Insurance companies will contend that only 10 percent of Farmland plant needs to be replaced in a lawsuit against the City of Albert Lea.

Wednesday, March 27, 2002

Insurance companies will contend that only 10 percent of Farmland plant needs to be replaced in a lawsuit against the City of Albert Lea.

They insist the city’s demolition order only benefits Farmland, which has been claiming the fire inflicted a total loss. The city will refute the claims by attempting to prove that state law does not stipulate an insurance company as a party that can be involved in the demolition order process.

During a court hearing on Thursday, the insurance companies will ask for a temporary injunction and restraining order to freeze the demolition order. The city’s order would force the company to begin demolishing its partly-burned plant or allow the city to begin doing it.

According to the insurers, Farmland is claiming an insurance payment of $86 million. The insurers contest the demolition because it will eliminate the chance of restoring the plant, which they think is possible.

&uot;It is in Farmland’s interest not to fight the order of removal so that it can argue for a total loss recovery under the policies on the order, which would be a windfall,&uot; attorneys stated in a memorandum.

The insurance firms conducted an investigation to assess damages inflicted by the fire on July 8, 2001.

According to their findings, only 58,074 square feet require total replacement out of the entire plant’s floor area of 611,211 square feet. Additionally, 25,469 square feet need to be repaired, the companies say.

Specialists retained by the insurance companies to assess the damage have submitted their affidavits to support the insurers’ contention.

Francis A. Dickson, president of Dichem Corporation in Florida, said that the smoke and water damage can be cleaned. He presented Farmland two different estimates for cleanup after the fire, and recommended they take the higher of the two. But Farmland did not proceed with the recommendation &uot;for reasons unknown to the interested insurers,&uot; court documents say.

The proposed $1.5 million project included a comprehensive cleaning of the facility and equipment as well as treatment to prevent the spread of mold to uncontaminated areas.

Glenn R. Schmidt, professor of Animal Science at Colorado State University, said there is no basis for the city’s statement that a portion of the plant is contaminated by bacteria grown from smoke and water, rendering it unfit for a food processing facility.

&uot;It is my opinion that most of the occupied portion of the plant could still be cleaned and sealed to meet the requirements of the Food Safety and Inspection Service of the United States Department of Agriculture,&uot; he said.

The demolition order by the city officially served on March 13 says the entire plant is beyond the realistic possibility of repair, and requires Farmland to remove the structure within 270 days.

State laws defines that property owners have a 20-day period to respond the order. After that, the city can file a motion to enforcing the order. If the property owners do not comply with the order, the city can remove the building and assess the cost against the owners.

The insurance companies aim to prevent the city from taking such action, interpreting that insurers can be involved in the process.

They employ examples from past cases in which the court admitted the involvement of insurers. But they occurred 1917 and 1934, before the enactment of the current statute in 1965.

&uot;They have no standing,&uot; said Albert Lea City Manager Paul Sparks. &uot;We will proceed with the demolition order as quickly as possible.&uot;

Mayor Bob Haukoos said, &uot;Farmland has not shown any objection against the order, and understood what the city has to do. Contamination by the fire may cause possible product liability in the future.&uot;

The plaintiffs: The eight insurance companies suing the city over its Farmland demolition order are: Allianz Insurance Company, Axa Corporate Solutions Ltd., Factory Mutual Insurance Co., Gerling General Insurance Co./GE Specialty Insurance Co., Liberty Mutural Insurance Co., Nation Union Fire Insurance, XL Insurance Co. and Zurich America Insurance Co.