-La Roche, Inc., 511 F.3d 506, 510 (5th Cir. 2007).
      7
          Baker v. Canadian Nat’l/Ill. Cent. R.R., 536 F.3d 357, 363-64 (5th Cir. 2008).
      8
          Id. at 364.

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its deliberations.” 9 Even if we find error, “we will not reverse if we determine,
based on the entire record, that the challenged instruction could not have
affected the outcome of the case.”10
       2. Exclusivity of Wind Damage
       The Kodrins’ homeowner’s policy insured their home and its contents
against wind damage, but did not provide coverage for damage caused by
flooding. Policies of this sort are common and have been much-litigated in the
wake of Hurricane Katrina and other recent storms. We have held that a
homeowner may recover under such a policy only when wind is the exclusive
cause of the damage.11 The Kodrins insist that Louisiana courts do not read the
provision so restrictively; rather, that they hold that coverage under a
homeowner’s policy is available if flooding is not the “proximate or efficient
cause” of the damage.12 We acknowledge the existence of tension between the
relevant case law of this circuit and that of the Louisiana intermediate courts,

       9
           Id. at 363-64.
       10
         Wright v. Ford Motor Co., 508 F.3d 263, 268 (5th Cir. 2007) (internal quotation marks
and citation omitted).
       11
          Bilbe v. Belsom, 530 F.3d 314, 316-17 (5th Cir. 2008) (applying Leonard v.
Nationwide Mutual Insurance Co., 499 F.3d 419, 430 (5th Cir. 2007), to Louisiana law). The
policy provision here at issue — called an “anti-concurrent cause” provision — bars recovery
when wind and water act together or in sequence. Id.
       12
          Landry v. La. Citizens Prop. Ins. Co., 964 So. 2d 463, 477 (La. App. 3d Cir. 2007)
(“[T]he fact that flood waters contributed to the damage or washes the property away does not
compel a finding that flood damage was the efficient or proximate cause of the total loss.”),
vacated in part on other grounds, 983 So. 2d 66 (La. 2008); see also Best v. State Farm Fire &
Cas. Co., 969 So. 2d 671, 675 (La. App. 4th Cir. 2007) (quoting 11 COUCH ON INSURANCE 3d,
§ 153:17). The Kodrins reliance on Roach-Strayhan-Holland Post No. 20, American Legion
Club v. Continental Insurance Co. of New York is misplaced. 112 So. 2d 680 (La. 1959). The
case interpreted a policy providing wind damage coverage following a windstorm and rejected
consideration of the contribution of other factors, such as building decay, to the damage. Id.
at 683. Although the policy contained a water damage exclusion, the exclusion was not at
issue, indeed the court noted that the windstorm policy was “not otherwise limited or defined.”
Id.

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but we are bound by our own precedent.13 Moreover, in this case, we view the
distinction as being of little import. First, the divergent interpretations of this
court and the Louisiana courts matter mainly when two forces, such as flood and
wind, act together to cause damage. Here, there is no role for such a middle
ground:      Neither party maintained that wind and flood acted in some
combination, only that one or the other caused all the damage. As a result, the
jury’s only options were 100 percent wind or 100 percent flood.14 It was not
presented with facts on which to determine that some combination of the two
forces caused the damage, and it was not asked to decide on such a basis.
       Second, our holding in Bilbe creates a stricter rule than the Louisiana
appellate court’s Landry holding and thus is more favorable to State Farm —
indeed, State Farm asserts that under Bilbe we must reverse. When we apply
Bilbe, however, the jury instructions survive, so that even if we could consider
Landry, we would not need to reach the issue.                  Thus, following Bilbe, the
Kodrins could recover under their homeowner’s policy only if the jury should find
that wind alone, and not flooding at all, caused their loss. Conversely, if the jury




       13
          See, e.g., FDIC v. Abraham, 137 F.3d 264, 268-69 (5th Cir. 1998) (addressing instance
of intervening contrary state appellate court decisions); see also First Nat’l Bank of Durant v.
Trans Terra Corp. Int’l, 142 F.3d 802, 809 (5th Cir. 1998) (decision of state intermediate court
is a “datum for ascertaining state law,” which must be considered by, but is not binding on this
court). In this case, Bilbe was decided in 2008 after both Landry and Best.
       14
          State Farm contends that the jury was left to contemplate that a wind-driven storm
surge might have destroyed the home and, thus, to determine incorrectly that wind coverage
was permissible. See, e.g., Bilbe, 530 F.3d at 317 n.3 (“The classic example of such a concurrent
wind-water peril is the storm-surge flooding that follows on the heels of a hurricane’s
landfall.”). In Bilbe, the plaintiff sought coverage under her homeowner’s policy based on the
contention that Hurricane Katrina’s winds drove the storm surge that inundated her home.
Finding “storm surge” to be essentially synonymous with “flooding,” the court affirmed the
denial of coverage. Id. at 316. In the instant case, we find no merit in State Farm’s assertion:
The Kodrins maintained that a pre-flood tornado, not a wind-driven storm surge, destroyed
their home.

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should find that flooding destroyed the home, the policy’s exclusionary clause
would bar recovery.15
       State Farm claims that the wording of the jury instructions vitiated the
effect of the policy’s flood exclusion by failing to make clear the all-or-nothing
requirement of the homeowner’s policy — as outlined in Bilbe. After stating that
the Kodrins had the burden to prove that their claim was covered by the policy,
the district court instructed the jury:
              State Farm argues that it properly refused payment to the
              Kodrins based on its determination that the damage to
              plaintiffs’ property was caused by water, which falls under
              the flood exclusion in plaintiffs’ homeowner’s policy, and
              not by wind. Under Louisiana law, State Farm bears the
              burden of proving the applicability of any exclusionary
              clause contained in its insurance policy by a
              preponderance of the evidence. If you find that State Farm
              has met its burden of proving by a preponderance of the
              evidence that the property damage claimed by the Kodrins
              was caused by a non-covered peril, such as flooding, then
              State Farm is not liable to plaintiff for any damages under
              the policy.

State Farm complains that this instruction did not allow the jury to reach a
third conclusion, viz., that both wind and flood contributed to the damage and
that, if this were the case, the Kodrins could not recover at all.
       We are satisfied that the jury instruction correctly and unambiguously
recited the law applicable in this case: If flood caused the damage “then State
Farm is not liable.” Again, neither State Farm nor the Kodrins contended at
trial that a combination of wind and flood destroyed the Kodrins’ home. State



       15
        It is important to distinguish between this dispute over which force totally destroyed
a home and cases in which the parties disagree as to the causes of various damaged elements
of a home. Distinct elements of damage would have to be considered separately. Flood-
damaged carpets, for example, would not bar recovery for a wind-damaged roof.

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Farm insisted that flooding was the sole cause; the Kodrins were equally
insistent that wind was the sole cause. The district court correctly observed that
a complicated instruction addressing the combination of the two forces would be
likely to do more harm than good, causing confusion by attempting to address
a fact pattern not before the jury. As the parties claimed only that either wind
alone or flood alone destroyed the home, it is they, not the court, who left the
jury no way to find that the damage was caused by some combination of the two.
      3. Jury Interrogatories
      State Farm also complains that the jury interrogatories compounded the
problem by asking only about wind. The first interrogatory asked: “Do you find
by a preponderance of the evidence that Mrs. Kodrin sustained wind damage to
her home?” The ensuing questions regarding other structures on the property
and the contents of the home were worded identically.16 If the jury answered the
first questions for each category of property in the affirmative, the next
interrogatory asked: “What amount does State Farm owe Mr. and/or Mrs. Kodrin
for wind loss to their property?” The verdict form divided this question by type
of property: dwelling, other structures, dwelling contents, and additional living
expenses.
      We can see that, if viewed in a vacuum, the interrogatories might be
confusing, but we are comfortable that on the basis of the discrete facts of this
case and the way it was tried by the parties, they were not. First, as already
discussed, neither side presented its case on a theory that wind was a
contributing factor; wind either did or did not cause the damage entirely,
depending on which party’s version was accepted by the jury. This issue was


      16
         They asked: “Do you find by a preponderance of the evidence that Mrs. Kodrin
sustained wind damage to any other structure on her property?” and “Do you find by a
preponderance of the evidence that Mr. and Mrs. Kodrin sustained wind damage to the
contents of their home?”

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central during the trial: State Farm argued vigorously that flooding caused the
damage and for that reason, the Kodrins could not recover; the Kodrins argued
the reverse. The jury was never presented with facts that would permit it to find
that the wind caused some but less than all the damage or that flood caused
some but less than all the damage, which is the concern State Farm raises.
Additionally, the jury charge itself made clear that if flooding caused the
damage, recovery was barred.                 As a result, the jury could answer the
interrogatories affirmatively and find in favor of the Kodrins if — but only if —
it found that flooding did not contribute to the destruction of the Kodrins’
property. We always presume that jurors follow the instructions given by the
trial court,17 and State Farm offers no argument to persuade us to abandon this
well-established presumption here.
        The district court has broad discretion in formulating jury instructions,
and in this case offered a sound rationale for its choice. State Farm must
demonstrate that the language creates “substantial and ineradicable doubt
whether the jury has been properly guided in its deliberations.” 18 Instead, its
argument rests on the contention that the district court omitted an instruction
regarding an argument not made by either side at trial. “In reviewing a trial
judge’s instruction to a jury, we must look at the charge as a whole.” 19 When
taken        together    and    in   context, the      district   court’s   instructions   and
interrogatories amply state the applicable law. As such, the trial court acted
well within its discretion.



        17
          Russell v. Plano Bank & Trust, 130 F.3d 715, 721 (5th Cir. 1997) (quoting United
States v. Fletcher, 121 F.3d 187, 197 (5th Cir. 1997)).
        18
          FDIC v. Mijalis, 15 F.3d 1314, 1318 (5th Cir. 1994) (internal quotation marks and
citation omitted).
        19
             Farace v. Indep. Fire Ins. Co., 699 F.2d 204, 207 (5th Cir. 1983).

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       4. Burden of proof
       Even though State Farm had the burden of proof that the damage to the
Kodrins’ home was excluded from coverage, the Kodrins had the burden of proof
at all times with respect to coverage of their contents.                 Unlike the policy
provision for coverage of the structure, the provision for coverage of its contents
was on a so-called “named-peril basis,” meaning that the contents of the Kodrins’
home were covered only if they were damaged by an enumerated cause.
“Windstorm or hail” were enumerated causes; flooding was not. This contrasts
with the coverage provision for the Kodrins’ home itself which was covered
unless it was damaged by an enumerated exclusion, of which flooding was one.
A named-peril provision requires the policyholder to prove that the claim is
covered. Thus, the Kodrins had the burden of proof that the damage to or loss
of the contents of their home was caused by wind.20
       The district court instructed the jury that the Kodrins had the burden of
proving that their claims were covered. Specifically, the jury charge included
four individual elements that the Kodrins had to prove:
                1) That a valid enforceable contract existed between the
                parties; 2) That the claim for damage being made under
                the policy is covered by the policy; 3) The amount of the
                claim for damages under the contract; and 4) that State
                Farm breached the policy by failing to pay a covered
                claim.21

The district court also instructed the jury that State Farm had the burden to
prove the applicability of the exclusionary clause. State Farm protests that the
district court did not provide a separate instruction regarding the burden of

       20
          See, e.g., Best v. State Farm Fire & Cas. Co., 969 So. 2d 671, 675 (La. App. 4th Cir.
2007) (quoting Carriere v. Triangle Auto Serv., 340 So. 2d 665, 666 (La. App. 4th Cir. 1976));
see also Opera Boats, Inc. v. La Reunion Française, 893 F.2d 103, 105 (5th Cir. 1990).
       21
            Emphasis added.

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proof for the contents. Its argument appears to assume that the jury would
interpret the instruction as to the exclusionary clause to mean that State Farm
had the burden of proof across the boards.
       The language of the charge is plain, and State Farm’s suggested
instruction would be largely redundant. The district court instructed the jury
in detail that the Kodrins had the burden of proving coverage and that this
burden only shifted with respect to the exclusionary clause.22 (The jurors had
the policy in front of them.) As no exclusionary clause applied to the contents
provision, the burden of proof obviously remained on the Kodrins.                         The
interrogatories then separated out each of the categories of covered property so
that the jury had to find with specificity that the cause of damage to each was
wind if the Kodrins were to prevail.
       The interrogatory relevant to contents asked: “Do you find by a
preponderance of the evidence that Mr. and Mrs. Kodrin sustained wind damage
to the contents of their home?” If the jury instruction left any doubt as to the
burden of proof of the cause of contents damage or loss, this interrogatory made
perfectly clear that, to recover, the Kodrins had to prove wind damage to their
contents.23 Indeed, the entirety of the Kodrins’ position at trial was that wind,

       22
         State Farm conflates this case with those in which plaintiffs proved only that
damage was caused by a hurricane and insisted that was sufficient proof to bring a claim
within coverage of a homeowner’s policy. See, e.g., Broussard v. State Farm Fire & Cas. Co.,
523 F.3d 618, 624-25 (5th Cir. 2008). In Broussard, the plaintiff claimed to have fulfilled his
burden by proving, without more, that the damage to his personal property resulted from
Hurricane Katrina. We held that the plaintiff had to go further and prove that the damage
was caused by a named peril, i.e., wind. Id. Broussard is inapposite to the instant case
because there is no question that here the jury was instructed that the Kodrins had to do more
than demonstrate the claimed damage was caused by a hurricane.
       23
           We construe the jury charge and interrogatories as a whole. Baker v. Canadian
Nat’l/Ill. Cent. R.R., 536 F.3d 357, 363 (5th Cir. 2008); Consol. Cigar Co. v. Tex. Commerce
Bank, 749 F.2d 1169, 1173 (5th Cir. 1985) (“[T]he test is not whether the charge was faultless
in every particular but whether the jury was misled in any way and whether it had
understanding of [the] issues and its duty to determine [the] issues.”).

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not flooding, caused every bit of their damage. There is no basis on which the
jury could have thought that State Farm had the burden of proof with respect
to that provision. The instruction properly placed the burden on the Kodrins for
proving coverage as the result of wind damage, and there it remained with the
sole exception of the exclusionary clause that had no applicability to contents.
Thus, to hold otherwise would require not only abandoning the presumption that
jurors follow instructions, but also assuming, with no evidence or basis
whatsoever, that these jurors acted in direct contravention to the charge given.
B. Bad Faith
       1. Standard of Review
       We review a district court’s denial of a motion for judgment as a matter of
law de novo and apply the same standards as the district court.24 We construe
the facts and draw all inferences in favor of the non-moving party, here, the
Kodrins. We will reverse only if “there is no legally sufficient evidentiary basis
for a reasonable jury to find for a party.” 25 Although our review is de novo, we
afford “great deference” to the jury’s verdict.26
       2. Analysis
       Under Louisiana law, an insurer owes its policyholder a duty of good faith
in settling claims.27 Failure to pay a claim within 30 days of being presented
with satisfactory proof of loss is a breach of the duty if it is “arbitrary, capricious,
or without probable cause.” 28 In Louisiana, such a breach exposes the insurer

       24
            Baker, 536 F.3d at 362.
       25
            Piñeda v. United Parcel Serv., Inc., 360 F.3d 483, 486 (5th Cir. 2004).
       26
            Id.
       27
       L     A.   REV . STAT . § 22:1220 (2007).
       28
      L A . REV . STAT . § 22:658(B)(1) (2007). Under R.S. 22:658(B)(1) “[f]ailure to make such
payment within thirty days after receipt of such satisfactory written proofs and demand

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to liability for damages and discretionary penalties under R.S. 22:1220 or to
penalties and attorneys’ fees under R.S. 22:658.29 R.S. 22:1220 and 22:658 are
penal in nature and must be construed strictly.30
       The insured has the burden of proving that the insurer acted in bad faith.31
Under the applicable statutes, “arbitrary and capricious” means “vexatiously,”
as in a “vexatious refusal to pay” or a refusal to pay without reason or
justification.32     An insurer does not act arbitrarily or capriciously when its
refusal to pay a claim is based on a genuine dispute over coverage or the amount
of the loss.33
       The only evidence that the Kodrins offered to demonstrate that this denial
was in bad faith is the fact of the denial itself and their expert’s testimony that
wind actually caused the damage to the home. This is evidence that State Farm
was wrong about the cause of damage, but without more, it is not evidence of bad
faith. An insurer cannot be held to have acted in bad faith simply because it




therefor . . . when such failure is found to be arbitrary, capricious, or without probable cause,
shall subject the insurer to a penalty . . . as well as reasonable attorney fees and costs.” An
insurer is liable under R.S. 22:1220(B)(5) for “failing to pay the amount of any claim due any
person insured by the contract within sixty days after receipt of satisfactory proof of loss from
the claimant when such failure is arbitrary, capricious, or without probable cause.” Emphasis
added.
       29
        A plaintiff may get penalties under only one of the two statutes, whichever is higher,
although he may get attorneys’ fees under R.S. 22:658 if he is awarded penalties under R.S.
22:1220. Calogero v. Safeway Ins. Co. of La., 753 So. 2d 170, 174 (La. 2000).
       30
            Sher v. Lafayette Ins. Co., 988 So. 2d 186, 206 (La. 2008).
       31
            Reed v. State Farm Mut. Auto Ins. Co., 857 So. 2d 1012, 1021 (La. 2008).
       32
            Id.
       33
            Id.; see Saavedra v. Murphy Oil U.S.A., Inc., 930 F.2d 1104, 1111 (5th Cir. 1991).

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eventually turned out to be wrong about the cause of the damage.34 “Where
there is a serious dispute as to the nature of the loss, thus leaving the question
of coverage in doubt, the insurer’s refusal to pay the claim is not arbitrary,
capricious or without probable cause.” 35 Instead, the Kodrins had the burden of
proving that State Farm withheld payment unjustifiably and without cause, and
they failed to do so. For example, the Kodrins offered no evidence that State
Farm believed that wind was likely the cause of the damage but nevertheless
withheld payment.
       State Farm denied payment to the Kodrins under their homeowner’s policy
on its determination that the home and its contents were destroyed by the storm
surge (i.e., flooding), an excluded cause of loss.36 State Farm declared that it
determined flooding was the more likely cause of the damage to the home
because (1) the Kodrins’ neighborhood was inundated when a levee was
overtopped during Hurricane Katrina, (2) the Kodrins’ home was just one house
away from that levee, and (3) many other houses in the area were lifted off their
foundations and destroyed by the floodwaters.                    The Kodrins themselves
acknowledged that their claimed wind damage to their home was unusual in
their neighborhood, advancing that a tornado must have caused the damage as
their speculation why their home was the only one in the area destroyed by
wind, not flooding. On these facts, we perceive no probative evidence that State




       34
          Icklone v. Travelers Indem. Co., 345 So. 2d 202, 203 (La. App. 3d Cir. 1977)
(“Penalties may not be assessed merely because the insurer is the unsuccessful litigant in a
lawsuit.”).
       35
         Id. At least one Louisiana court has held that when the cause of damage is hotly
contested at trial this is evidence that the insurer did not act in bad faith. Block v. St. Paul
Fire & Marine Ins. Co., 742 So. 2d 746, 755 (La. App. 2d Cir. 1999).
       36
            See, Bilbe v. Belsom, 530 F.3d 314, 317 (5th Cir. 2008).

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Farm acted in bad faith. State Farm’s refusal to pay was with reason,37 even if
the jury ultimately rejected that reason.38 The Kodrins have failed to prove
otherwise; they essentially ask this court to find bad faith any time an insurer
denies coverage and a jury disagrees. This would unduly pressure insurers to
pay out claims that they have reason to believe lie outside the scope of coverage,
solely to avoid penalties later. Such a rule would pervert the presumption that
insurers act in good faith unless the insured proves bad faith, and this is
foreclosed by Louisiana law.39
       Awards and penalties under R.S. 22:1220 and 22:658, including damages
awarded under R.S. 22:1220 for mental anguish, require that the insurer be
proved to have acted arbitrarily and capriciously in violation of these statutes.
As we hold that, as a matter of law, the Kodrins failed to bear their burden of
proving that State Farm acted in bad faith, we vacate the district court’s awards
of penalties and damages under R.S. 22:1220 and its award of attorneys’ fees
under R.S. 22:658.
                                  III. CONCLUSION
       We affirm the jury’s finding of coverage and its award of damages for the
loss of the Kodrins’ home and its contents under the homeowner’s policy. We
vacate that portion of the court’s judgment awarding penalties, damages, and


       37
         Molony v. USAA Prop. & Cas. Ins. Co., 708 So. 2d 1220, 1226 (La. App. 4th Cir. 1998)
(insurer’s refusal to pay is not arbitrary and capricious “if there is a reasonable dispute
between the insurer and insured as to the amount of a loss.”). In this case, the dispute was
over the all-or-nothing cause of the loss, not over some combined cause.
       38
         A determination of whether an insurer acted in good faith is based on the information
known to the insurer at the time it refused payment. La. Bag Co., Inc. v. Audubon Indem. Co.,
___ So. 2d ___, 2008 WL 5146674, at *7 (La. 2008).
       39
          We caution insurers, however, that simply denying coverage on the basis that
damage was caused by an excluded peril is not a route to avoiding R.S. 22:1220 and 22:658
penalties and fees. We decide this case on the Kodrins’ failure to present evidence legally
sufficient to prove bad faith.

                                             15
                                No. 08-30092
                           consolidated w/08-30169

attorneys’ fees under R.S. 22:1220 and 22:658 resulting from the jury’s finding
of bad faith.   We therefore remand this case to the district court with
instructions to enter a revised judgment consistent with this opinion.
AFFIRMED in part, VACATED in part, and REMANDED for entry of judgment
in accordance herewith.




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