F I L E D

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 07-60443

NORMAN J BROUSSARD; GENEVIEVE BROUSSARD

Plaintiffs-Appellees

STATE FARM FIRE AND CASUALTY COMPANY

Defendant-Appellant

Appeal from the United States District Court

for the Southern District of Mississippi

USDC No. 1:06-CV-6

Before JONES, Chief Judge, and WIENER and CLEMENT, Circuit Judges.

EDITH BROWN CLEMENT, Circuit Judge:

Norman and Genevieve Broussard (“the Broussards”) lost their home

during Hurricane Katrina. State Farm Fire and Casualty Co. (“State Farm”)

rejected their homeowner’s insurance claim, and the Broussards sued to collect

benefits under their policy. The case went to trial and, at the close of all the

evidence, the district court granted Judgment as a Matter of Law (“JMOL”) in

favor of the Broussards. The jury awarded the Broussards $2.5 million in

punitive damages, which the district court remitted to $1 million. State Farm

appeals. We reverse the grant of JMOL, vacate the award of punitive damages,

and remand for a new trial.

I. FACTS AND PROCEEDINGS

United States Court of Appeals

Fifth Circuit

F I L E D

April 7, 2008

Charles R. Fulbruge III

Clerk

No. 07-60443

The Broussards’ Biloxi home was completely destroyed during Hurricane

Katrina, leaving only the foundation slab. The Broussards, who did not have

flood insurance, brought a claim under their State Farm homeowners policy.

The State Farm claims adjuster who inspected the site concluded that the

“[e]vidence suggests [the] home was more damaged by flood than wind,” and

State Farm denied the Broussards’ claim in its entirety.

TheBroussards’ homeowners policy contained two types of coverage. They

had$90,524in“namedperil”coveragefortheirpersonal property, which covered

losses caused by a list of perils, including windstorms. They had $120,698 in

“open peril” coverage for their dwelling, which covered any “accidental direct

loss” to their home. Both the personal property and the dwelling coverage

excluded lossescaused by water damage. Both coverages were also subject to an

“Anti-Concurrent Cause” (“ACC”) clause, which stated:

We do not insure under any coverage for any loss which would not

have occured in the absence of one or more of the following excluded

events. We do not insure for such loss regardless of: (a) the cause of

the excluded event; or (b) other causes of the loss; or (c) whether

other causes acted concurrently or in any sequence with the

excluded event to produce the loss . . . .

It is undisputed that the Broussards’ personal property and dwelling were a

total loss and that the value of their personal property and dwelling met or

exceeded the policy limits.

After State Farm denied their claim, the Broussards filed suit against

State Farm in Mississippi state court. The Broussards claimed breach of

contract and bad faith on the part of State Farm and sought the policy limits of

their coverage, extra-contractual damages, and punitive damages. State Farm

removed the case to the Southern District of Mississippi. The case was tried

before a jury in two phases, causation and damage. Following the close of the

evidence in the causation phase of the trial, both sides made oral motions for

JMOL. The district court granted JMOL in favor of the Broussards on both the

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personal property and dwelling claims. With regard to the personal property

claim, the district court found that the parties had stipulated that the

Broussards’ property was destroyed during Hurricane Katrina, that Hurricane

Katrina was a “windstorm,” and that State Farm was liable under the “named

peril” personal property coverage because “windstorm” was a named peril. With

regard to the dwelling claim, the district court held that State Farm bore the

burden of proving that the Broussards’ loss was caused by the excluded peril of

flooding. The district court noted that State Farm’s expert admitted that he

could not distinguish between the wind and water damage to the Broussards’

home with any reasonable degree of probability. In light of this admission, the

district court found that “there was no sound evidence upon which the finder of

fact could rationally determine that [State Farm] had met its burden of proof”

and entered JMOL for the Broussards.

During the damage phase of the trial, the district court gave the jury a

punitive damage instruction. The jury awarded the Broussards $2.5 million in

punitive damages, which the district court remitted to $1 million.

State Farm appeals the entry of JMOL on both the personal property and

dwelling claims and seeks reversal or remittitur of the jury’s punitive damages

award. State Farm also appeals the district court’s denial of its motion to strike

thetestimonyoftheBroussards’expert,JamesSlider,a structural engineerwho

testified that “wind or a tornado” destroyed the Broussards’ home before the

Katrina storm surge arrived. Finally, State Farm appeals the district court’s

denial of its motion for change of venue.

II. DISCUSSION

The Broussards argue that their home was destroyed by “tornadic” winds

before the Katrina storm surge arrived, and that they are entitled to recover

under their homeowners policy for any losses which State Farm cannot show

were caused by water, which is an excluded peril under both the personal

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The claims in Broussard are different from the claims in Tuepker. The Tuepker

plaintiffs challenged the enforceability of the ACC clause and the applicability of the water

damage exclusion to a hurricane-created storm surge. 507 F.3d at 348. The main thrust of

the Broussards’ claim is that their home was destroyed by tornadic winds prior to the arrival

of the storm surge.

property and dwelling coverages. This Court has issued several Katrina-related

insurance decisions since this case was tried in early 2007, including Tuepker v.

State Farm Fire & Casualty Co., a Mississippi slab case interpreting a State

Farm homeowners insurance policy whose provisions were identical to the

Broussards’ policy in all significant respects.

507 F.3d 346, 350–53 (5th Cir.

2007); see also Leonard v. Nationwide Mut. Ins. Co., 499 F.3d 419, 423 (5th Cir.

2007) (holding that Nationwide Mutual homeowners insurance policy, which

included an ACC clause, was valid and enforceable under Mississippi law).

These and other recent Katrina-related cases inform this decision. Because we

hold that the district court erred as a matter of law in entering JMOL for the

Broussards, we reverse the district court, vacate the award of punitive damages,

and remand for a new trial.

A. Judgment as a Matter of Law

The standard of review for rulings on motions for JMOL is de novo. Evans

v. Ford Motor Co., 484 F.3d 329, 334 (5th Cir. 2007). This Court has held that

motions for JMOL should be granted

only if “the facts and inferences point so strongly and

overwhelmingly in favor of one party that the Court believes that

reasonable men could not arrive at a contrary verdict. . . . On the

other hand, if there is substantial evidence opposed to the motions,

that is, evidence of such quality and weight that reasonable and

fair-minded men in the exercise of impartial judgment might reach

different conclusions, the motions should be denied. . . .”

Brown v. Bryan County, 219 F.3d 450, 456 (5th Cir. 2000) (internal quotations

omitted). When evaluating the district court’s grant of JMOL, we “consider all

of the evidence, drawing all reasonable inferences and resolving all credibility

No. 07-60443

determinations in the light most favorable to the non-moving party,” State

Farm. Id.

(1) Personal Property “Named Peril” Coverage

We reverse the district court’s grant of JMOL with regard to the

Broussards’ “named peril” personal property coverage. The district court erred

when it found that the destruction of the Broussards’ personal property by

Hurricane Katrina was sufficient to establish the separate assertion that the

property was destroyed by “windstorm,” a “named peril” under the Broussards’

personal property coverage.

Lunday v. Lititz Mutual Insurance Co. considered damage sustained by a

Mississippi home during Hurricane Camille and held that, under “named peril”

coverage, “the burden of proof was on the [insured] to prove that the damages

sustained were covered by the peril insured against, that is, by direct action of

the wind.” 276 So. 2d 696, 699 (Miss. 1973). Although there was no question

that the insured property was destroyed during Hurricane Camille, the Lunday

court did not find that this automatically established that it was damaged by

wind. Id. Likewise, a stipulation that the Broussards’ personal property was

destroyed by Hurricane Katrina is insufficient to establish that it was destroyed

by a windstorm, since Hurricane Katrina unleashed both wind and water forces.

Accordingly, we reverse the grant of JMOL with regard to the Broussards’

personal property claim and remand to permit the Broussards to carry their

burden of proving that the personal property was destroyed by a peril covered

under their policy.

(2) Dwelling “Open Peril” Coverage

We also reverse the district court’s grant of JMOL to the Broussards on

their dwelling “open peril” coverage. The district court granted JMOL because

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it found that “there was no sound evidence upon which the finder of fact could

rationally determine that [State Farm] had met its burden of proof” to show that

the Broussards’ home was destroyed by an excluded peril. “This Court reviews

. . . the determinations that the parties met their burdens [of proof] under the

clearly erroneous standard.” Stevens Shipping & Terminal Co. v. JAPAN

RAINBOW II MV, 334 F.3d 439, 443 (5th Cir. 2003).

The district court’s conclusion that State Farm failed to meet its burden

of proof under the dwelling coverage was clear error. State Farm’s experts

introduced sufficient evidence to permit a reasonable jury to find in its favor.

Two of State Farm’s experts, Kurt Gurley and Robert Dean, testified that the

damage to the actual structure of the Broussards’ home came from the storm

surge. Gurley stated that it was “75% likely” that wind caused a relatively small

amount of damage to the Broussards’ roof before the storm surge arrived, but

that Hurricane Katrina’s winds were not strong enough to cause structural

damagetothehome. Gurley also opined that, given the data available regarding

the Broussards’ home, no other wind engineer could state more definitively

whether there was wind damage or specify the extent of the damage more

precisely.

State Farm’s evidence was more than sufficient to withstand a motion for

JMOL. A rational jury could conclude, based on the testimony of State Farm’s

experts, that the Broussards’ home and personal property were destroyed by

water. Wall v. Swilley, 562 So. 2d 1252, 1256 (Miss. 1990) (“Unless the evidence

is so lacking that no reasonable jury could find for plaintiffs, the motion must be

denied.”). We reverse the district court’s entry of JMOL for the Broussards on

the dwelling coverage and remand for a new trial.

B. Burdens of Proof

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The Broussards’ policy also contained an ACC clause identical to the one considered

in Tuepker. 507 F.3d at 350–51. The clause applied to both the personal property and

dwelling coverage in the State Farm policy. The ACC clause, like the water damage exclusion,

is an affirmative defense, and State Farm bears the burden of pleading and proving that the

ACC clause applies. Id. at 356–57. State Farm’s position on appeal is that it did not rely on

the ACC clause in denying the Broussards’ claim, and that the claim was denied because

“absent physical evidence of wind damage there was no way to pay the claim other than to

speculate.” Thus, State Farm has waived any defense based on the ACC clause.

State Farm also argues that the district court erred in allocating the

burdens of proof. “This Court reviews the allocation of the burden of proof de

novo . . . .” Stevens Shipping, 334 F.3d at 443.

“Under Mississippi law a plaintiff has the burden of proving a right to

recover under the insurance policy sued on,” and this basic burden never shifts

from the plaintiff. Britt v. Travelers Ins. Co., 566 F.2d 1020, 1022 (5th Cir.

1978); see also Home Ins. Co. v. Greene, 229 So. 2d 576, 579 (Miss. 1969) (“An

insured seeking recovery on a policy insuring against fire has the burden of

proving the loss and its extent.”). In this case, the parties agreed that the home

and its contents were a total loss, and the disputed issue is which peril caused

the loss.

The parties bear different burdens of proof under the personal property

and dwelling coverages.

For [personal property] “named peril” coverage . . . the plaintiff has

the burden of proving that any losses were caused by a peril covered

by the policy. Under [dwelling] “open peril” coverage . . . the

plaintiff still has the basic burden of proving his right to recover.

However, under “open peril” coverage the insurer bears the burden

of proving that a particular peril falls within a policy exclusion, and

must plead and prove the applicability of an exclusion as an

affirmative defense.

Tuepker, 507 F.3d at 356–57 (internal quotations and citations omitted). The

Broussards’ personal property and dwelling coverages are both subject to a water

damage exclusion identical to the exclusion in Tuepker. Id. at 350–51.

The

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parties do not dispute that this exclusion applies to any damage caused by the

Hurricane Katrina storm surge.

State Farm argues that under the dwelling coverage, once it advances

evidence to establish its affirmative policy exclusion defenses, the burden shifts

back to the Broussards to prove that there is an exclusion to the defenses or to

segregate covered from non-covered damages. In support of its theory, State

Farm points to Texas cases such as Britt v. Cambridge Mutual Fire Insurance

Co., which hold that “[o]nce an insurer has pled an exception to the insurance

policy, the burden is on the insured to prove that the occurrence in question did

not come within the exclusion of the policy.” 717 S.W.2d 476, 482 (Tex. App.

1986). Mississippi courts have not explicitly addressed shifting burdens of proof

under “open peril” policies, so we “must make an educated ‘Erie guess’ as to how

the Mississippi Supreme Court would resolve the issue.” Leonard, 499 F.3d at

431.

The Mississippi Supreme Court rejected a rule similar to State Farm’s

“shifting back” theory in a Hurricane Camille slab case construing a “named

peril” policy. Lititz Mut. Ins. Co. v. Boatner, 254 So. 2d 765, 766 (Miss. 1971).

The factual similarities between Boatner and the case at hand are striking. In

Boatner, nothing was left of the insureds’ home and its contents but a concrete

slab. Id. at 765. The insureds argued that their home was destroyed by wind

prior to the arrival of the hurricane-produced tidal wave. Id. at 767. The

insurer admitted that some wind damage was probable, but withheld full

payment under the policy because it argued that the home was actually

destroyed by the tidal wave, an excluded peril. Id. at 766. The jury found in

favor of the insureds and the Mississippi Supreme Court affirmed. Id. The

court held that the insureds were required to introduce some evidence regarding

causation to recover under a “named peril” policy, but rejected the rule “that the

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burden of proof was upon the homeowners . . . [to] also show that [their home]

was in no respect damaged by tidal wave . . . .” Id.

In Grace v. Lititz Mutual Insurance Co., another Hurricane Camille case,

the Mississippi Supreme Court sustained a jury verdict for the insureds under

a windstorm policy which excluded water damage. 257 So. 2d 217, 219, 224–25

(Miss. 1972). The Grace court stated that “[t]he rule is well established in this

state that where the question presented to the jury was whether the loss was

due to windstorm or to water, the entire question of proximate cause is treated

as one of fact independent of the explicit application of any rule of law.” Id.

(citing Commercial Union Ins. Co. v. Byrne, 248 So. 2d 777, 781 (Miss. 1971)).

The Grace court also reversed the trial court’s remittitur of $2500 and awarded

damages in the amount of the policy limits because the insurer never contested

the fact that the insureds’ property was a total loss and did not “offer any

evidence at any time during the trial of what value or of what part of the

[insureds’] property was destroyed by water prior to its destruction by wind.” Id.

at 225.

BoatnerandGraceinvolved“named peril” policies under which the insured

was required to prove that his loss was caused by a specified peril as part of his

prima facie case. The Mississippi Supreme Court has not explicitly addressed

the “shifting back” theory when considering an “open peril” policy. We think it

unlikely, however, that the court would reject rules similar to State Farm’s

“shifting back” theory when considering “named peril” policies and embrace

them when considering an “open peril” policy under which the insurer must

prove causation by an excluded peril as an affirmative defense.

In support of this view, we note that the rule that causation is a fact

question for the jury applies equally to “open peril” and “named peril” policies.

In Byrne, a Hurricane Camille case involving an “open peril” policy, the

MississippiSupremeCourtheldthatadirectedverdictwasnotproperwherethe

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plaintiff introduced some evidence that his house and personal property were

damaged by wind prior to the arrival of flood waters from a nearby bayou. 248

So. 2d at 781. In language later quoted in Grace, the Byrne court held that

causation was a question of fact “independent of the explicit application of any

rule of law” which would take the issue away from the jury. Id.; see Grace, 257

So. 2d at 224. State Farm’s “shifting back” theory seems to be the sort of “rule

of law” which would operate in many cases to take the issue of causation away

from the jury.

In light of Boatner, Grace, and Byrne, we hold that State Farm’s “shifting

back” theory is not the rule in Mississippi. Grace, 257 So. 2d at 224; Boatner,

254 So. 2d at 766; Byrne, 248 So. 2d at 781. On remand, the parties must meet

their burdens of proof as outlined in Tuepker, 507 F.3d at 356–57, and the

ultimate allocation of wind and water damages under the Broussards’ dwelling

coverage is a question of fact for the jury. Grace, 257 So. 2d at 224.

C. Punitive and Consequential Damages

We also reverse the district court’s decision to submit the punitive

damages question to the jury. “In insurance contract cases, the trial court is

responsible for reviewing all evidence before it in order to ascertain whether the

jury should be permitted to decide the issues of punitive damages.” Lewis v.

Equity Nat’l Life Ins. Co., 637 So. 2d 183, 185 (Miss. 1994) (internal quotations

omitted). If, upon reviewing all the evidence, the district court concludes that

the insurer acted in bad faith, or that reasonable minds could differ regarding

whether the insurer acted in bad faith, then the district court should send the

issue of punitive damages to the jury. Id. at 185–86. The district court denied

State Farm’s motion for JMOL on punitive and extra-contractual damages and

sent the issue to the jury. We review the district court’s ruling on State Farm’s

motion for JMOL de novo. Sobley v. S. Natural Gas Co., 302 F.3d 325, 335–36

(5th Cir. 2002).

No. 07-60443

Under Mississippi law, insurers have a duty “to perform a prompt and

adequateinvestigation and make a reasonable, good faith decision based on that

investigation” and may be liable for punitive damages for denying a claim in bad

faith. Liberty Mut. Ins. Co. v. McKneely, 862 So. 2d 530, 535 (Miss. 2003); U.S.

Fid. & Guar. Co. v. Wigginton, 964 F.2d 487, 492 (5th Cir. 1992). The

Broussards bear the burden of proving that State Farm acted in bad faith when

it denied their insurance claim. Wigginton, 964 F.2d at 492.

Section 11-1-65(1)(a) of the Mississippi Code Annotated states that

“[p]unitive damages may not be awarded if the claimant does not prove by clear

and convincing evidence that the defendant against whom punitive damages are

sought acted with actual malice, gross negligence which evidences a willful,

wantonorrecklessdisregard for the safety of others, or committed actual fraud.”

Mississippi law does not permit parties to recover punitive damages unless they

first prove that they are entitled to compensatory damages. MISS. CODE ANN. §

11-1-65(1)(b)-(c); Sobley, 302 F.3d at 330.

To recover punitive damages for bad faith denial of their insurance claim,

the Broussards “must show that the insurer denied the claim (1) without an

arguable or legitimate basis, either in fact or law, and (2) with malice or gross

negligence in disregard of the insured’s rights.” Wigginton, 964 F.2d at 492.

State Farm, on the other hand, “need only show that it had reasonable

justifications, either in fact or in law, to deny payment.” Id. The question of

whether State Farm had an arguable basis for denying the Broussards’ claim “is

an issue of law for the court.” Id. Insurers who are not liable for punitive

damages may nonetheless be liable for “consequential or extra-contractual

damages (e.g., reasonable attorney fees, court costs, and other economic losses)”

where their decision to deny the insured’s claim is without “a reasonably

arguable basis” but does not otherwise rise to the level of an independent tort.

Andrew Jackson Life Ins. Co. v. Williams, 566 So. 2d 1172, 1186 n.13 (Miss.

No. 07-60443

The district court also found a basis for punitive damages in State Farm’s legal

position regarding burdens of proof. Under Mississippi law, however, an insurance company

is not subject to punitive damages for referring a disputed legal question to the courts, even

if the question is not resolved in its favor. Dunn v. State Farm Fire & Cas. Co., 927 F.2d 869,

874 (5th Cir. 1991). Although we reject State Farm’s legal position regarding the “shifting

back” burdens of proof, it is not liable for punitive damages for advancing this legal argument.

1990); see also Sw. Miss. Reg’l Med. Ctr. v. Lawrence, 684 So. 2d 1257, 1267–69

(Miss. 1996) (reversing an award of punitive damages but affirming an award

of consequential damages including, inter alia, compensation for the plaintiff’s

reasonably foreseeable emotional distress following the denial of her claim).

We hold that State Farm had an arguable basis for denying the

Broussards’ claim in October 2005 and that a punitive damages instruction is

not warranted on this ground. The State Farm claims adjuster who

recommended denying the Broussards’ claim examined the position of the home

seaward of the debris line and the condition of trees on and around the

Broussards’ property. The adjuster concluded that the damage to the trees was

more consistent with flooding than with tornadic winds and stated that “[o]ur

investigation shows that the insured location and surrounding neighborhood was

damaged by a tidal surge and flood” and denied coverage on this ground.

Although the Broussards have pointed to some facts which suggest that wind

destroyed their home prior to the arrival of the tidal surge, State Farm had an

arguable basis for denying their claim based on the observations of its adjuster

regarding the position of the debris line and the condition of trees on and

surrounding the property. Dunn v. State Farm Fire & Cas. Co., 711 F. Supp.

1362, 1364–65 (N.D. Miss. 1988) (denying defendant insurer’s motion for

summary judgment because there were genuine issues of material fact, but

rejecting plaintiff’s claim for punitive damages because the facts, although

contested, provided the insurer with an arguable basis for denying the plaintiff’s

claim).

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State Farm’s claim file indicates that this money was advanced immediately after the

storm by the Broussards’ insurance agent, who mistakenly thought that they had flood

insurance.

Although it is a much closer question, we also hold that State Farm is not

liable for punitive damages for continuing to withhold payment under the policy

after its expert opined that some covered wind damage likely occurred prior to

the arrival of the storm surge. State Farm had a duty to re-evaluate the

Broussards’ claim which continued even after the claim was refused and the

Broussards filed suit. See Gregory v. Cont’l Ins. Co., 575 So. 2d 534, 541 (Miss.

1990). State Farm’s expert Gurley stated that there was a 75% likelihood that

between none and 35% of the shingles on the Broussards’ roof were damaged by

wind prior to the arrival of the storm surge. State Farm was liable to the

Broussards for this damage, however minor. See Dixie Ins. Co. v. Mooneyhan,

684 So. 2d 574, 584 (Miss. 1996).

Under the somewhat unusual circumstances of this case, however,

punitive damages are not appropriate on this ground. The State Farm claim file

reflects that the Broussards received a $2000 advance within ten days of

Hurricane Katrina.

Counsel for State Farm stated at oral argument that it was

State Farm’s position that this amount, combined with the Broussards’ two-

percent deductible of about $2400, was adequate to cover the kind of minor roof

damage discussed by Gurley. Without deciding whether this payment was in

fact adequate, we hold that State Farm did not act with sufficient “malice or

gross negligence” to merit punitive damages. Wigginton, 964 F.2d at 492.

However, as State Farm lacked an arguable basis for denying this portion of the

Broussards’ claim, on remand the district court should consider whether

additional actual or consequential damages are appropriate. Williams, 566 So.

2d at 1186 n.13.

Our inquiry does not end there. Mississippi courts have held that under

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The district court also faulted State Farm for placing the Broussards “in a most

difficult position during a time of extreme economic hardship.” Mississippi cases have

recognizedthat insurance companiesthatuseaninsured’s financialhardshiptoforce anunjust

settlement may deserve punitive damages. See Andrew Jackson Life Ins. Co. v. Williams, 566

So. 2d 1172, 1186–87 (Miss. 1990); Travelers Indem. Co. v. Wetherbee, 368 So. 2d 829, 835

(Miss. 1979). However, these cases have considered forced settlement in conjunction with

other bad-faith behavior not at issue here, such as fraudulent sales practices. Williams, 566

So. 2d at 1175.

certain limited circumstances, insureds may recover punitive damages even

though the insurer had an arguable basis for denying their claim. Lewis v.

Equity Nat’l Life Ins. Co., 637 So. 2d 183, 185 (Miss. 1994). Mississippi courts

have sent the issue of punitive damages to the jury when the insurer’s behavior

in writing the insurance policy or handling the insurance claim breaches “an

implied covenant of good faith and fair dealing” and rises to the level of an

independent tort. Stewart v. Gulf Guar. Life Ins. Co., 846 So. 2d 192, 202–05

(Miss. 2002); Lewis, 637 So. 2d at 185. Mississippi courts have found

independent torts based on the insurer’s behavior in writing the policy,

Stewart, 846 So. 2d at 202, and on the basis of grossly negligent claim

investigation, id. at 204. The district court found that State Farm engaged in

both kinds of behavior.

(1) Policy Terms

The district court found that punitive damages were warranted in part

because State Farm “continued to urge an interpretation of its anti-concurrent

cause clause that would entitle it to collect premiums from policyholders for

what amounts to no coverage if even a small part of a loss was due to water.”

State Farm argues on appeal that it did not rely on the ACC clause to deny

coverage to the Broussards. Even if the district court is correct and the ACC

clause played a role in State Farm’s treatment of the Broussards’ claim, this is

not a basis for a punitive damages instruction. In Leonard v. Nationwide

Mutual Insurance Co., this Court held that an ACC clause similar to that relied

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upon by State Farm is valid and enforceable under Mississippi law. 499 F.3d

419, 430, 435 (5th Cir. 2007); accord Tuepker, 507 F.3d at 354 (“Leonard governs

thiscase,andcompelstheconclusion that the ACC Clause in State Farm’s policy

is not ambiguous, and should be enforced under Mississippi law.”). State Farm

cannot be liable for punitive damages solely for relying on a legally valid and

enforceable clause in its insurance contract.

(2) Negligent Claim Investigation

The district court found that State Farm “did not conduct a reasonably

prompt investigation of all relevant facts before denying the [Broussards’] claim

and, after conducting such an investigation, did not make a realistic evaluation

of the claim.” To qualify for punitive damages for negligent claim investigation,

“the level of negligence in conducting the investigation must be such that a

proper investigation by the insurer would easily adduce evidence showing its

defenses to be without merit.” Sobley, 302 F.3d at 342 (internal quotations

omitted) (discussing a homeowners insurance policy). In other words, the

Broussards must show “that further investigation would undercover evidence

that would have undermined at least the arguable merit” of State Farm’s

defenses. Id. (internal quotations omitted).

This is not a case in which further investigation has “easily adduce[d]

evidence” showing that State Farm’s position lacks arguable merit. Even after

extensive investigations by both parties, the question of whether the Broussards’

property was first destroyed by wind or water remains an extremely close one.

See supra, Part II(A). We hold that State Farm’s fall 2005 claim investigation

did not breach the implied covenant of good faith and fair dealing, and that

punitive damages are not appropriate on this ground. We reverse the district

court’s decision to submit the question of punitive damages to the jury and

vacate the jury’s award of punitive damages.

No. 07-60443

D. Motion to Exclude the Broussards’ Expert Witness James Slider

State Farm appeals the admission of testimony by James Slider, a civil

engineer who testified as an expert on behalf of the Broussards. This Court

“review[s] the district court’s determination of admissibility of expert evidence

under Daubert for abuse of discretion.” Knight v. Kirby Inland Marine Inc., 482

F.3d 347, 351 (5th Cir. 2007). The Daubert factors for evaluating expert

testimony include “whether the theory or technique the expert employs is

generally accepted; whether the theory has been subjected to peer review and

publication; whether the theory can and has been tested; whether the known or

potential rate of error is acceptable; and whether there are standardscontrolling

thetechnique’s operation.” Id.(citingDaubertv.MerrellDowPharms.,Inc.,509

U.S. 579, 593 (1993)).

Slider, whose specialty is in structural engineering, opined that wind

destroyed the Broussards’ home prior to the arrival of the storm surge. He

considered and ruled out other causes for the initial damage to the Broussards’

home by evaluating data from the Stennis Space Center and eyewitness

testimony. He also based his conclusions on physical evidence left on the

Broussards’ property. State Farm objected to his testimony in part because his

work had not been peer reviewed and he did not know of others who had used

his methods. The district court evaluated Slider’s testimony in a written order

and found that the data he relied on was sufficiently reliable to support his

opinions. After reviewing the record, we affirm and hold that the district court

did not abuse its discretion when it admitted Slider’s testimony.

E. Motion for Change of Venue

ThedistrictcourtdeniedStateFarm’s change of venue motion. This panel

reviews the district court’s venue rulings for abuse of discretion. In re

Volkswagen AG, 371 F.3d 201, 203 (5th Cir. 2004). This Court asks three

questions: “Did the district court correctly construe and apply the relevant

No. 07-60443

statutes; . . . Did the district court consider the relevant factors incident to ruling

upon a motion to transfer; and . . . Did the district court abuse its discretion in

deciding the motion to transfer.” Id. Relevant factors under 28 U.S.C. § 1404(a)

include whether the proposed transfer venue is a forum in which the suit could

originally have been brought, the convenience of the parties and witnesses, and

the interests of justice. Id.

We hold that the district court did not abuse its discretion when it denied

State Farm’s motion for change of venue, notwithstanding the intensive pretrial

publicity concerning Hurricane Katrina-related insurance claims. See id. As

this Court noted in Mayola v. Alabama, even the “broad and intensive public

awareness” stemming from notorious events like “the battlefield execution of

Vietnamese civilians by Lt. William Calley, Jr., and other soldiers, and the high

level conspiracy to cover up the Watergate break-in,” was held not to have

created a presumption of juror prejudice in either Calley v. Callaway, 519 F.2d

184, 203–13 (5th Cir. 1975) (Lt. Calley) or United States v. Haldeman, 559 F.2d

31, 60–69 (D.C. Cir. 1976) (Watergate). See 623 F.2d 992, 998–99 (5th Cir.

1980). The transcript reveals that the district court was very aware of its

responsibility to protect the interests of justice by selecting a jury free from

prejudice. Media-related matters took up seventeen pages in the voir dire

transcript, and the record shows that at least ten prospective jurors were

removed for cause in part because of opinions formed by pretrial publicity. In

its written order denying State Farm’s motion, the district court noted the

extensive voir dire and “the additional expenses and the great inconvenience

that individual plaintiffs would incur if the trial of this action and similar

actions were moved to another division of this district.” The district court’s

decision not to grant a change of venue was consistent with the change-of-venue

statute, and it adequately weighed the factors set out in 28 U.S.C. § 1404. We

affirm the denial of State Farm’s motion for change of venue.

No. 07-60443

III. CONCLUSION

We REVERSE the judgment of the district court entering JMOL in favor

of the Broussards. We REVERSE and VACATE the jury’s award of punitive

damages. We AFFIRM the district court’s admission of testimony from the

Broussards’ expert witness. We AFFIRM the district court’s denial of State

Farm’s motion to change venue. We REMAND the case for a new trial.