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IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT

No. 90-3820

FIRST NATIONAL BANK OF LOUISVILLE,
Plaintiff-Appellee,
Cross-Appellant,
versus
LORETTA LUSTIG, et al.,
Defendants,
and
AETNA CASUALTY & SURETY CO. and
FEDERAL INSURANCE CO.,
Defendants-Appellants,
Cross-Appellees.

Appeals from the United States District Court
for the Eastern District of Louisiana

ON PETITION FOR REHEARING
(June 29, 1992)
(Opinion May 18, 1992, 5 Cir., 1992, F.2d )
Before REAVLEY, HIGGINBOTHAM, and DeMOSS, Circuit Judges.
PER CURIAM:
The petition for rehearing is denied. We write briefly here,
however, to clarify our opinion on two of the issues the Sureties
raise in their petition.

First, the Sureties ask that we decide whether they are
entitled to additional discovery of FNBL loan files on remand. We
believe that the need for particular discovery in light of our
opinion is best decided by the district court in the first
instance. We express no opinion on whether the Sureties are
entitled to additional discovery on remand.
Second, the Sureties ask for a clarification of the causation
standard for a covered loss in light of our rejection of their "oil
patch" defense. We do not intend to suggest that the bank can
establish liability without proving loss proximately caused by
employee fraud as defined by the bond. Nor do we relieve the bank
of any duty to mitigate damages it may have under Kentucky law. We
decline to announce other intervening causes of loss that might be
sufficient to defeat proximate causation. We hold only that the
decline in the value of collateral as described by the "oil patch"
defense would not break a chain of causation which the jury might
otherwise find.
In all other respects, the petition for rehearing is DENIED.
2