                  UNITED STATES COURT OF APPEALS
                       For the Fifth Circuit

                   ___________________________

                          No. 94-40648
                   ___________________________


              NATIONAL UNION FIRE INSURANCE COMPANY
                       OF PITTSBURGH, PA.,

Plaintiff-Consolidated-Counter-Claimant-Appellant/Cross-Appellee,

                              VERSUS


                    CHARLES F. CAGLE, ET AL.,

Defendants-Consolidated    Counter-Defendants-Appellees/Cross-
Appellants.
                      * * * * * * * * * *

                    CHARLES F. CAGLE, ET AL.,

Plaintiffs-Counter-Defendants-Appellees-Cross-Appellants,

                              versus

      NATIONAL UNION FIRE INSURANCE CO. OF PITTSBURGH, PA,

Defendant-Counter-Claimant-Appellant-Cross-Appellee.

       ___________________________________________________

          Appeals from the United States District Court
              for the Western District of Louisiana
      ____________________________________________________

                         November 7, 1995
Before JOLLY, DAVIS, and EMILIO M. GARZA, Circuit Judges.

DAVIS, Circuit Judge:

     In this diversity case, the appellant, National Union, appeals

a district court declaratory judgment that appellant's insurance

policy afforded coverage for a loss which was reduced to judgment

in a Louisiana court by appellee, Cagle, et al.   In a cross-appeal,

the appellee challenges the district court's judgment exonerating
National Union from any obligation for penalties.          We affirm the

district court's judgment in all respects.



I.   Facts

       Appellant National Union Fire Insurance Company of Pittsburgh

("National Union") issued directors and officers liability and

corporation reimbursement insurance policies (the "D&O policies")

to First National Bank of Shreveport ("FNB").         Mr. Jess Loyd, Jr.,

was a senior vice-president and supervisor of the agricultural

lending department of FNB for 37 years until his suicide in 1987.

Mr. Loyd was an insured under the D&O policy.         The appellees (the

"Cattlemen") are six families in the cattle ranching business and

were customers of FNB since 1970.          Mr. Loyd handled all of the

Cattlemen's loans and other financial transactions with the bank.

The Cattlemen were persuaded by Mr. Loyd to change their mode of

operation from a traditional cow-calf, low-risk operation into a

speculative, high-risk operation.         Over the years, the Cattlemen

sustained high losses and became more and more dependant on Mr.

Loyd to provide loans to cover their losses.      The Cattlemen alleged

Mr. Loyd took advantage of his position at the bank and their

vulnerability by requiring them to buy cattle and supplies at

inflated prices from third parties who gave kickbacks to Loyd.

       In 1987 and 1988, the Cattlemen filed a series of lawsuits

(the "lender liability suits") in Louisiana state courts against

FNB,   alleging   claims   of   duress,   negligent   misrepresentation,

domination and control, breach of fiduciary duty, and fraud.         The

Succession of Loyd (the "Succession") was named as a co-defendant


                                    2
in   two         of   these   suits.     Concurrently,   in   Spring,    1988,   the

Cattlemen filed a second series of suits against the Succession in

Caddo           Parish   (the   "Caddo   Parish   suits"),    alleging    personal

liability of Mr. Loyd due to fraud and self-profiteering.1                  In the

Caddo Parish suits, the Succession filed third-party claims against

FNB. Mr. John Cox represented FNB in both the lender liability and

Caddo Parish suits.             He notified all insurers, including National

Union, of the claims against FNB and the Succession and forwarded

the insurers copies of the pleadings.

      The National Union policy had three clauses that caused

National Union to pay little attention to this litigation.                  First,

under the policy National Union had no duty to defend either FNB or

the Succession.               As a result National Union's counsel was not

defending either insured.              Second, the policy afforded no coverage

for losses arising from acts of fraud or willful misconduct, as was

alleged in the pleadings.                Finally, the policy had a no-action

clause which, at that time, protected the insurer from a direct

action under the Louisiana Direct Action Statute before a judgment

was rendered against the insured.2




        1
      Under Louisiana law unless the Succession waived venue, the
Cattlemen had to sue the Succession in Caddo Parish where the
Succession had been judicially opened. See La. Code C. Pr. art. 81.
            2
       Subsequently, the Louisiana Supreme Court ruled that the
Direct Action Statute, La. R.S. 22:655, overrides such policy
provisions. Quinlan v. Liberty Bank & Trust Co., 575 So. 2d 336
(La. 1991). In fact, National Union could have been sued under
this ruling in July, 1991, when the Caddo Parish suits were
amended, consolidated and moved to Natchitoches Parish. The Direct
Action Statute, however, gives the Cattlemen the choice of suing
only the insured or both the insured and his insurer.

                                            3
      The Cattlemen settled the lender liability suits against FNB

in   September,    1988,     but   reserved         their    rights    against     the

Succession and FNB's insurers.           As a condition to the settlement,

the Cattlemen agreed to get the Succession to drop the third-party

claims against FNB in the Caddo Parish suits.                  In a letter dated

December 9, 1988, Mr. Cox informed National Union that FNB had

settled its uninsured liability with the Cattlemen, that FNB was no

longer a party in the state court suits, and that the Cattlemen

planned to pursue all insurers.

      In an earlier letter to National Union dated August 24, 1988,

Mr. Cox had reported that the Cattlemen and the Succession had

reached a settlement accommodation which included an obligation of

the Succession to deliver to the Cattlemen all the records of Jess

Loyd, Jr.     Actually, the Succession did not enter into a written

agreement with the Cattlemen until December, 1988, and January,

1989.   In the settlement instrument (termed a "nonrecourse" or

"forbearance"     agreement),      the   Succession         agreed    to   waive   any

objection to the Cattlemen combining all suits in Natchitoches

Parish, to provide relevant information to the Cattlemen without

need for formal discovery, and to dismiss the third-party claims

against FNB. The Cattlemen, in exchange, agreed to seek no further

recovery from the Succession but rather to limit their recovery to

available insurance.       In addition, the parties agreed to limit the

expenditures of the Succession and the Loyd family in defending the

Cattlemen's    claims   at    court.         When   this    agreement      was   made,

National Union had not contacted the Succession, and the Succession

did not inform National Union of the agreement.


                                         4
     In July, 1991, the Cattlemen obtained the necessary orders to

transfer all of their state court actions against the Succession to

Natchitoches Parish.     At that time, the Cattlemen amended their

petitions to delete claims predicated on fraud, duress, and other

intentional acts. Following the amendments, their petitions stated

only claims flowing from negligence and domination and control,

which were not excluded by the terms of National Union's D&O

policy.    On August 29, 1991, Mr. Bobby Gilliam, counsel for the

Succession, notified National Union of the transfer of venue and

sent copies of the amended petitions. National Union received this

letter on October 2, 1991.    At this time, National Union did not

contact Gilliam, but did forward his letter to their counsel,

D'Amato & Lynch. Not hearing from National Union, Mr. Gilliam sent

a second letter on November 10, 1991.   National Union still did not

respond.

     On December 16, 1991, a bench trial was held on the merits of

the Cattlemen's negligence claims against the Succession. National

Union was not informed of the trial date.     On the morning of the

trial, one of Mr. Gilliam's associates appeared for the Succession

and filed an answer, but declined to give opening or closing

statements or to examine witnesses.     The Cattlemen called twelve

fact and three expert witnesses to establish Loyd's negligence and

the Cattlemen's damages. At the conclusion of the trial, the court

awarded the Cattlemen $14,308,397.00, plus interest, costs, and

attorney's fees, and apportioned fault between FNB and Loyd as 10%

and 90%, respectively.       On December 20, 1991, the Cattlemen's




                                  5
counsel forwarded a copy of the judgment to National Union and

demanded payment.

     National Union contacted Mr. Gilliam for the first time in

February, 1992, requesting information about the trial.           National

Union    intervened   in   March,   1992,   to   devolutively   appeal   the

judgment.    The judgment was affirmed by a Louisiana intermediate

appellate court and writs were denied by the Louisiana Supreme

Court.    Cagle v. Loyd, 617 So. 2d 592 (La. App. 3d Cir.), writ

denied, 620 So. 2d 877 (La. 1993).          National Union subsequently

filed an action in state court seeking to nullify the judgment

based on evidence of fraud or ill practices in obtaining the

judgment.    That suit is pending in state district court after a

summary judgment for the Cattlemen was reversed by a Louisiana

appellate court.      National Union Fire Ins. Co. v. Cagle, 649 So. 2d

642 (La. App. 3d Cir. 1994), writ denied, 651 So. 2d 266 (La.

1995).

     In February, 1992, National Union filed a declaratory judgment

action in United States District Court seeking a determination that

the state court judgment was not within the coverage of National

Union's D&O insurance policy.       In March, 1992, the Cattlemen filed

a supplemental petition against National Union in state court

seeking to collect the judgment and to assert a bad-faith claim for

penalties under La.R.S. 22:1220.3 National Union removed this suit


     3
        La. R.S. 22: 1220 provides in relevant part:

     (A) An insurer . . . owes to his insured a duty of good faith
     and fair dealing.    The insurer has an affirmative duty to
     adjust claims fairly and promptly and to make a reasonable
     effort to settle claims with the insured or the claimant, or
     both. Any insured who breaches these duties shall be liable

                                      6
to federal court and the district court consolidated this action

with the declaratory judgment action.          National Union then amended

the declaratory judgment complaint to assert a state law nullity

claim.       The   district   court   stayed   the   nullity   claim   pending

resolution of the parallel state court nullity action.

     Prior to trial, the district court granted summary judgment in

favor of the Cattlemen on a number of National Union's policy

coverage defenses.4      The principal issues that remained to be tried


     for any damages sustained as a result of the breach.

     (B) Any one of the following acts, if knowingly committed or
     performed by an insurer,       constitutes a breach of the
     insurer's duties imposed in Subsection A.
               . . . .
          (5) 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.

     (C) In addition to any general or special damages to which a
     claimant is entitled to for breach of the imposed duty, the
     claimant may be awarded penalties assessed against the insurer
     in an amount not to exceed two times the damages sustained or
     five thousand dollars, whichever is greater.
         4
        The district court found in favor of the Cattlemen and
concluded that coverage would not be precluded under the following
policy provisions:
     1) Provision (7b) which excludes coverage if proper notice of
the claim is not given could not be solely used to destroy coverage
since National Union was informed of the claims, though evidence of
notice might be relevant on the collusion issue.
     2) Provision 4(n) which excludes coverage when the insured is
entitled to indemnification from the company does not apply, since
under the applicable corporation articles of FNB, the Succession
was only entitled to indemnification from FNB to the extent that
the insurance policy did not cover.
     3) Provision 4(a) which excludes coverage when the claim
resulted from a finding of personal profit, gain or advantage does
not apply since the underlying state court proceeding did not make
such a finding.
     4) Provision 4(d) which excludes coverage when the claim is
brought about by fraudulent, dishonest or criminal acts of the
insured also requires an adjudication of fraud in the underlying

                                       7
were whether coverage was defeated by the conduct between the

Cattlemen and the Succession that culminated in the state court

judgment obtained by the Cattlemen and whether National Union

breached a duty of good faith and fair dealing triggering penalties

under the Louisiana statute.    The district court bifurcated the

coverage and bad faith issues for presentation to the jury.    The

jury first found the Cattlemen and Succession did not collude to

obtain the state court judgment.     The jury then found National

Union had breached its duty of good faith and fair dealing and

could be assessed penalties pursuant to La. R.S. 22:1220. National

Union applied for judgment as a matter of law or, alternatively, a

new trial.    The district court upheld the jury's verdict on

coverage but disagreed with the jury's determination of bad faith

and sua sponte granted judgment as a matter of law in favor of

National Union on the penalty issue.    The court entered judgment

accordingly and this appeal followed.



II.   Discussion

      National Union makes a number of arguments on appeal, two of

which merit discussion:5   (1) it was entitled to a new trial based


judgment and thus does not apply.
     5) Exclusion # 15 which excludes performance of professional
services for others does not apply since Loyd's actions were
outside the course of his bank duties and no evidence of
compensation for managing the Cattlemen's operations was presented.

      5
      In addition to the issues discussed, National Union asserts
the following errors of the district court:         1) refusal to
bifurcate the issues of coverage and bad faith at an earlier point
in the trial; 2) admission of evidence of National Union's alleged
negligence in handling the claim; 3) refusal to allow National
Union to examine the Cattlemen's counsel; 4) refusal to find

                                 8
on errors in the instructions given to the jury; and (2) it was

entitled to judgment as a matter of law either because the conduct

of the Succession in failing to disclose the nonrecourse agreement

or the date of trial was a breach of the insurance contract or

because the evidence was insufficient to support the jury verdict

of no collusion in obtaining the state court judgment. We also

discuss below the Cattlemen's cross-appeal challenging the district

court's denial of penalties and attorneys' fees.



     A. Errors in Jury Instructions

     National    Union   argues   first   that   the   district   court

erroneously declined to give its tendered jury instructions on the

duty of the insured to the insurer and on the Louisiana definition

of fraud.   It also contends that the court's instructions on the

legal status of the nonrecourse agreement and the state court

judgment were erroneous.

     To succeed in its challenge, National Union must satisfy a

two-part test.     First, National Union must demonstrate that the

charge as a whole creates "substantial and ineradicable doubt

whether the jury has been properly guided in its deliberations."

Bender v. Brumley, 1 F.3d 271, 276 (5th Cir. 1993) (citations

omitted).   "In the review of jury instructions, a challenged

instruction should not be considered in isolation but rather as


National Union an indispensable party to the state court action; 5)
refusal to credit the settlement of the Cattlemen and FNB to the
state court judgment; 6) refusal to find no coverage based on the
"professional services" exclusion of the D&O policy; and 7) refusal
to limit coverage liability to the 1986-1987 D&O policy. We have
considered these issues and, for reasons given by the district
court, find no merit in them.

                                   9
part of an integrated whole.      If, viewed in that light, the jury

instructions are comprehensive, balanced, fundamentally accurate,

and not likely to confuse or mislead the jury, the charge will be

deemed adequate."    Scheib v. Williams-McWilliams Co., 628 F. 2d

509, 511 (5th Cir. 1980).       Second, even if the jury instructions

were erroneous, we will not reverse if, based upon the entire

record, the "challenged instruction could not have affected the

outcome of the case." Bender, 1 F.3d at 276-77, quoting Bass v.

United States Dept. of Agriculture, 737 F.2d 1408, 1414 (5th Cir.

1984). In considering whether the district court erred in refusing

to give National Union's proffered instruction, the threshold

question   is   whether   the   proffered   instruction   is   a   correct

statement of the law.     Treadway v. Societe Anonyme Louis-Dreyfus,

894 F.2d 161, 167 (5th Cir. 1990).

     National Union's principal argument on this issue is that the

district court erred in refusing to instruct the jury that the

Succession owed a duty of "utmost candor and good faith" to

National Union.     National Union relies on two Louisiana circuit

court cases to support this argument.         In Miller v. Lumbermens

Mutual Casualty Company, 488 So. 2d 273 (La. App. 2d Cir. 1986),

writ denied, 493 So. 2d 637 (La. 1986), an insured sued his auto

insurer for repair costs after an accident. The insurer offered to

pay the actual cost of repair.     The insured based his demand on two

higher estimates.    The insured argued that the higher value was

owed under the policy because the actual repair was inadequate and

incomplete.     The trial court assessed the cost of repair at an

intermediate value and ordered the insurer to pay not only the


                                    10
repair costs, but also penalties and attorney's fees.               The trial

court based this award of penalties and attorney's fees on a belief

that    the   insurer    had   breached    its   fiduciary   duty    by   not

investigating further the costs of adequate repair.          The appellate

court reversed. The court disagreed that a fiduciary duty was owed

to the insured and stated: "[T]he contract of insurance created no

fiduciary relationship between these parties nor did the facts of

this case indicate such a relationship.              There was a bilateral

contractual     relationship     between     them,     but   no     fiduciary

relationship."     Id. at 278.       The court then expanded on the

relationship between an insurer and its insured and found there was

"an obligation in this contract insurance on the part of both

[parties] . . . to deal with each other 'uberrimae fidei', that is

an absolute perfect candor and good faith, but there was no trust

or fiduciary relationship by either party."          Id. at 278, quoting 42

AM JUR. 2d Insurance Section 159 (1982) at page 242.

       In Ray Gibbins Certified Welders v. Griggs, 543 So. 2d 68 (La.

App. 1st Cir. 1989), the insured paid insurance premiums to an

insurance broker who agreed to remit the funds to a general

insurance agent.        The general agent had formulated an insurance

plan for the insured and was to ultimately pay the insurance

carriers.     The insurance broker fraudulently kept the insured's

money and the coverage was never obtained.            The insured sued the

broker, the general agent, and the insurance carriers. The insured

argued that the general agent had breached its fiduciary duty to

the insured.     The appellate court disagreed and held that the




                                     11
contract of insurance created no fiduciary relationship between

these parties, quoting the above language from Miller.

       The   primary   holding     in    both       of    these   cases     is    that    no

fiduciary relationship is established by an insurance contract.

Significantly, no other Louisiana court has adopted the language

relied on by National Union that an insured owes his insurer an

enhanced duty of utmost candor and good faith.

       To the contrary, the Louisiana Supreme Court recently made it

clear that insurance policies are generally governed by the same

rules as other types of contracts.                    Louisiana Ins. Guar. Assn.

(LIGA) v. Interstate Fire & Casualty Co., 630 So. 2d 759, 763-64

(La. 1994). "An insurance policy is a contract between the parties

and     should    be   construed        by        using   the     general        rules    of

interpretation of contracts set forth in the Civil Code." Id. at

763.     In LIGA, the Louisiana Supreme Court emphasized that the

insurance      contract   controls       the       obligations     of     the     parties.

"Absent a conflict with statutory provisions or public policy,

insurers, like other individuals, are entitled to limit their

liability and to impose and to enforce reasonable conditions upon

the policy obligations they contractually assume." LIGA, 630 So. 2d

at 763 (omitting citations).            When "the policy wording at issue is

clear    and     unambiguously     expresses          the   parties'      intent,        the

insurance contract must be enforced as written." Id. at 764.

       Because the insurance contract is governed by the general

rules of contracts, the underlying duty of the parties to each

other in performance of the contract is controlled by the Louisiana

Civil Code.      The Louisiana Civil Code states "[c]ontracts must be


                                             12
performed in good faith."       La. Civ. Code art. 1983.        The Civil

Code, however, does not define "good faith," but does define "bad

faith" as "an intentional and malicious failure to perform."              La.

Civ. Code Ann. art. 1997 cmt. c.        Louisiana courts have looked to

this definition of "bad faith" for guidance in determining conduct

that breaches the duty of good faith.       See, e.g., Great Southwest

Fire Ins. Co. v. CNA Ins. Cos., 557 So. 2d 966, 969 (La.1990);

Heirs of Gremillion v. Rapides Parish Police Jury, 493 So. 2d 584,

587 (La. 1986); American Bank & Trust of Coushatta v. FDIC, 49 F.3d

1064, 1066 (5th Cir. 1995).       "[A] breach of contract occurs if

contractual discretion is exercised in bad faith, a term connoting

fraud, deception    or   sinisterly-motivated    nonfulfillment      of    an

obligation." Adams v. First National Bank of Commerce, 644 So.2d

219 (La. App. 4th Cir. 1994).     In contrast to the general duty of

good faith, we recognize that Louisiana courts have implied a

higher duty on the insurer in performance of its policy obligation

of the duty to defend the insured against covered claims, including

a   consideration   of   the   interests   of   the   insured   in   every

settlement.   Pareti v. Sentry Indemnity Co., 536 So.2d 417, 423

(La. 1988).

      Thus, we agree with the district court that the obligations of

the Succession to National Union are governed by the policy terms.

We also agree with the district court that the Succession's duty of

good faith in the performance of its obligations under the contract

is not enhanced because this is an insurance contract.                    The

requested jury instruction was properly denied.




                                   13
      This brings us to National Union's next argument that the

collusion instruction as given to the jury was improper.6               National

Union requested that the Louisiana definition of fraud be included

in   this     instruction.7    It   argued      that   the   court's   collusion

instruction required a finding of "deceitful" or "evil" intent,

while Louisiana law on fraud required less.              We do not agree with

National      Union's   interpretation     of   the    district   court's   jury

instruction. The district court's instruction defined collusion in

three ways.       The instruction does not require the jury to find

deceit to conclude that fraud was committed.                 Moreover, National

Union's requested jury instruction on fraud presents an incomplete




          6
              The district court gave the following instruction on
collusion:

           Collusion has been defined in several ways:
      1.   A deceitful agreement between two or more persons, for
      one party to bring an action against the other for some evil
      purpose, such as to defraud a third party of its rights;
      2.   A secret arrangement between two or more persons, whose
      interests are apparently conflicting, to make use of the forms
      and proceedings of law in order to defraud a third party or to
      obtain that which justice would not give them, by deceiving a
      court or its officers; or
      3.   A secret combination, conspiracy or concert of action
      between two or more persons for fraudulent or deceitful
      purposes.
           National Union has the burden of proving by a
      preponderance of the evidence that the procurement of the
      state court judgment against the Succession was obtained
      through collusion between the Succession and the Cattlemen.
      What constitutes collusion will differ with each fact
      situation.
      7
      National Union requested the following definition of fraud,
taken from the Louisiana Civil Code:
          Fraud is a misrepresentation or a suppression of the
     truth made with intention either to obtain an unjust advantage
     for one party or to cause a loss or inconvenience to the
     other. Fraud may also result from silence or inaction.
La. Civ. Code art. 1953.

                                      14
statement of Louisiana law.8              We agree with the district court

that an additional instruction on the meaning of fraud was not

necessary     to   aid    the   jury    and,    in   fact,    would    have   led   to

heightened confusion in an already complicated case. The collusion

instruction,       when   viewed   as    a     whole,   was   not     inadequate    or

confusing.9

     National Union complains next about the district court's

instruction to the jury that the nonrecourse agreement between the

Succession and the Cattlemen was not "on its face" improper.10

Relatedly, in the same jury instruction, National Union complains

of the statement that the state court trial was "on its face" an

actual trial.       We find no error in these statements of the law.

Each statement was qualified by the language "on its face," leaving



    8
     La. Civ. Code art. 1954 further elaborates on when fraud will
negate consent in a contractual obligation:

          Fraud does not vitiate consent when the party against
     whom the fraud was directed could have ascertained the truth
     without difficulty, inconvenience, or special skill.
          This exception does not apply when a relation of
     confidence has reasonably induced a party to rely on the
     other's assertions or representations.
La. Civ. Code art. 1954.
     9
      In fact, the jury instructions on collusion were taken from
an earlier memorandum submitted by National Union.
     10
          The complete jury instruction provided:

          In deciding whether or not collusion existed between the
     Succession of Loyd and the Cattlemen, you are instructed that
     the agreement entered into between the Cattlemen and the
     Succession is, on its face, not an improper act.      You are
     further instructed that the state court trial which took place
     in Natchitoches Parish between the Succession and the
     Cattlemen was, on its face, an actual trial which resulted in
     a valid judgment against the Succession of Loyd. It is for
     you to decide whether or not that judgment is collectable
     against National Union.

                                          15
the jury free to determine that, under all the circumstances, this

agreement and this judgment were collusive.



     B.    Breach of the Insurance Contract

     National Union argues next that the Succession's conduct was

an absolute coverage defense.       It contends that the Succession's

failure to disclose the existence of the nonrecourse agreement and

the date of the trial was either a breach of its duty of good faith

and candor or a breach of the cooperation clause of the insurance

contract.

     National Union argues that the duty of good faith and utmost

candor imposes an affirmative obligation on the Succession to

communicate candidly without first being asked.               As discussed

above, the insured owes the insurer the duty of complying with the

contract terms together with a general duty of performance in good

faith. The insured does not owe the insurer a fiduciary obligation

-- a higher duty that may indeed impose an affirmative duty to

disclose facts beyond that required by the contract.            See, e.g.,

FDIC v. Duffy, 47 F.3d 146, 152 (5th Cir. 1995) (fiduciary duty

owed by a partner to the partnership to disclose true interests in

business deal); Pitre v. Pitre, 172 So.2d 695 (La. 1965) (fiduciary

duty owed by husband to wife to disclose assets in partition

agreement).     In an insurance contract, the insured's duty to

provide information ordinarily arises only under the express policy

obligations.

     The    cooperation   clause,   clause   7(e),   states   that   "[t]he

insureds shall give the insurer such information and cooperation as


                                    16
it may reasonably require and shall be in the insureds' power."

National    Union     asserts   the   Succession      breached    this   clause

regardless of whether National Union requested the information.

Under Louisiana law, however, before proving a breach by the

insured of the cooperation clause, the insurer must show a diligent

effort to obtain the information.               Pelas v. American Employer's

Ins. Co., 299 So. 2d 815 (La. App. 4th Cir.), writ denied, 302 So.

2d 310 (La. 1974); Lindsey v. Gulf Ins. Co., 7 So. 2d 757 (La. App.

2d Cir. 1942).       In addition, even if a breach of the cooperation

clause could be shown by National Union, under the Louisiana Direct

Action Statute, this breach would not affect the Cattlemen's

rights, as a third-party claimant, to the proceeds of National

Union's policy, absent fraud or collusion.             King v. King, 217 So.

2d 395, 400 (La. 1968); Futch v. Fidelity & Casualty Co., 166 So.

2d 274, 278-79       (La. 1964).

      We agree with the district court that the failure of the

Succession to furnish information not requested by National Union

did not as a matter of law constitute a breach of the insurance

contract.



      C. Sufficiency of Evidence

      National Union argues next that the evidence is insufficient

to   support   the    jury's    finding    of    no   collusion   between   the

Succession and the Cattlemen and that the district court erred in

refusing to grant judgment as a matter of law.             We review all the

evidence bearing on this issue and draw all inferences in favor of

the verdict. Using this standard, if a reasonable juror could have


                                      17
found no collusion, we must affirm.             McNair v. City of Cedar Park,

993 F. 2d 1217, 1219 (5th Cir. 1993).

     National Union contends that the Succession and Cattlemen

colluded      to    prevent   National    Union      from   knowing   about    the

nonrecourse agreement or from participating in the state court

proceeding.         In support of its claim, National Union cites the

following facts:         (1) the Succession entered into a nonrecourse

agreement with the Cattlemen with the advance knowledge that there

would be a trial and the resultant judgment could only be collected

against National Union; (2) the Succession never informed National

Union about the agreement; (3) the Succession never informed

National Union of the trial date; (4) the Succession never intended

to defend the Cattlemen's suits; and (5) the Gilliam letter, giving

notice   of    the    amended   claims,       was   carefully   drafted   by   the

Cattlemen to avoid alerting National Union that it should assume an

active role in the litigation.

     On the other hand, the Cattlemen contend that the jury was

entitled to find that the Succession fulfilled its obligations to

National Union and was entitled to take action to protect its own

interests.         The Cattlemen argue that no collusion or conspiracy

existed between the Cattlemen and the Succession and that National

Union's ignorance of the nonrecourse agreement and the trial date

was due to its own negligence.            In support of this argument, the

following evidence was submitted to the jury:               (1) The Succession

(or the bank) gave National Union notice of the suits instituted

against the Succession as required by the policy;                (2) the policy

imposed no duty to defend on National Union and the Succession was


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required to mount the best defense possible with the meager funds

available to it; and (3) although National Union knew that the

Succession and the Cattlemen were discussing settlement, National

Union never requested any information about the settlement from the

Succession; and (4) in November 1990, counsel for National Union

actively discussed the likelihood of a settlement between the

Cattlemen and the Succession in light of the amendments to the

Cattlemen's complaint deleting the claims not covered by the

policy.

       Reviewing the evidence in a light favorable to the verdict, a

jury was entitled to find that the Succession did not collude with

the    Cattlemen     but   acted   appropriately       to    defend     against   the

Cattlemen's lawsuit. The nonrecourse agreement was not illegal and

was,    in   fact,   approved      by   a    state   court   in   the    Succession

proceeding.        The Succession had no affirmative duty under the

insurance contract to inform National Union of the nonrecourse

agreement or the trial date in the absence of a general request by

National Union for such information.             The evidence does not compel

a finding of fraudulent or deceitful conduct on the part of the

Succession or the Cattlemen as a matter of law.               The district court

correctly denied National Union's post-judgment motion for judgment

as a matter of law and for new trial.



       D.    Assessment of Penalties under Louisiana Law

       The Cattlemen challenge the district court's judgment as a

matter of law, reversing the jury's finding that National Union had

breached its duty of good faith and fair dealing.                     We review the


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district court's ruling by viewing the evidence in the light most

favorable to the Cattlemen.    We sustain the judgment only if we

find "that on all the evidence no reasonable juror could arrive at

a verdict contrary to the district court's conclusion."      Allied

Bank-West, N.A. v. Stein, 996 F.2d 111, 114 (5th Cir. 1993).

     Louisiana R.S. 22:1220(A) "grants third-party claimants a

right of action when an insurer violates its duty of good faith and

fair dealing."    Midland Risk Ins. Co. v. State Farm Mutual Auto

Ins. Co., 643 So. 2d 242, 243 (La. App. 3d Cir. 1994), citing

Romero v. Gary, 619 So. 2d 1244 (La. App. 3d Cir. 1993).         To

recover penalties under this statute, the claimant must prove that

the insurer received adequate notice of the loss and that the

insurer acted in bad faith in refusing to pay.   Romero, 619 So. 2d

at 1247-48.   "There must be a showing that the insurer's actions or

failure to act were unjustifiable. Whether an insurer's refusal to

pay a claim is arbitrary, capricious, or without probable cause,

warranting imposition of statutory penalties and attorney's fees,

depends on the facts known to the insurer at the time of its

action." Id. at 1247.

     At the time it refused to pay the Cattlemen, National Union

knew the following: (1) the allegations against the Succession had

been changed from fraud and self-profiteering, which were not

covered under the D&O policy, to negligence, a covered act;     (2)

the existence, if not the substance, of an agreement between the

Cattlemen and the Succession; (3) the refusal of the Succession's

lawyer to actively defend at the state court trial; and (4) the

Succession did not advise National Union of the state court trial


                                 20
date.   National Union was not arbitrary in denying coverage.    It

had plausible arguments of no coverage either under a policy

exclusion or a collusion theory.     Even viewing the evidence in a

light most favorable to the Cattlemen, we find no reasonable juror

could find National Union acted arbitrarily, capriciously, or

without probable cause in refusing payment.

     IV.   Conclusion

     For reasons stated above, the judgment of the district court

is in all respects AFFIRMED.




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