Iowa Corn Milling Company Loses Lawsuit Over Flood Insurance

August 30, 2010

A judge has thrown out a lawsuit filed by a Cedar Rapids, Iowa, corn milling company that accused two insurance companies of acting in bad faith for refusing to pay millions of dollars in claims from the devastating 2008 flood.

At the request of the insurance companies, Chief U.S District Judge Linda Reade dismissed Penford Products Corp.’s lawsuit before it went to jury. Reade also ruled that Penford must pay the insurers’ legal costs.

Penford is “very disappointed” with the ruling and intends to appeal, said Christopher L. Lawlor, the company’s general counsel. He declined further comment.

Penford, which manufactures ethanol and starch products, had to temporarily close its Cedar Rapids plant after the plant was inundated by floodwaters two years ago. The company expected damages to exceed $56 million.

National Union Fire Insurance Co. of Pittsburgh and Ace American Insurance Co. paid $20 million on Penford’s policies, but denied many of the company’s claims. The insurers claimed their obligations were capped by two $10 million “sublimits” applicable to flooding in two zones at the Cedar Rapids plant.

Penford contended it had a $300 million property insurance policy through the two insurance companies.

Penford was one of many eastern Iowa businesses that sustained losses after massive flooding in eastern Iowa in June 2008.

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