Zydeco's II, LLC, Zydeco's Corp, Dustin Gainey and Rosemarie Gainey Versus Certain Underwriters at Lloyd's, London Subscribing to certificate/policy No. D1180d150152-59633, David Brennan, Dave Brennan Insurance Inc., and Braishfield Associates, Inc.

ZYDECO'S II, LLC, ZYDECO'S CORP, NO. 19-CA-562
DUSTIN GAINEY AND ROSEMARIE
GAINEY FIFTH CIRCUIT

VERSUS COURT OF APPEAL

CERTAIN UNDERWRITERS AT LLOYD'S, STATE OF LOUISIANA
LONDON SUBSCRIBING TO
CERTIFICATE/POLICY NO.
D1180D150152-59633, DAVID BRENNAN,
DAVE BRENNAN INSURANCE INC., AND
BRAISHFIELD ASSOCIATES, INC.

October 28, 2021

Nancy F. Vega
Chief Deputy Clerk

ON APPLICATION FOR REHEARING

Panel composed of Susan M. Chehardy,
Marc E. Johnson, and Stephen J. Windhorst

DENIED WITH REASONS

SJW
SMC

CONCURS WITH REASONS

MEJ

WINDHORST, J.

For the reasons that follow, we deny appellant/defendant, Certain

Underwriters at Lloyd’s, London (“Underwriters”), and appellees/plaintiffs,

Zydeco’s II, LLC and Zydeco’s Corp (“Zydeco plaintiffs”), applications for

rehearing.

On June 10, 2021, Underwriters filed an application for rehearing arguing that

1) this court erred in rejecting Underwriters’ coverage defense based on the P-2

Endorsement; and 2) Underwriters did not act in bad faith in denying coverage based

on the P-2 Endorsement.

On June 11, 2021, the Zydeco plaintiffs filed an application for a partial

rehearing and motion to vacate in part this court’s opinion concerning the only non-

unanimous issue in the opinion. Specifically, the Zydeco plaintiffs contend that

when this court modified the trial court’s judgment regarding loss of income and

correspondingly the bad faith damages with one judge dissenting, it was required

under La. Const. Art. 5, §8 B to have the case reargued before a panel of at least five

judges prior to rendition of judgment on only the non-unanimous issue.1 They argue

that this court should vacate the portion of its judgment modifying the trial court’s

judgment of loss of income and the corresponding bad faith damages and grant this

limited application for rehearing solely on the issue regarding the reduction of loss

of income and the accompanying reduction of the bad faith damages.

In response to the Zydeco plaintiffs’ application for rehearing, Underwriters

filed an opposition arguing that under the plain language of La. Const. Art. 5, §8 B,

1 The Zydeco plaintiffs contend that this court unanimously agreed on all issues and findings except:

However, on one point alone this Honorable Court was split in its decision.
Two judges of the three-judge panel rendered judgment in this matter
modifying the district court’s loss of business damages award from
$4,900,000.00 to $2,900,000.00 thereby also modifying the corresponding
statutory penalties on those damages. The third panel judge dissented on
this limited issue. (Emphasis added.)

19-CA-562 1

the entire case must be reargued before a panel of five judges, not just the non-

unanimous decision concerning modification of the loss of income and

corresponding bad faith damages. Therefore, Underwriters contends that the

Constitution requires that a five-judge panel must rehear all issues raised by both

sides.

The Zydeco plaintiffs filed a reply arguing that the Constitution does not

require the entire case to be reheard and that rehearings are routinely granted on

limited bases. They contend that this court unanimously rendered judgment in

accordance with the constitutional mandate on all issues except the majority’s

reduction of the loss of income and associated bad faith damages; thus, a limited

rehearing is warranted to correct one constitutional error.

DISCUSSION and ANALYSIS

A review of this court opinion shows that the Zydeco plaintiffs’ restaurant was

completely destroyed by fire on May 30, 2016. Prior to the fire, Underwriters issued

a commercial property insurance policy insuring the restaurant with the Zydeco

plaintiffs as the named insureds. The policy contained a limit of $900,000.00 for the

building, and $100,000.00 for business personal property. The policy also contained

a “Protective Safeguards – Fire P2” (the “P2 endorsement”) which included the

requirement of a centrally monitored fire alarm. After the fire, the Zydeco plaintiffs

submitted a claim to Underwriters. While reviewing the claim, Underwriters learned

that the premises did not have a centrally monitored fire alarm as required in the P2

endorsement. Instead of investigating the claim or denying the claim, on August 26,

2016, Underwriters rescinded the policy and returned to the Zydeco plaintiffs all

premiums paid on the policy for the past six years.

In the petition for damages, plaintiffs contended that Underwriters’ failure to

pay the claim and rescission of the policy violated La. R.S. 22:1892 and La. R.S.

22:1973, and that Underwriters was liable for penalties and attorney’s fees.

19-CA-562 2

Plaintiffs also contended that Underwriters breached the duty of good faith and fair

dealing pursuant to La. R.S. 22:1973 A and C.

On appeal, this court affirmed the trial court’s findings that (1) Underwriters

improperly rescinded the insurance policy; (2) Underwriters violated its duties of

good faith and fair dealing in the investigation and adjustment of the May 30, 2016

fire loss in violation of La. R.S. 22:1973; (3) Underwriters failed to pay the Zydeco

plaintiffs’ claim within 30 days of receiving satisfactory proof of loss in violation of

La. R.S. 22:1892; and (4) as a result of Underwriters’ improper rescission and

violations of La. R.S. 22:1973 and La. R.S. 22:1892, the Zydeco plaintiffs sustained

damages and are entitled to statutory penalties. We further affirmed the trial court’s

findings that (1) comparative fault is not applicable to Brennan and the Zydeco

plaintiffs; and (2) La. R.S. 22:1973 and La. R.S. 22:1892 are applicable in this case.

Given our findings, we amended the judgment and awarded the following damages

to the Zydeco plaintiffs: (1) $900,000.00 for loss of the building and $100,000.00

for business personal property; (2) $2,900,000.00 for lost income; and (3)

$5,800,000.00 for bad faith damages.

We vacated that portion of the trial court’s judgment awarding attorney’s fees

in the amount of $7,388,474.23, and remanded the matter to the trial court for further

proceedings consistent with our opinion. We further reversed in part that portion of

the judgment awarding legal interest on penalties and attorney’s fees from the date

of judicial demand until paid, and rendered judgment awarding legal interest as to

the award of penalties from the date of judgment. The judgment was affirmed as

amended and affirmed in all other respects.

One panel member dissented in part stating that he “agree[d] with the

majority’s opinion with the exception of the finding that the trial court committed

manifest error in awarding $4,900,000 for lost income, resulting in an amended

award by this Court.” [Emphasis added.] He found there was a reasonable factual

19-CA-562 3

basis for the award and that the record did not support a finding that the trial court

was clearly wrong, or manifestly erroneous in awarding $4,900,000. Thus, he

dissented “only from the part of the majority opinion that substitute[d] this court’s

factual findings for those of the trial court in amending the damages award for loss

of income.”

The dissent concerns only the majority’s opinion in amending the loss of

income to correct the trial court’s misinterpretation of the testimony and reducing

the amount awarded from $4,900,000 to $2,900,000. The dissent did not mention

or address the majority’s opinion that amended the corresponding bad faith damages.

In amending the award of bad faith damages, this court found that the trial court

erred by including damages awarded under the insurance contract (awards for loss

of the building and debris removal) in the calculation of penalties. We found that

the Zydeco plaintiffs were awarded lost income damages for the loss of their

business as a result of Underwriters’ breach of its duties under La. R.S. 22:1973 A

and C in the amount of $2,900,000, as amended. Finding that the penalties provided

by La. R.S. 22:1973 C may not exceed twice the damages sustained due to the

insurer’s breach, we reduced the penalty awarded by the trial court from

$12,314,123.72 to $5,800,000.00 ($2,900,000.00 x 2), which is twice the damages

which resulted from Underwriters’ bad faith. Consequently, we amended the

judgment and awarded the Zydeco plaintiffs $5,800,000.00 for bad faith damages.

With regard to the limited issue raised in the dissent, i.e., amending the amount

awarded for loss of income to $2,900,000, the decree stated that “we amend the

judgment,” and also “amended and affirmed as amended” the award for loss of

income. The concluding boldface pronouncement read as follows:

AFFIRMED IN PART; AMENDED IN PART AND
AFFIRMED AS AMENDED; REVERSED IN PART;
AND VACATED IN PART

19-CA-562 4

An appeal is the exercise of the right of a party to have a judgment of a trial

court revised, modified, set aside, or reversed by an appellate court. (Emphasis

added.) La. C.C.P. art. 2082.

La. Const. Art. 5, §8 provides in pertinent part:
(B) Judgments. A majority of the judges sitting in a case shall concur
to render judgment. However, in civil matters only, when a
judgment of a district court or an administrative agency
determination in a workers' compensation claim is to be modified or
reversed and one judge dissents, the case shall be reargued before
a panel of at least five judges prior to rendition of judgment, and a
majority shall concur to render judgment. (Emphasis added.)

U.R.C.A., Rule 1-5, which mirrors La. Const. Art. 5, §8 B, provides in part:

In civil cases, when a judgment or ruling of a trial court is to be
modified or reversed and one judge dissents, the case shall be
reargued or resubmitted before a panel of at least 5 Judges if
required by the constitution or by the local rules of the particular
appellate court.

In Veal v. Dwyer, 504 So.2d 884, (La. App. 5 Cir. 1987), this court held that

a decision to amend a judgment is neither a modification nor a reversal of the lower

court and is thus, not subject to the rule requiring that the case be reargued before a

panel of at least five judges when a judgment of a trial court in a civil appeal is to be

modified or reversed and one judge dissents.

In Veal this court held:

We note La. C.C.P. art. 2082 grants the “right of a party to have a
judgment of a trial court revised, modified, set aside, or reversed by
an appellate court.” In its wisdom, the legislature apparently found
some difference between a “revision” and a “modification.” The
term “amended” is not included in this list of possible dispositions,
and neither is “affirmed” nor “remanded” [See La. C.C.P. art. 2082
Comment (d); La. C.C.P. art. 2164, Comment (d)]. If the
enumerated dispositions in art. 2082 are not meant to be exclusive,
it suggests that “amended,” although certainly akin to the terms
“revised” and “modified,” is nonetheless a separate disposition.
Accordingly, to “amend” a judgment would not make the appeal
subject to Rule 1-5 and La. Const. art. V, §8(B) because technically
we have neither “modified” nor “reversed” the lower court
judgment.

19-CA-562 5

This semantic exercise aside, an inquiry into the choice of language
in La. Const. art. V, §8(B) leads to Vol. VI, p. 756 of the transcripts
from the Constitutional Convention. Therein, Delegate Chris J. Roy
explained § 8(B) upon its presentation to the delegates. In the debate
over the article on the floor of the Convention, only “reversal” is
discussed in considering the effect of the article.

In light of the jurisprudence and the delegates' discussion, we find
that the term “modified” contemplates a change in the judgment
which would constitute a reversal. In other words, a “modification”
is a change which is tantamount to reversal as a practical matter.

Bearing in mind our state constitution, our court rules, our statutory
law, and our jurisprudential guidelines, we find the changes of the
trial court's judgment in our decree constitute a correction of the trial
court's misinterpretation of the medical testimony, thereby defining
a specific revision. Additionally, this Circuit, as a matter of policy,
has decided that the majority of each panel determines the state of
any “change” in the trial court's judgment in accordance with its
vested authority. (Original footnotes omitted.)

APPLICATION FOR REHEARING DENIED.

The Louisiana First Circuit in Hurst v. Eaton, 588 So.2d 1130, 1138, n.3 (La.

App. 1 Cir. 1991) amended the trial court’s award of damages finding manifest error,

and agreed with the Veal interpretation of La. Const. Art. V, §8(B), U.R.C.A., Rule

1-5, and La. C.C.P. art. 2082 as held by this court in Veal, supra. In an extensive

footnote (n.3), the First Circuit stated:

Although one of our panel members would agree to amend and
affirm the judgment, but disagrees with the amount of the proposed
amendment, we find it unnecessary to resubmit this matter to a five-
judge panel under La. Const. art. V, § 8(B). Our research discloses
no prior published cases in this circuit in which a three-member
panel was divided on the question of amending a judgment.
However, our brethren in the other circuit courts of appeal have
considered the issue in similar situations, and their discussions have
been helpful. We find, after considering the opposing positions of
the Second Circuit (see, for example, Sanders v. State Farm Mutual
Automobile Insurance Co., 516 So.2d 1162 (La. App. 2nd Cir.1987)
and the other circuits, that we agree with the interpretation of La.
Const. art. V, § 8(B), LSA-C.C.P. art. 2082, and Rule 1-5, Uniform
Rules, Courts of Appeal, expressed by our brethren in the Fifth
Circuit in Veal v. Dwyer, 504 So.2d 884 (La. App. 5th Cir.1987) on
application for rehearing.

19-CA-562 6

See also State Department of Highways v. Mims, 336 So.2d 24 (La.
App. 3d Cir.) on application for rehearing, writ denied, 339 So.2d
16 (La.1976); and Williams v. City of New Orleans, 433 So.2d 1129
(La. App. 4th Cir.) on application for rehearing, writ not considered,
437 So.2d 1135 (La. 1983).

Thus, the Louisiana First Circuit also found that the Louisiana Constitution and the

U.R.C.A. do not require a five-judge panel where the trial court judgment is amended

and affirmed as amended.

As stated in Veal, we find this court’s opinion amending the trial court’s

judgment “constitute[s] a correction of the trial court’s misinterpretation” of the

expert’s testimony, thus “defining a specific revision.” Further, while one panel

member dissented in part to the judgment only as to the amended award for lost

income, he did not dissent to the amended award for bad faith damages, which

subsequently used the amended lost income award to correctly calculate the bad faith

damages. We find this court’s amended opinion is not subject to La. Const. Art. 5,

§8 B and U.R.C.A., Rule 1-5 requiring that the case be reargued before a panel of at

least five judges when a judgment of a trial court in a civil appeal is modified or

reversed and one judge dissents.

DECREE

For the reasons stated herein, we deny the applications for rehearing.

19-CA-562 7

ZYDECO'S II, LLC, ZYDECO'S CORP, NO. 19-CA-562
DUSTIN GAINEY AND ROSEMARIE
FIFTH CIRCUIT
GAINEY
COURT OF APPEAL
VERSUS
STATE OF LOUISIANA
CERTAIN UNDERWRITERS AT
LLOYD'S, LONDON SUBSCRIBING
TO CERTIFICATE/POLICY NO.
D1180D150152-59633, DAVID
BRENNAN, DAVE BRENNAN
INSURANCE INC., AND
BRAISHFIELD ASSOCIATES, INC.

JOHNSON, J., CONCURS WITH REASONS

I agree to deny the applications for rehearing but write separately to

clarify the decision not to specifically dissent from the bad faith damages award

of $5.8 million, as modified by the majority. I remain convinced that the trial

court’s determination of the lost income award should not have been disturbed

on appeal, but otherwise believe that the award for bad faith damages was

calculated correctly.

19-CA-562 1

SUSAN M. CHEHARDY CURTIS B. PURSELL

CHIEF JUDGE CLERK OF COURT

NANCY F. VEGA
FREDERICKA H. WICKER
CHIEF DEPUTY CLERK
JUDE G. GRAVOIS
MARC E. JOHNSON
ROBERT A. CHAISSON SUSAN S. BUCHHOLZ
STEPHEN J. WINDHORST
FIRST DEPUTY CLERK
HANS J. LILJEBERG
JOHN J. MOLAISON, JR. FIFTH CIRCUIT
MELISSA C. LEDET
JUDGES 101 DERBIGNY STREET (70053)
DIRECTOR OF CENTRAL STAFF
POST OFFICE BOX 489
GRETNA, LOUISIANA 70054 (504) 376-1400

(504) 376-1498 FAX
www.fifthcircuit.org

NOTICE OF DISPOSITION CERTIFICATE OF DELIVERY
I CERTIFY THAT A COPY OF THE DISPOSITION IN THE FOREGOING MATTER HAS BEEN
TRANSMITTED IN ACCORDANCE WITH UNIFORM RULES - COURT OF APPEAL, RULE 4-6 THIS
DAY 10/28/2021 TO THE TRIAL JUDGE, THE TRIAL COURT CLERK OF COURT, AND AT LEAST ONE OF
THE COUNSEL OF RECORD FOR EACH PARTY, AND TO EACH PARTY NOT REPRESENTED BY
COUNSEL, AS LISTED BELOW:

19-CA-562
E-NOTIFIED
29th Judicial District Court (Clerk)
Honorable Connie M. Aucoin (District Judge)
Graham J. Rees (Appellee) Joel T. Chaisson, II (Appellee) Richard D. Roniger, II (Appellee)
Robert P. Charbonnet, Jr. (Appellee) Alexandra G. Roselli (Appellant)
Martin A. Stern (Appellant) Raymond P. Ward (Appellant)
Mark C. Landry (Appellee)

MAILED
Honorable Emile R. St. Pierre James S. Rees, IV (Appellee) Peter M. Donovan (Appellee)
(District Judge) Attorney at Law Attorney at Law
Division "C" 3750 South Claiborne Avenue 4640 Rye Street
29th Judicial District Court New Orleans, LA 70125 Suite 100
P. O. Box 424 Metairie, LA 70006
Hahnville, LA 70057 Stacy N. Kennedy (Appellee)
Attorney at Law
Henry S. Provosty (Appellant) Post Office Box 52124
Zachary P. Fickes (Appellant) Lafayette, LA 70505
Attorneys at Law
650 Poydras Street
Suite 2700
New Orleans, LA 70130