Case Name: Joseph SHER v. LAFAYETTE INSURANCE COMPANY; United Fire & Casualty Company; the United Fire Group; Robert Jones; Wes Swank; Fred Vanderbrook; and Property Loss Consulting, Inc.
Court: Louisiana Court of Appeal
Jurisdiction: Louisiana
Decision Date: 2007-11-19
Citations: 973 So. 2d 39
Docket Number: No. 2007-CA-0757
Parties: Joseph SHER v. LAFAYETTE INSURANCE COMPANY; United Fire & Casualty Company; the United Fire Group; Robert Jones; Wes Swank; Fred Vanderbrook; and Property Loss Consulting, Inc.
Judges: (Court composed of Judge PATRICIA RIVET MURRAY, Judge JAMES F. McKAY, III, Judge TERRI F. LOVE, Judge MAX N. TOBIAS, JR., and Judge LEON A. CANNIZZARO).
Reporter: Southern Reporter, Second Series
Volume: 973
Pages: 39–72

Head Matter:
Joseph SHER v. LAFAYETTE INSURANCE COMPANY; United Fire & Casualty Company; the United Fire Group; Robert Jones; Wes Swank; Fred Vanderbrook; and Property Loss Consulting, Inc.
No. 2007-CA-0757.
Court of Appeal of Louisiana, Fourth Circuit.
Nov. 19, 2007.
Writ Granted Jan. 11, 2008.
James M. Garner, Darnell Bludworth, Lauren L. Hudson, Timothy B. Francis, Sher Garner Cahill Richter Klein & Hilbert, L.L.C., New Orleans, LA, for Joseph Sher.
Robert A. McMahon, Jr. Howard B. Kaplan, William D. O’Regan, IV, Bernard, Cassisa, Elliott & Davis, APLC, Metairie, LA, Ralph S. Hubbard III, Lugenbuhl, Wheaton, Peck, Rankin & Hubbard, New Orleans, LA, for Lafayette Insurance Company.
James M. Garner, Darnell Bludworth, Timothy B. Francis, Kevin M. McGlone, Sher Garner Cahill Richter Klein & Hilbert, L.L.C., New Orleans, LA, Amicus Curiae, Xavier University of Louisiana.
Charles C. Foti, Jr., Attorney General, Baton Rouge, LA, Amicus Curiae, State of Louisiana.
John W. Houghtaling, II, James M. Williams, Gauthier, Houghtaling & Williams, L.L.C., Metairie, LA, Amicus Curiae, Gauthier, Houghtaling & Williams, L.L.C.
Kevin E. Cunningham Roedel Parsons Koch Frost Balhoff & McCollister, Baton Rouge, LA, Amicus Curiae, American Insurance Association.
Wm. Ryan Acomb, Adrianne L. Baum-gartner, Charles L. Chassaignae, IV, Por- teous, Hainkel & Johnson, LLP, New Orleans, LA, Amicus Curiae, The National Association of Mutual Insurance Companies.
Dominic J. Ovella, Sean P. Mount, Daniel M. Redmann, Hailey McNamara Hall Larmann & Papale, L.L.P., Metairie, LA, Amicus Curiae, Fidelity and Deposit Company of Maryland; Empire Fire and Marine Insurance Company; Empire Indemnity Insurance Company; and Centre Insurance Company.
Edward D. Wegmann, Harry S. Hardin, III, Madeleine Fischer, Joseph J. Lowen-thal, Jr., Jones Walker Waechter Poitevent Carrere & Denegre, L.L.P., New Orleans, LA, Robert Shulman, Howery LLP, Washington, DC, Amicus Curiae, The Administrators of the Tulane Educational Fund.
(Court composed of Judge PATRICIA RIVET MURRAY, Judge JAMES F. McKAY, III, Judge TERRI F. LOVE, Judge MAX N. TOBIAS, JR., and Judge LEON A. CANNIZZARO).

Opinion:
TERRI F. LOVE, Judge.
|! This appeal arises from an insurance claim resulting from damages related to Hurricane Katrina. Joseph Sher, the owner of a five-unit apartment building in New Orleans, contested the claim determination of his commercial insurer, Lafayette Insurance Company. Lafayette Insurance Company refused to pay additional funds asserting that Joseph Sher's property was not properly maintained and that the policy did not cover flood damages. The trial court held that the insurance policy was ambiguous and therefore covered flood damage. A jury determined Joseph Sher's damage awards and the trial court awarded attorney's fees and costs.
Lafayette asserts that the insurance policy is not ambiguous and that the damage awards are excessive. Joseph Sher alleges the trial court erred by not allowing evidence and jury charges relating to his alleged mental anguish. We find the insurance policy ambiguous and affirm the trial court's granting of the partial motion for summary judgment. We find that the 2006 amendments to La. R.S. 22:658 cannot be applied retroactively and adjust the penalty award accordingly. The trial court erred in awarding attorney's fees; therefore, we vacate the award. Lastly, we find the jury properly determined the property damage amounts and |2affirm as amended.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Hurricane Katrina ("Katrina") brought catastrophic loss to New Orleans on August 29, 2005. With the naturally occurring storm also came the failure of the levee system built and maintained by the United States Army Corps of Engineers, causing New Orleans to be inundated with water. Joseph Sher ("Mr. Sher") owned and lived in a five-unit apartment building ("Building") located at 1410 Broadway Street. Three weeks prior to Katrina, Mr. Sher suffered three heart attacks, which required surgery and a hospital stay. He thought evacuating would be too strenuous and decided to remain in his apartment during the mandatory evacuation period.
During Katrina, Mr. Sher said that the Building shook, water came in around the windows, and it appeared that the walls were "weeping." Early Tuesday morning, August 30, 2005, Gayle Parmelee, one of Mr. Sher's tenants who remained with Mr. Sher in the Building during the mandatory evacuation period, observed water rising around the Building. The water inundated the basement level of the Building with approximately four feet of water. Mr. Sher later evacuated the Building in a canoe and traveled to Baton Rouge to reside with one of his sons.
Mr. Sher first obtained his commercial all-risk insurance policy ("Policy") on the Building with Lafayette Insurance Company ("Lafayette") in 1989. Mr. Sher notified Lafayette of his insurance claim during the first or second week of September 2005. Lafayette assigned Mr. Sher's claim to Property Loss | .^Consulting, Inc. ("PLC") around October 5, 2005, when Lafayette asserts it first learned of the claim. Following the initial inspection of the Building, Lafayette determined that most of the damage to the Building was not covered under the Policy because the damage was caused by lack of maintenance, disrepair, or flooding. Lafayette estimated Mr. Sher's covered damages at $8,307.09. Lafayette then subtracted a hurricane deductible of $1,000 and a premium price of $2,087, which meant Mr. Sher was issued a check for $270.09. Mr. Sher then began to dispute the covered damages with Lafayette.
Following a second inspection conducted by Fred Vanderbrook ("Mr. Vander-brook"), a consulting engineer retained by Lafayette for inspection of the roof and interior of the Building, Lafayette issued a supplemental check to Mr. Sher for $2,484.99. Neither check was ever negotiated. Mr. Sher forwarded additional estimates and invoices for repairs to Lafayette that he felt the Policy covered. Lafayette did not tender payment for the estimates or invoices.
Mr. Sher filed a petition for insurance coverage, bad faith penalties, attorney's fees and costs, and bad faith breach of insurance contract on August 28, 2006, against Lafayette; United Fire and Casualty Company ("UFC"); the United Fire Group ("UFG"); Robert Jones ("Mr. Jones"); Wes Swank ("Mr. Swank"); Mr. Vanderbrook; and PLC. Lafayette asserted the declinatory exception of lis pendens in its answer, which was dismissed. UFC and UFG then filed a motion for summary judgment as a matter of law asserting that Mr. Sher had no claims regarding their liability. Mr. Sher then dismissed UFC and UFG without prejudice.
Mr. Vanderbrook filed a dilatory exception of vagueness/ambiguity. Mr. Sher then dismissed Mr. Vanderbrook without prejudice.
Lafayette then filed a motion for leave to file a third party demand against R. LDavid Paulison, as the director of the Federal Emergency Management Agency, FEMA, and the National Flood Insurance Program ("NFIP"), which the trial court denied due to time constraints of the impending trial.
Mr. Sher filed a motion for partial summary judgment as a matter of law against Lafayette that the Policy covered his damages. The trial court then granted Mr. Sher's motion for partial summary judgment holding that the flood exclusion contained in the Policy was ambiguous; therefore, it covered "man-made events." Additionally, the trial court held that "Lafayette has not met its burden of proving" that Mr. Sher's "damage was not caused by a man-made event." Lastly, the trial court denied Lafayette's motion to strike an expert witness or to continue the trial.
Lafayette filed a motion in limine to exclude new theories of recovery not dis closed prior to trial, which the trial court granted. Mr. Sher then filed a motion in limine to exclude limitations or exclusions not properly pled in Lafayette's answer as affirmative defenses, which the trial court granted finding that each exclusion or limitation needed to be specifically pled.
Lafayette followed with a motion in li-mine to exclude prejudicial statements. Lafayette wanted to preclude Mr. Sher from revealing to the jury that he was a Holocaust survivor. The trial court denied the motion to exclude prejudicial statements regarding the Holocaust on a limited basis.
The trial court bifurcated the trial into two phases, with the second phase pertaining only to the alleged arbitrary and capriciousness of Lafayette. After a five-day trial, including both phases, the jury
awarded damages as follows:
Building Damage Above the Basement $ 175,850
Building Damage in the Basement $ 144,300
Lost Rents $ 17,350
Business Personal Property $ 31,577
IsPenalties Pursuant to La. R.S. 22:658 $ 184,538.50
TOTAL $ 553,615.50
The trial court reserved the amount of attorney's fees and costs, plus interest from the date of judicial demand until paid, for determination at a later date. Following the trial, Mr. Sher dismissed and reserved his rights against Mr. Jones, Mr. Swank, and PLC.
Lafayette filed a motion for a new trial or alternatively remittitur, which was denied. Lafayette then timely filed this sus-pensive appeal. The trial court assessed attorney's fees and costs as follows:
Costs Pursuant to La. C.C.P. art. 1920 $ 16,288.60
Costs Pursuant to La. C.C.P. art. 970 $ 42,020.24
Attorney's Fees Pursuant to La. C.C. art.
1997 and/or La. R.S. 22:658_$ 258,728
TOTAL $317,036.84
Thus, the total amount assessed against Lafayette was $870,652.34.
Lafayette appeals asserting that the trial court erred by: 1) granting Mr. Sher's motion for partial summary judgment; 2) retroactively applying an amendment to La. R.S. 22:658; 3) awarding $258,728 in attorney's fees; 4) striking defenses other than flood and NFIP; 5) not allowing a credit for Mr. Sher's NFIP policy; 6) awarding $42,020.24 in costs pursuant to La. C.C.P. art. 970; 7) awarding legal interest on penalties and attorney's fees from the date of judicial demand; 8) entering judgment on the jury's finding of arbitrary and capriciousness; 9) entering judgment on the jury's award of $31,577 for business personal property ("BPP"); 10) entering judgment on the jury's award for lost rents; and 11) entering judgment on the jury's award for building damages. Mr. Sher answered the appeal asserting that the trial court erred in refusing to instruct the jury regarding damages for mental anguish and that the jury interrogatories should have included an [ (¡opportunity to award such damages.
PARTIAL SUMMARY JUDGMENT
Lafayette asserts the trial court erred by granting Mr. Sher's motion for partial summary judgment and determining that the meaning of flood in the context of the Policy was ambiguous.
Appellate courts review summary judgments using the de novo standard of review. Denson v. Diamond Offshore Co., 06-0568, p. 3 (La.App. 4 Cir. 3/28/07), 955 So.2d 730, 732. To find genuine issues of material fact, the reviewing court examines the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits." La. C.C.P. art. 966(B). If no genuine issues of material fact exist and the "mover is entitled to judgment as a matter of law," then summary judgment should be granted. La. C.C.P. art. 966(B). The mover bears the burden of proof. La. C.C.P. art. 966(C)(2).
insurance policy is a contract. The Louisiana Civil Code states that the "[i]nterpretation of a contract is the determination of the common intent of the parties." La. C.C. art.2045. Further, "[w]hen the words of a contract are clear and explicit and lead to no absurd consequences, no further interpretation may be made in search of the parties' intent." La. C.C. art.2046. If a word in a contract is not defined in the document, it must be given its "generally prevailing meaning." La. C.C. art.2047. However, "[w]ords susceptible of different meanings must be interpreted as having the meaning that best conforms to the object of the contract." La. C.C. art.2048. When determining the meaning best conforming to the object of the contract, the meaning must be one that renders it effective and not one that renders it ineffective. La. C.C. art.2049.
17Provisions of a contract must be interpreted along with the contract in totem. La. C.C. art.2050. Although worded in general terms, a contract "must be interpreted to cover only those things it appears the parties intended to include." La. C.C. art.2051. "When the parties made no provision for a particular situation, it must be assumed that they intended to bind themselves not only to the express provisions of the contract, but also to whatever the law, equity, or usage regards as implied in a contract of that kind or necessary for the contract to achieve its purpose." La. C.C. art.2054. Ultimately, if doubt exists, "a provision in a contract must be interpreted against the party who furnished its text." La. C.C. art.2056. Thus, "[a] contract executed in a standard form of one party must be interpreted, in case of doubt, in favor of the other party." La. C.C. art.2056.
The Policy contains the following water exclusion, in pertinent part:
B. EXCLUSIONS
1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
g. Water
(1) Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not;
(2) Mudslide or mudflow;
(3) Water that backs up from a sewer or drain; or
(4) Water under the ground surface pressing on, or flowing or seeping through:
(a) Foundations, walls, floors or paved surfaces;
(b) Basements, whether paved or not; or
(c) Doors, windows or other | «openings.
The Policy also contains a section entitled "SECTION V—DEFINITIONS," which includes the definitions of words used in the policy. However, "flood" is not defined in this section.
The common intent of the parties in an insurance contract is to provide insurance coverage. The meaning of "flood" is not defined within the Policy. Therefore, it must be given its generally prevailing meaning. However, because "flood" is susceptible to different meanings due to varying causes of floods, we must find a meaning that conforms to the object of the contract, which also renders the contract effective.
A review of the Policy reveals that the parties intended to cover and include all risks that were not specifically excluded or limited. Lafayette failed to specifically exclude all floods because of the ambiguity contained within the water exclusion. While the Policy states that it does not cover damage caused by a "flood," it also states that it does not cover "waves, tides, tidal waves," and the "overflow of any body of water . whether driven by the wind or not." This exclusion includes "flood," but then continues to list specific natural disasters that cause inundations of water, commonly labeled as "floods." For example, a varying cause of a flood can be man-made or natural, as documented in La. R.S. 29:762, which states that a "flood" is a "natural disaster."
A contract must be interpreted to achieve its purpose. La. C.C. art.2054. The purpose of the Policy was to provide insurance coverage for all risks not specifically excluded or limited. Therefore, in case of any doubt, when | reinterpreting a contract of a standard form, the contract must be interpreted against Lafayette as the issuer of the Policy.
As such, after a de novo review, we make the legal determination that the Policy with Lafayette is ambiguous as it relates to the water exclusion because it is unclear what types of floods are excluded. Therefore, strictly construed against Lafayette, Mr. Sher is covered for the damage to the basement level of the Building.
MENTAL ANGUISH
Mr. Sher asserts that the trial court erred by refusing to instruct the jury as to general damages for mental anguish, inconvenience, and emotional distress. He requested that the trial court include the following jury charges:
Plaintiff's Proposed Jury Charge Regarding General Damages
A finding that an insurance company breached the duty owed to its insured of good faith and fair dealing, pursuant to Louisiana Revised Statutes 22:1220, entitles the insured to recover penalties against the insurer for "any damages sustained as a result of the breach." Such damages may include general damages for mental anguish and emotional distress associated with the pursuit of the insurance claim, as well as aggravation and inconvenience.
La. R.S. 22:1220
Lewis v. State Farm Ins. Co., 41,527 (La.App. 2 Cir. 12/27/06), 946 So.2d 708, 728.
Reed v. Ricard, [sic] 97-2250 (La.App. 1 Cir. 11/18/98), 744 So.2d 13, 19.
Williams v. La. Indemn. Co., 26,887 (La.App. 2 Cir. 6/21/95), 658 So.2d 739, 743.
Plaintiff's Proposed Jury Charge Regarding Mental Anguish
The finding that an insurance company violated Louisiana Civil Code Article 1997 by engaging in a bad faith breach of contract supports an award of damages for | ininconvenience, anguish and the like resulting from the actions of the defendant.
La. C.C. art.1997.
Modisette v. Am. Integrity Ins. Co., 297 So.2d 498 (La.App. 2nd Cir.1974).
Plaintiff's Proposed Jury Charge Regarding Mental Anguish
Damages for nonpecuniary losses such as emotional distress and mental anguish are also available under Louisiana Civil Code Article 1998, which allows recovery of such damages where the contract is intended to gratify a nonpe-cuniary interest.
The nonpecuniary interest need only be a "significant" object or cause of the contract, as opposed to the primary or exclusive object of the contract for such damages to be recoverable. Damages for nonpecuniary losses can be recovered where the contract is intended to gratify both pecuniary and nonpecuniary interests. Contracts pertaining to plaintiffs residence can satisfy such an objective. La. C.C. art.1998.
Young v. Ford Motor Co., 595 So.2d 1123, 1124 (La.1992).
Thomas v. Desire Comm. Hous. Corp., 98-2097 (La.App. 4 Cir. 7/19/00), 773 So.2d 755, 763.
Taylor v. Burton, 93 — 1348[sic] (La.App. 3 Cir. 3/6/98), 708 So.2d 531, 535-36.
Mr. Sher requests that this Court award him general damages of $500,000 for mental anguish, inconvenience, and emotional distress.
Rejecting a requested jury instruction constitutes an error of law when it is "prejudicial" by "materially" affecting the result and depriving "a party of substantial rights." Lam v. State Farm Mut. Auto. Ins. Co., 03-0180, p. 4 (La.App. 4 Cir. 4/1/05), 901 So.2d 559, 564, rev'd in part on other grounds, 05-1139 (La.11/29/06), 946 So.2d 133. The manifest error standard presumes the jury utilized the correct law. Rathey v. Priority EMS, Inc., 04-0199, p. 27 (La.App. 4 Cir. 1/12/05), 894 So.2d 438, 458, writ denied, 05-0789 and 05-0802 (La.5/6/05), 901 So.2d 1107, 1108.
| nDe novo review will be used by the appellate court "if the jury applied the incorrect law because of erroneous jury instructions" and it "could have affected the jury's decision." Rathey, 04-0199, pp. 27-28, 894 So.2d at 459. "De novo review is used only if the jury charges precluded 'the jury from reaching a verdict based on the law and the facts.' " Chaisson v. Avondale Indus., Inc., 05-1511, p. 27 (La. App. 4 Cir. 12/20/06), 947 So.2d 171, 190, quoting Jones v. Liberty Mut. Ins. Co., 568 So.2d 1091, 1094 (La.App. 5th Cir.1990). "Ultimately, the determinative question is whether the jury instructions misled the jury to the extent that it was prevented from dispensing justice." Nicholas v. Allstate Ins. Co., 99-2522, p. 8 (La.8/31/00), 765 So.2d 1017,1023.
"[I]t is well established that damages for mental anguish are recoverable in tort actions." Gele v. Markey, 387 So.2d 1162, 1164 (La.1980). The damages sought by Mr. Sher "are not recoverable for breach of lease or of any contract unless psychological gratification was the primary object of the contract." Buddy's Tastee No. 1, Inc. v. Tastee Donuts, Inc., 483 So.2d 1321, 1324 (La.App. 4th Cir. 1986). However, "courts have been willing to compensate victims of mental distress in contract cases which have elements of tort actions." Id. "[B]are allegations of depression and embarrassment" are not sufficient. Id. Louisiana law dictates "that the object of a contract of insurance is the payment of money." Dixon v. First Premium Ins. Group, 05-0988, p. 16 (La.App. 1 Cir. 3/29/06), 934 So.2d 134, 146, writ denied, 06-0978 (La.6/16/06), 929 So.2d 1291.
The case sub judice presents a contract of insurance, the object of which is to pay money. There is no evidence that psychological gratification or nonpeeuniary interests was the object of this Policy. The proffered testimony of Mr. Leopold Sher addresses Mr. Sher's alleged mental anguish. Mr. Leopold Sher contended 11zthat Mr. Sher was "sick in his heart and mentally and emotionally upset every single day." However, the record lacks evidence of Lafayette's actions, other than failure to pay, that would demonstrate that "the obli-gor intended, through his failure, to aggrieve the feelings of the obligee." La. C.C. art.1998. The evidence in the record does not rise to the level that would merit the award of mental anguish damages in a contractual based action as opposed to a delictual based action. As such, we find that the trial court did not commit, an error of law by refusing to include Mr. Sher's proposed jury instructions as he was not materially or prejudicially affected or deprived of substantial rights.
FLOOD INSURANCE POLICY CREDIT
We pretermit the discussion of Lafayette's claim for a credit for flood insurance policy payments as no evidence in the record exists to establish Mr. Sher received payments from the NFIP.
STANDARD OF REVIEW
The remaining issues in the case sub judice pertain to factual determinations, legal issues, and damage awards, which require the appellate court to utilize the following standards of review.
Factual determinations are reviewed with the manifestly erroneous/clearly wrong standard. Rosell v. ESCO, 549 So.2d 840, 844 (La.1989). Reviewing and reversing the factfinder's determinations involves a two-part test developed by the Louisiana Supreme Court. Mart v. Hill, 505 So.2d 1120, 1127 (La.1987). The reviewing court must find that no reasonable factual basis exists for the trial court's findings and that the findings are wrong or "manifestly erroneous" according to the record. Id. The entire record must be reviewed to determine whether the factfin-der was clearly wrong. Stobart v. State, Through Dept. of Transp. and Dev., 617 So.2d 880, 882 (La.1993). The factfinder has a "better capacity to evaluate live witnesses." Canter v. Koehring Co., 283 So.2d 716, 724 (La.1973). Thus, "the appellate court must determine if the factfin-der's decision was a reasonable one." Norfleet v. Lifeguard Transp. Serv., Inc., 05-0501, p. 5 (La.App. 4 Cir. 5/17/06), 934 So.2d 846, 852. "[W]here two permissible views of the evidence exist, the factfinder's choice between them cannot be manifestly erroneous or clearly wrong." Stobart, 617 So.2d at 883.
Damage awards by the factfinder are not altered or reversed absent an abuse of discretion. Factfinders have "much discretion" when assessing damages. La. C.C. art. 2324.1. The damage amount is "entitled to great deference on review." Trunk v. Med. Ctr. of La. at New Orleans, 04-0181, p. 9 (La.10/19/04), 885 So.2d 534, 539, citing Wainwright v. Fontenot, 00-0492, p. 6 (La.10/17/00), 774 So.2d 70, 74. Accordingly, the abuse of discretion standard is utilized. Youn v. Maritime Overseas Corp., 623 So.2d 1257, 1260 (La.1993). Notwithstanding opposing viewpoints on an appropriate award, an abuse of discretion is found only if the award is "beyond that which a reasonable trier of fact could assess for the effects of the particular injury to the particular plaintiff under the particular circumstances." Id. 623 So.2d at 1261.
Legal errors are reviewed by appellate courts with a de novo standard. Overton v. Shell Oil Co., 05-1001, p. 8 (La.App. 4 Cir. 7/19/06), 937 So.2d 404, 410.
STRICKEN DEFENSES
Lafayette avers the trial court legally erred by not allowing it to present defenses other than the water exclusion and payments made under an NFIP policy. The trial court held that Lafayette did not specifically plead all of the exclusions | ufrom the Policy as affirmative defenses; thus, the exclusions/limitations were waived. Lafayette's Answer included the following language:
Lafayette adopts the terms, conditions, coverages, exclusions and endorsements of its policy, as if copied herein in exten-sio, [sic] as a defense to petitioner's claims; Lafayette further pleads all defenses, exclusions, rights and remedies under the policy of insurance issued by Lafayette to petitioner.
Lafayette asserts that this pled the Policy in its entirety as an affirmative defense.
"[A] defendant's answer must set forth any matter constituting an affirmative defense." Pendleton v. Smith, 95-1805, p. 5 (La.App. 4 Cir. 5/8/96), 674 So.2d 434, 437. See La. C.C.P. art. 1005. "An affirmative defense raises a new matter, which assuming the allegations in the petition are true, constitutes a defense to the action." Allvend, Inc. v. Payphone Comm'ns Co., 00-0661, p. 5 (La.App. 4 Cir. 5/23/01), 804 So.2d 27, 30. The list of affirmative defenses contained in La. C.C.P. art. 1005 is "illustrative, not exclusive." Bienvenu v. Allstate Ins. Co., 01-2248, p. 5 (La.App. 4 Cir. 5/8/02), 819 So.2d 1077, 1079. "Whether an issue is an affirmative defense is a question of fact, determined by the circumstances of the individual case." Bienvenu, 01-2248, p. 5, 819 So.2d at 1080. "Reliance upon an exclusion in an insurance contract is considered to be an affirmative defense, which must be specially pleaded in defendant's answer." Pendleton, 95-1805, 674 So.2d at 437. "In the absence of such a pleading, no proof can be offered in connection with the exclusion." Id.
The purpose of specifically pleading an affirmative defense is to give fair notice to the plaintiff of the nature of defenses. Bienvenu, 01-2248, p. 6, 819 So.2d at 1080. Special pleading prevents "trial by ambush" and does not give the | -^defendant an unfair advantage. Walters v. Metro. Erection Co., 94-0162 and 94-0475 (La.App. 4 Cir. 10/27/94), 644 So.2d 1143, 1147. Pleading an insurance policy "in extenso" does not meet the requirement that affirmative defenses be specifically pled. Dixie Sav. and Loan Ass'n v. Pitre, 99-154, pp. 23-24 (La.App. 5 Cir. 7/27/99), 751 So.2d 911, 924-25, writ denied, 99-2867 (La.12/10/99), 751 So.2d 855.
Lafayette refers to two cases to support the assertion that pleading an insurance policy in extenso is sufficient as a general rule. Lafayette asserts that Brantley v. State Farm Ins. Co., 37,601 (La.App. 2 Cir. 1/28/04), 865 So.2d 265, and Levet v. Calais & Sons, Inc., 514 So.2d 153 (La.App. 5th Cir.1987), maintain the proposition that Louisiana appellate courts have ruled that pleading the policy is sufficient. We find these cases distinguishable from Dixie, as the cases do not establish a general rule that pleading a policy in its entirety complies with the requirements of La. C.C.P. art. 1005.
In Brantley, the trial court allowed the defendant to submit a handwritten answer, which asserted "all defenses under the pol icy" on the day of trial. 37,601 at pp. 8-9, 865 So.2d at 270. The plaintiffs alleged that they were prejudiced by the ruling because no continuance was granted. Brantley, 37,601, p. 8, 865 So.2d at 270. The trial court gave the plaintiffs an opportunity to file a motion for summary judgment following the filing of the answer and prior to the recommencement of trial, which they declined. Id. The appellate court found that "[biased upon this record," the trial court was not clearly wrong "in finding that the answer was sufficient and in denying the motion to strike." Brantley, 37,601, p. 9, 865 So.2d at 270.
Similarly limited to particular facts and circumstances, in Levet, the h (¡defendant and the defendant's insurer pled the insurance policy "in extenso." 514 So.2d at 160. However, the defendant and the plaintiffs opposed the insurer's motion to limit liability based on the fact that the policy limits were not specifically pled. Levet, 514 So.2d at 160. The appellate court found that the policy limit was deemed admitted because of the failure to respond to a request for admissions. Id. Like Brantley, the appellate court did not hold as a general rule that pleading a policy "in extenso" was sufficient to comply with La. C.C.P. art. 1005. Thus, neither appellate court found, as a general rule, that specific provisions of an insurance policy, intended to be used as affirmative defenses, need not be pled if the answer states that the defendant pleads the policy or the policy in extenso.
Thus, given the nature and purpose of affirmative defenses and that Lafayette did not specifically plead defenses other than NFIP and the water exclusion, we find that the trial court did not commit legal error in precluding the presentation of other defenses, as in extenso is insufficient to plead other exclusions and limitations of the Policy.
BUSINESS PERSONAL PROPERTY
Lafayette maintains that the trial court committed -legal error by allowing evidence of Mr. Sher's BPP into evidence and submitting the issue to the jury because it claims the Policy did not cover Mr. Sher's BPP due to the lack of a BPP limit or information on the declarations page of the Policy. However, Lafayette failed to plead that the Policy did not cover BPP as an affirmative defense. Additionally, Lafayette never raised it in a reservation of rights. Thus, Mr. Sher asserts that this affirmative defense was waived'. Lafayette moved for a directed verdict on the issue of BPP at the close of Mr. Sher's case-in-chief, which the trial [ 17court denied.
The Policy states, on the "Building and Personal Property Coverage Form," in pertinent part:
A. COVERAGE
We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.
1. Covered Property
Covered Property, as used in this Coverage Part, means the following types of property for which a Limit of Insurance is shown in the Declarations:
a. Building meaning the building or structure described in the Declarations, including:
(1) Completed additions;
(2) Permanently installed:
(a) Fixtures; '
(b) Machinery; and
(c) Equipment;
(3) Outdoor fixtures;
(4) Personal property owned by you that is used to maintain or ser vice the building or structure or its premises, including:
(a) Fire extinguishing equipment;
(b) Outdoor furniture;
(c) Floor coverings; and
(d) Appliances used for refrigerating, ventilating, cooking, dish-washing or laundering;
The form referenced above also includes the following section regarding BPP, in pertinent part:
b. Your Business Personal Property located in or on the building described in the Declarations or in the open (or in a vehicle) within 100 feet of the described premises, consisting of the following unless otherwise specified in the Declarations or on the Your Business Personal Property — Separation of 11sCoverage form:
1) Furniture and fixtures;
(2) Machinery and equipment;
(3) "Stock;"
(4) All other personal property owned by you and used in your business;
(5) Labor, materials or sendees furnished or arranged by you on personal property of others;
(6) Your use interest as tenant in improvements and betterments. Improvements and betterments are fixtures, alterations, installations or additions:
(a) Made a part of the building or structure you occupy but do not own; and
(b) You acquired or made at your expense but cannot legally remove;
(7)Leased personal property for which you have a contractual responsibility to insure, unless otherwise provided for under Personal Property of Others.
Mr. Sher submitted a list of the contents he lost and the respective values into evidence. All of the items reported on Mr. Sher's list are covered by either the section under "building coverage," "BPP," or both. Irrespective of a finding that Lafayette waived the argument that the Policy does not cover BPP, there is not a definitive statement that the Policy does not include BPP. There is merely no reference to BPP specifically on the declaration page in the Policy. This creates ambiguity that is construed against Lafayette. Therefore, we find that the trial court did not commit legal error and the jury was neither manifestly erroneous nor abused its discretion by awarding Mr. Sher $31,577 for BPP.
LOST RENTS
Lafayette contends the trial court erred by entering judgment on the jury's award for $17,350 in lost rents. Lafayette claims the lost rents award should be | igreduced to $4,600 because it states the loss from Apartment E was based on flood damage and the loss from Apartments A and C was based on post-Katrina valuations. In order to arrive at $4,600, Lafayette did not include $8,550 for Apartment E and used the pre-Katrina valuations of $700 a month for Apartments A and C.
Mr. Leopold Sher, Mr. Sher's son, testified as to the amount of rent Mr. Sher lost following Katrina because of the damage to the Building. He stated that the rent for both Apartments A and C prior to Katrina was $700 each and Apartment E was $450. He further stated that, after reviewing the prices in the post-Katrina market, both Apartments A and C each had a monthly value of $1,400 and Apartment E $450. Mr. Sher also testified as to these valuations. The jury determined Mr. Sher's lost rents as follows:
Apartment A: $400 + ($1,400 x 2 months) $ 3,200
Apartment C: $1,400 X 4 months $ 5,600
Apartment E: $450 x 19 months $ 8,550
TOTAL $17,350
The Policy includes a section on business income coverage, which reads, in pertinent part:
A. COVERAGE
Coverage is provided as described below for one or more of the following options for which a Limit of Insurance is shown in the Declarations:
(i) Business Income including "Rental Value".
We will pay for the actual loss of Business Income you sustain due to the necessary suspension of your "operations" during the "period of restoration".
The Policy covers Mr. Sher's "actual loss" of business income.
As we found above, the ambiguous water exclusion in the Policy covers |anfloods. Therefore, we find Lafayette's assertion as to the lost rents from Apartment E without merit. With respect to Apartments A and C, we find that the jury's award was not manifestly erroneous because the Policy covers actual loss. The jury had the opportunity to weigh Mr. Sher and Mr. Leopold Sher's credibility as to their study of post-Katrina valuations. If Mr. Sher could have leased Apartments A and C post-Katrina, then, according to Mr. Leopold Sher's testimony regarding the new rental market, he would have been able to collect $1,400 a month on each apartment. Therefore, we affirm the award of lost rents as the jury did not commit manifest error or abuse its discretion.
BUILDING DAMAGES
Lafayette maintains that Mr. Sher's building damages should be reduced for the following reasons: 1) forty-five percent allowance for overhead and profit is gouging; 2) "water hammer" damages are not covered under the Policy; S) there was no evidence of structural damage; 4) the jury's verdict is in excess of the amounts estimated by $50,000; and 5) Lafayette should get a credit for amounts paid.
Gouging
The jury awarded Mr. Sher $320,150 for damages to the Building. Lafayette asserts that the award reflects a forty-five percent allowance for overhead and profit. Barry Scairono ("Mr. Scairo-no"), Mr. Sher's expert in architecture; water intrusion analysis; roofing; cost estimation; and construction administration, provided the estimates for repairing the upper level and basement level of the Building, which contained a twenty-five percent allowance for overhead and profit and a twenty percent allowance as an amount for unknown contingencies.
Mr. Scairono prepared an "opinion of probable repair costs" for the damage |⅞1 to the upper level of the Building and another for damage to the basement level of the Building. Mr. Scairono's estimates for repairs to the upper level and basement level of the Building were $134,850 and $144,300, respectively. These estimations included a twenty-five percent allowance for overhead and profit. Mr. Scairono testified that twenty-five percent was "reasonable" and "typical" for an overhead and profit allowance. He also stated that the Louisiana Office of State Facility Planning and Control, the entity that does the construction for the Louisiana, allows for a twenty-five percent allowance. A separate cost of twenty percent was included for contingency purposes. Mr. Scairono described the contingency as money included for "unidentified costs in construction jobs."
Lafayette combined the percentage allocated for overhead and profit with that for contingency. However, due to the testimony of Mr. Sciarono, which differentiated the two calculations, we find neither manifest error nor abuse of discretion in the jury's determination.
Water Hammer
Lafayette avers that damages associated with the "water hammer" effect should be subtracted from the jury's award because it was not covered under the Policy. However, the trial court ruled that Lafayette was precluded from asserting additional affirmative defenses that it did not specifically plead. We affirmed the ruling regarding additional affirmative defenses. Therefore, we find that this argument is precluded.
Structural Damage
Further, Lafayette contends that the award for structural damage should be reduced beqause Mr. Sher alleges structural damage that was not proven. | ^Lafayette also avows that the amount the jury awarded Mr. Sher to inspect for structural damage should be deducted from the building damages award.
Roy Carubba ("Mr. Carubba"), Mr. Sher's expert in civil engineering, with a subspecialty in structural engineering, and as a contractor, testified that the Building cracked because it shook for two to three hours. Mr. Carubba testified that the porch moved from the wind and that constituted structural damage. He also stated that he believes there is "underlying structural damage" to the Building, but that cracks could appear without structural damage. In order to repair the structural damage he observed in the Building, Mr. Carubba stated it would cost approximately $42,410. Mr. Sciarono also testified that it would cost between $50,000 and $80,000 to determine whether there was further interior structural damage.
Dr. Jerry Householder ("Dr. Householder"), Lafayette's expert in construction and structural engineering, testified that there was no evidence of structural damage in the Building. However, Dr. Householder stated that he "hasn't seen any proof there is no structural damage."
Lafayette avows that the amount awarded by the jury for building damages exceeds the amount estimated by $50,000 because it presumes that the jury included the money to allow Mr. Sher to inspect for further structural damage to the Building.
The factfinder is allowed great discretion when awarding damages. "One injured through the fault of another is entitled to full indemnification for damages caused thereby." Hornsby v. Bayou Jack Logging, 04-1297, p. 5 (La.5/6/05), 902 So.2d 361, 365. The injured party should have his property restored "as nearly as | ¡^possible to the state it was in immediately preceding the damage.... " Coleman v. Victor, 326 So.2d 344, 346 (La.1976). "The amount of damages is dependant on the facts of each case." Gulfstream Servs., Inc. v. Hot Energy Servs., Inc., 04-1223, p. 10 (La.App. 1 Cir. 3/24/05), 907 So.2d 96, 103.
Mr. Sciarono testified that it would cost between $50,000 and $80,000 for Mr. Sher to inspect for interior structural damage to the Building. Given this testimony and the facts of the case sub judice, we do not find that the jury committed manifest error by including money for a structural inspection in the total building damages award as the jury may have determined that a structural inspection was necessary to properly restore the Building to its pre-Katrina condition.
Amounts Paid
We find that Lafayette should not receive a credit for amounts paid because Mr. Leopold Sher testified that the two checks Lafayette issued to Mr. Sher, totaling $2,755.08, were never negotiated.
In sum, the jury heard the testimony of experts and adjusters regarding the Building. It was in a better position to evaluate credibility and weigh the evidence in correlation with the witnesses. Accordingly, we find that the jury did not commit manifest error or an abuse of discretion by awarding Mr. Sher $320,150 for building damages.
ARBITRARY, CAPRICIOUS, & WITHOUT PROBABLE CAUSE
Lafayette maintains that it did not act arbitrarily, capriciously, or without probable cause by failing to timely pay Mr. Sher.
^Statutes regarding the imposition of penalties on insurers for arbitrary and capricious conduct are penal in nature and must be strictly construed. Maurice v. Prudential Ins. Co., 02-0993, p. 9 (La. App. 4 Cir. 10/23/02), 831 So.2d 381, 388. The applicable revision of La. R.S. 22:658 states, in pertinent part:
A. (1) All insurers issuing any type of contract, other than those specified in R.S. 22:656, R.S. 22:657, and Chapter 10 of Title 23 of the Louisiana Revised Statutes of 1950, shall pay the amount of any claim due any insured within thirty days after receipt of satisfactory proofs of loss from the insured or any party in interest.
(3) Except in the case of catastrophic loss, the insurer shall initiate loss adjustment of a property damage claim and of a claim for reasonable medical expenses within fourteen days after notification of loss by the claimant. In the case of catastrophic loss, the insurer shall initiate loss adjustment of a property damage claim within thirty days after notification of loss by the claimant. Failure to comply with the provisions of this Paragraph shall subject the insurer to the penalties provided in R.S. 22:1220.
(4) All insurers shall make a written offer to settle any property damage claim, including a third-party claim, within thirty days after receipt of satisfactory proofs of loss of that claim.
B. (1) Failure to make such payment within thirty days after receipt of such satisfactory written proofs and demand therefor or failure to make a written offer to settle any property damage claim, including a third-party claim, within thirty days after receipt of satisfactory proofs of loss of that claim, as provided in Paragraphs (A)(1) and (4), respectively, or failure to make such payment within thirty days after written agreement or settlement as provided in Paragraph (A)(2), when such failure is found to be arbitrary, capricious, or without probable cause, shall subject the insurer to a penalty, in addition to the amount of the loss, of twenty-five percent damages on the amount found to be due from the insurer to the insured, or one thousand dollars, whichever is greater, payable to the insured, or to any of said employees, or in the event a partial payment or tender has been made, twenty-five percent of the difference between the amount paid or tendered and the amount found to be due....
12BLa. R.S. 22:658. The applicable version of La. R.S. 22:1220 states, in pertinent part:
A. An insurer, including but not limited to a foreign line and surplus line 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 insurer who breaches these duties shall be liable 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 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. Such penalties, if awarded, shall not be used by the insurer in computing either past or prospective loss experience for the purpose of setting rates or making rate filings....
La. R.S. 22:1220.
The factfinder's determination that an insurer arbitrarily and capriciously handled a claim is a factual finding subject to the manifestly erroneous/clearly wrong standard. Calogero v. Safeway Ins. Co. of La., 99-1625, p. 5 (La.1/19/00), 753 So.2d 170, 173. Mr. Sher, as the insured, bears the burden of proving the alleged arbitrary and capricious behavior of Lafayette. Warner v. Liberty Mut. Fire Ins. Co., 543 So.2d 511, 515 (La.App. 4th Cir.1989). An insurer acts arbitrary and capricious "when its willful refusal of a claim is not based on a good faith defense . or is unreasonable or without probable cause." Calogero, 99-1625, p. 5, 753 So.2d at 173. "[I]f part of a claim for property damage is not [^disputed, the failure of the insurer to pay the undisputed portion of the claim within the statutory delay will subject the insurer to penalties on the entire claim." Warner, 543 So.2d at 515. Lafayette has an
affirmative duty to verify, through a reasonable investigation, whether a claim was actually excluded from coverage and when an insurer chooses to resist its contractual obligation based upon a supposed defense, which a reasonable investigation would have proved to be without merit, it acts at its peril and renders itself liable for statutory penalties and attorney's fees.
Deutschmann v. Rosiere, 02-2002, p. 6 (La.App. 4 Cir. 4/9/03), 844 So.2d 1082, 1086. Further,
[a]n insurer must take the risk of misinterpreting its policy provisions. If it errs in interpreting its own insurance contract, such error will not be considered as a reasonable ground for delaying the payment of benefits, and it will not relieve the insurer of the payment of penalties and attorney's fees.
LeBlanc v. Underwriters at Lloyd's, London, 402 So.2d 292, 299 (La.App. 3rd 1981), quoting Carney v. Am. Fire and Indem. Co., 371 So.2d 815, 819 (La. 1979).
Adjustment Initiation Within Thirty Days
Lafayette states that it did not receive notice of Mr. Sher's claim until October 5, 2005, when the claim was assigned to Mr. Jones, a claims adjuster working for PLC through his company, Robert's Construction. Lafayette further asserts that Mr. Jones telephoned Mr. Sher on October 9, 2005, but did not speak with him. Mr. Jones testified that he made arrangements to inspect the Building on November 1, 2005.
Mr. Leopold Sher testified that he "notified" Lafayette of Mr. Sher's loss sometime during the first two weeks of September 2005. He stated that Mr. Jones 127spoke with him in October 2005. However, the Building was not inspected until November 1, 2005.
Loss adjustment initiation "requires that 'the insurer take some substantive and affirmative step to accumulate the facts that are necessary to evaluate the claim.' " Hollier v. State Farm Mut. Auto. Ins. Co., 01-0592, p. 4 (La.App. 4 Cir. 10/31/01), 799 So.2d 793, 797, quoting McClendon v. Economy Fire & Cas. Ins. Co., 98-1537, p. 7 (La.App. 3 Cir. 4/7/99); 732 So.2d 727, 731. Merely opening a file on a claim does not satisfy the statutory requirements. Hollier, 01-0592, p. 5, 799 So.2d at 797.
Considering the conflicting testimony from Mr. Leopold Sher and Lafayette as to the date Lafayette received notice of Mr. Sher's claim, we cannot say that the jury was manifestly erroneous in accepting Mr. Leopold Sher's date. Thus, the jury determined that Lafayette did not initiate Mr. Sher's claim within the requisite thirty days due to the November 1, 2005, inspection date.
Building Damages Claim
Acknowledging that the Building suffered some wind damage due to Katrina, Lafayette asserts that it was not in bad faith because Mr. Sher did not submit sufficient evidence of all of the building damages claims. Additionally, Lafayette contends Mr. Scairono's estimates were not finalized. Lastly, Lafayette also maintains that the Building's damage was due to lack of maintenance.
Mr. Sher presented evidence that Lafayette inspected the Building in 1994, 2001, 2002, and 2003, during the Policy's term. All of the inspection reports contained documentation that Lafayette believed the property was well-maintained prior to Katrina.
Mr. Jones, the first adjuster, refused to assess damages to the basement level 12salthough Mr. Leopold Sher offered to show Mr. Jones the damage. Mr. Jones also testified that he did not assess the basement level. The record reflects that Mr. Leopold Sher repeatedly sent estimates and invoices to Lafayette to no avail.
Mr. Carubba testified that the Building was in very good condition considering its age. He stated that the Building cracked because it shook for two to three hours. Mr. Carubba testified that the cracks were white, which meant that the cracks were new and not made pre-Katrina.
Lafayette contends that Mr. Sher's building was not properly maintained. However, Mr. Vanderbrook, a consulting engineer retained by Lafayette for inspection of the roof and interior of the Building, testified that he never said that damage was from a lack of maintenance. Mr. Vanderbrook also stated that he did not think the Building was poorly maintained. Lafayette also ignored a letter from its parent agent, Stone Insurance, Inc. ("Stone"), which stated that Stone believed that the damage surveyed was caused by wind driven rain, which was covered by the policy.
After reviewing the evidence, we find that the jury did not commit manifest er ror in finding that Lafayette failed to conduct a reasonable investigation into Mr. Sher's building damages. This is documented by Lafayette ignoring the letter from Stone, the multiple Lafayette inspection documents, which stated that the Building was well maintained, and by Mr. Jones refusing to survey the damage to the Building's basement level. As such, we do not find that the jury committed manifest error in finding that Lafayette was arbitrary and capricious when disputing Mr. Sher's claim regarding building damages.
Lost Rents Claim
Mr. Sher claimed the lost rents for three of the apartments in the Building, |MincIuding Apartment E located in the basement level, at post-Katrina valuations. Lafayette contends that Mr. Sher cannot use post-Katrina valuations for this claim. However, the Policy states that it covers the "actual loss of Business Income."
Both Mr. Sher and Mr. Leopold Sher testified as to the claim for lost rents. Mr. Sher rented two apartments post-Katrina for $1,400 each, resulting in his post-Katrina valuations. The only dispute regarded whether Mr. Sher was entitled to pre-Katrina or post-Katrina valuations. Therefore, Lafayette owed Mr. Sher $4,600 in undisputed lost rents. The record reflects that Lafayette never tendered payment to Mr. Sher for that $4,600. Lafayette failed to pay an undisputed portion of Mr. Sher's claim, which means that Lafayette is subject to penalties on Mr. Sher's entire claim pursuant to Warner. Regarding the testimony presented, we find no manifest error in the jury's decision regarding Lafayette's arbitrary and capriciousness towards Mr. Sher's claim for lost rents.
Business Personal Property Claim
Lafayette maintains that no bad faith exists as to Mr. Sher's claim for BPP because the Policy did not cover BPP and avers that Mr. Sher did not claim the BPP before litigation.
Mr. Sher asserts that whether his claim for BPP was disputed in good faith is irrelevant due to the fact that the failure to pay lost rents and property damage was in bad faith, which dictates that the trial court assess penalties on Mr. Sher's entire claim pursuant to Warner. We find that this argument has merit and pretermit a discussion on the dispute over BPP.
Flood Claim
Lafayette states that no Louisiana state court has found that flood damage is covered by a "non-flood policy." Mr. Sher states that the flood claim is a "non-fis-sue"30 because the lost rents and property damages were not disputed in good faith. We pretermit the discussion as it is moot since we find that the trial court correctly granted Mr. Sher's motion for partial summary judgment regarding the ambiguity of the water exclusion.
Accordingly, we find that the jury did not commit manifest error in finding that Lafayette was arbitrary, capricious, or without probable cause when it handled and denied Mr. Sher's claims under the Policy.
LA. R.S. 22:658:
Payment and adjustment of claims, policies other than life and health and accident; personal vehicle damaye claims; penalties; arson-related claims suspension
Lafayette asserts the trial court erred by applying and submitting to the jury the amended version of La. R.S. 22:658 effective at the time of trial. The amended version of La. R.S. 22:658(B)(1) increased penalties from twenty-five percent to fifty percent and added the award of attorney's fees and costs for arbitrarily and capriciously refusing to pay a claim within thirty days. The pre-amendment version of La. R.S. 22:658 read, in pertinent part, as follows:
B. (1) Failure to make such payment within thirty days after receipt of such satisfactory written proofs and demand therefor or failure to make a written offer to settle any property damage claim, including a third-party claim, within thirty days after receipt of satisfactory proofs of loss of that claim, as provided in Paragraphs (A)(1) and (4), respectively, or failure to make such payment within thirty days after written agreement or settlement as provided in Paragraph (A)(2), when such failure is found to be arbitrary, capricious, or without probable cause, shall subject the insurer to a penalty, in addition to the amount of the loss, of twenty-five percent damages on the amount found to be due from the insurer to the insured, or one thousand dollars, whichever is greater, payable to the insured, or to any of said employees, or in the event a partial payment or tender has been made, twenty-five percent of the difference between the amount paid or tendered and the amount found to be |sldue.
The jury instruction regarding La. R.S. 22:658 was jointly submitted in its amended form to the trial court. However, Lafayette objected to the use of the amended form at trial.
"A trial judge has a duty to give instructions which properly reflect the law applicable in light of the facts of the particular case." Berthelot v. Stallworth, 08-1771, p. 8 (La.App. 4 Cir. 9/14/04), 884 So.2d 648, 653. Therefore, the trial court has a duty to present the correct law to the jury regardless of joint stipulated jury instructions. Louisiana Revised Statutes are not applied retroactively "unless it is expressly so stated." La. R.S. 1:2. Regarding retroactivity, the Louisiana Civil Code provides guidance La. C.C. art. 6, which reads:
In the absence of contrary legislative expression, substantive laws apply prospectively only. Procedural and interpretive laws apply both prospectively and retroactively, unless there is a legislative expression to the contrary.
As La. R.S. 22:658 contains no language regarding retroactivity, we must determine whether La. R.S. 22:658's penalty percentage, attorney's fees, and cost awards constitute substantive or procedural changes. Patriot Am. Hospitality P'ship, LP v. Mississippi Land Holdings, Inc., 06-0601, p. 5 (La.App. 4 Cir. 12/13/06), 948 So.2d 249, 252, citing Davis v. Willis-Knighton Med. Ctr., 32,193, p. 3 (La.App. 2 Cir. 8/18/99), 738 So.2d 1191, 1193.
A statutory amendment changing the percentage of permitted penalties is substantive and cannot be applied retroactively. Francis v. Travelers Ins. Co., 581 So.2d 1036, 1044 (La.App.. 1st Cir. 1991). "Therefore, the time when the right to the penalty comes into existence determines which penalty percentage applies." Id., citing Gulf Wide Towing, Inc. v. F.E. Wright (U.K.) Ltd., 554 So.2d 1347 (LajApp.82 1st Cir.1989). "The right to a penalty comes into existence after the passage" of the time period provided by the statute. Francis, 581 So.2d at 1044. Although the parties dispute the exact date Lafayette received notice of Mr. Sher's claim, it is undisputed that the thirty-day time period passed prior to the 2006 amendment to La. R.S. 22:658.
Thus, we find the trial court committed legal error by applying the amended version of La. R.S. 22:658. The trial court applied a fifty percent penalty and awarded $184,538.50 in penalties pursuant to La. R.S. 22:658. Therefore, the pre-amendment version of La. R.S. 22:658, which allowed for a twenty-five percent penalty, applies and the amount of penalties awarded to Mr. Sher is reduced to $92,269.25.
ATTORNEY'S FEES
Lafayette asserts that the trial court erred in awarding $258,728 in attorney's fees pursuant to La. C.C. art.1997 and/or La. R.S. 22:658. As discussed above, if the attorney's fees were awarded based on La. R.S. 22:658, then we must eliminate the award for lack of retroactivity. However, the award of attorney's fees may have a basis in La. C.C. art.1997.
"An obligor in bad faith is liable for all the damages, foreseeable or not, that are a direct consequence of his failure to perform." La. C.C. art.1997. The prevailing Louisiana principle states that "the right to recover attorney fees must be expressed by a statute or a contract." Ratcliff v. Boydell, 93-0362, 92-0630 (La. App. 4 Cir. 4/3/96), 674 So.2d 272, 282. See also La. R.S. 22:1220. However, this Court opined that "attorney fees are not provided for in article 1997." Priority E.M.S. v. Crescent City E.M.S., 01-2171, p. 18 (La.App. 4 Cir. 10/16/02), 829 So.2d 1066,1077. "Attorney's fees are not allowable in an action for breach of | ^contract unless there is a specific provision therefor in the contract." Rye v. Tenninix Serv. Co., Inc., 423 So.2d 754, 757 (La.App. 4th Cir.1982). "[P]arties have an opportunity to stipulate in the contract that attorney's fees would be due in the event the contract is breached." Id.
In the case sub judice, Lafayette and Mr. Sher did not include a provision in the Policy to award attorney's fees in case of a breach. Likewise, La. C.C. art.1997 does not provide for the award of attorney's fees. Finally, because we find that La. R.S. 22:658 cannot be applied retroactively, we vacate the trial court's award of $258,728 in attorney's fees.
LEGAL INTEREST
The trial court awarded Mr. Sher interest from the date of judicial demand on damages and penalties. Lafayette avers that no legal interest should be permitted. However, if this Court finds legal interest applicable, Lafayette contends that it should be calculated from the date of judgment.
The timeline applicable for awarding legal interest is bifurcated based upon whether the award is for damages or attorney's fees/penalties. Interest on damages is calculated from the date of judicial demand. Sharbono v. Steve Lang & Son Loggers, 97-0110 (La.7/1/97), 696 So.2d 1382, 1386. This prejudgment interest "is meant to fully compensate the injured party for the use of funds to which he is entitled but does not enjoy because the defendant has maintained control over the funds during the pendency of the action." Id. "However, 'penalty interest is entirely of the post-judgment variety, and thus is calculated only from the date the penalties are awarded until the date they are paid.' " Overton, 05-1001, p. 23, 937 So.2d at 418, quoting Sharbono, 97-0110, 696 So.2d at 1389. See Becnel v. Lafayette Ins. Co., 99-2966, p. 13 (La.App. 4 Cir. 11/15/00), 773 So.2d 247, 254.
| ^Therefore, we find that interest is owed from the date of judicial demand on Mr. Sher's damage award of $351,727 and from the date of judgment on the penalty assessment of $92,269.25.
COSTS
Lafayette asserts there is no legal basis for the trial court's award of $42,020.24 in costs pursuant to La. C.C.P. art. 970 if this Court reduces Mr. Sher's awards to less than twenty-five percent more than his offer of judgment. La. C.C.P. art. 970 provides that costs may be awarded to the prevailing party by the trial court if the final amount awarded is at least twenty-five percent greater "than the amount of the offer of judgment made by the plaintiff-offeror." La. C.C.P. art. 970. "[T]he offeree must pay the offeror's costs, exclusive of attorney fees, incurred after the offer was made, as fixed by the court." La. C.C.P. art. 970.
Mr. Sher made an offer of judgment on Lafayette on February 9, 2006, for $225,000 "inclusive of costs, interest, attorney fees and any other amount which may be awarded Plaintiff against Lafayette in this matter." Lafayette refused the offer. Considering the amount owed by Lafayette, "inclusive of costs, interest, attorney fees and any other amount," after this Court's adjustments exceeds Mr. Sher's offer of judgment by at least twenty-five percent, we find no error in the award of documented costs pursuant to La. C.C.P. art. 970.
DECREE
Accordingly, we find that the trial court correctly granted Mr. Sher's motion for partial summary judgment in finding the water exclusion ambiguous. We find that the trial court did not commit legal error in striking additional defenses not specifically pled by Lafayette. Further, we do not find the jury committed manifest error in the awards for BPP, lost rents, or building damages. The trial court also Improperly refused to admit jury instructions regarding damages for mental anguish. The jury did not commit manifest error by determining that Lafayette acted arbitrary, capricious, and without probable cause by refusing to pay Mr. Sher's claim. However, we find that the trial court erred by applying La. R.S. 22:658 retroactively and awarding attorney's fees. The trial court also erred in awarding legal interest on penalties from the date of judicial demand. The trial court did not err in awarding costs pursuant to La. C.C.P. art. 970.
Thus, the awards are amended as follows:
Building Damage Above the Basement $ 175,850
Building Damage in the Basement $ 144,300
Lost Rents $ 17,350
Business Personal Property $ 31,577
Penalties Pursuant to La. R.S. 22:658 $ 92,269.25
TOTAL $461,346.25
Costs Pursuant to La. C.C.P. art. 1920 $ 16,288.60
Costs Pursuant to La. C.C.P. art. 970 $ 42,020.24
Attorney's Fees Pursuant to La. C.C. art.
1997 and/or La. R.S. 22:658 $ 0000.00
TOTAL $ 58,308.84
Lastly, legal interest is due from the date of judicial demand on the damage award and from the date of judgment on penalties.
AMENDED IN PART; AFFIRMED AND RENDERED AS AMENDED.
MURRAY, J., concurs in the result.
TOBIAS, J., concurs in the result and assigns reasons.
CANNIZZARO, J., concurs in part and dissents in part.
. Tom Miller, a United Fire and Casualty Company claims supervisor, testified that an "all-risk" insurance policy covers "all risks except those that are excluded or limited within the policy."
. Mr. Sher communicated with Lafayette throughout the process via his son Leopold Sher.
. "A contract is an agreement by two or more parties whereby obligations are created, modified, or extinguished." La. C.C. art.1906.
. La. R.S. 29:762 Definitions reads, in pertinent part:
(12)(a)(iii) A disaster, including but not limited to natural disasters such as hurricane, tornado, storm, flood,....
. The trial court denied the admittance of the requested jury charges and proffered Mr. Leopold Sher's testimony regarding Mr. Sher's alleged mental anguish.
. As determining what constitutes an affirmative defense is a question of fact, we do not find that the trial court committed manifest error by labeling Lafayette's other defenses as affirmative defenses.
. The "water hammer" effect results from a sudden increase in water pressure, which can burst water mains and pipes, etc.