Comment: 13 pages. Linearity for gains and linearity for losses are compatible with loss aversion. Ambiguity and aversion for it can be accommodated in our frameworkWe present a theory of expected utility with state-dependent linear utility functions for monetary returns, that incorporates the possibility of loss-aversion. Our results relate to first order stochastic dominance, mean-preserving spread, increasing-concave linear utility profiles and risk aversion. As an application of the expected utility theory developed here, we analyze the contract that a monopolist would offer in an insurance market that allowed for partial coverage of loss.