Iowa Supreme Court Sides With Insurer In Restaurant Fire Claim

May 14—OELWEIN — The Iowa Supreme Court has ruled against an Oelwein restaurant that was destroyed in a fire in a dispute with its insurance company.

A kitchen fire gutted Luigi's Restaurant and Lounge on Frederick Avenue in November 2016, resulting in a total loss.

The business was insured by United Fire and Casualty, and an initial appraisal estimated the building had been valued at $242,000, based on the market value of similar properties.

But Luigi's owner rejected the estimate and sought a second opinion. The second review, conducted by another party, came up with a $1.03 million estimate for building and fixtures based on the cost to replace, according to court records.

A hearing between the two appraisers came up with a $502,000 loss, which was just under the $550,000 loss limit on the insurance policy.

Luigi's took United Fire to court alleging the insurance company lowballed its offer. A jury awarded the restaurant $48,000 in actual damages for the difference between the appraisal and the policy limit. Jurors also awarded $41,000 in a bad-faith claim for expenses Luigi's incurred and another $30,000 in punitive damages.

United Fire appealed the verdict, and in a ruling handed down Friday, the Iowa Supreme Court sided with the insurance company.

"The word 'limit' denotes a maximum possible amount, not a guaranteed fixed amount," the high court wrote in the opinion.

The ruling also overturned the bad-faith and punitive awards and sent the case back to the district court for dismissal.

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