Opinion ID: 617942
Heading Depth: 2
Heading Rank: 1

Heading: Selection and Issuance of the All Risk Property Policy

Text: Penford contracted with Marsh USA, Inc. (Marsh), an insurance brokerage services firm, to obtain insurance and to handle claims. Under their agreement, Marsh was engaged to act as [Penford's] risk management advisor and consultant and insurance broker. J.A. 3379. Marsh was also authorized to represent and assist [Penford] in all discussions and transactions with insurers relating to the lines of insurance to be procured. J.A. 3380. The agreement provided that Marsh would negotiate on [Penford's] behalf with insurers and keep [Penford] informed of significant developments in the negotiations. J.A. 3382. Marilyn Rehmer, a Marsh employee, began to consult with Penford on its property insurance coverage in 2006 and was charged with renewing coverage through March 2008. Marsh had helped Penford procure its previous policy through the insurers, and Rehmer resumed discussions with National Union's underwriters, Michael Gunty and Timothy Scott, on the possibility of renewal. At the underwriters' suggestion, Marsh replaced the policy form used the previous year with a policy form that had been used on a different account, which Marsh had brokered as well. The next year, Rehmer again led the process of obtaining coverage through March 2009. She submitted Penford's specifications to various commercial insurers, including the insurers, and invited reply bids. The submission, dated January 28, 2008, proposed a $300 million limit and $15,000,000 per occurrence and annual aggregate as respects the peril of Flood in Cedar Rapids, IA. J.A. 2875. Rehmer commenced negotiations with Gunty and Scott of National Union and with Justin Weltscheff, underwriter for ACE. Neither insurer was willing to underwrite $15 million of flood coverage for the Cedar Rapids plant. Both had internal underwriting policies that restricted coverage to $5 million for areas prone to flooding. After further communications, each insurer offered to underwrite $5 million in coverage per flood zone, for a total of $10 million in coverage for Zone A and another $10 million for Zone B. On February 28, 2008, the insurers issued a binder reflecting this figure, and Rehmer renewed coverage on Penford's behalf through March 2009. In early June 2008, it became apparent that the Cedar River would flood. Mark Wynne, Penford's Vice President and Comptroller for North America, contacted Rehmer with questions about deductibles and qualifications for making a claim. Rehmer replied by email on June 11, offering, among other things, the following coverage summary: Penford currently purchases National Flood Insurance Program policies for several buildings on the Cedar Rapids, IA campus. Penford also purchases all risk property insurance which includes coverage for flood in Cedar Rapids, IA for both Flood Zone A for $10,000,000 and in Flood Zone B for $10,000,000. J.A. 2912. Rehmer attached a chart to the email that explained the coverage provided by the NFIP policy and by the insurers' policy. On June 17, 2008, days after the river crested, Steven Cordier, Penford's Chief Financial Officer and Senior Vice President, wrote a draft press release that was consistent with Rehmer's coverage summary. It stated: In addition to [the National Flood Insurance Program], the Company maintains several policies with highly rated insurance companies. The coverage provided includes property damage and business interruption protection. The applicable all risk policy has flood sub-limits aggregating to $20 million for a Cedar Rapids location. J.A. 3074. When cross-examined about the draft press release at trial, Cordier agreed that aggregating meant taken together as a whole or combined. J.A. 289-91. The same day that Cordier drafted the press release, he met with the loss adjuster named in the policy. The adjuster, together with personnel sent by Marsh, began surveying and documenting the damage throughout the plant and later shared their findings with Penford's management. The general consensus was that losses would exceed the policy's sublimits.