Ittella Foods, Inc. v. Zurich Ins. Co.

MEMORANDUM *

Prior to trial, Northern Insurance paid Ittella Foods approximately $505,000 without reserving its rights or making any express agreement. The parties’ stipulations in the final pretrial conference order following the district court’s partial summary judgment highlight the significance of this payment. They “agreed on an amount of benefits — $445,000 — which were then paid by Northern Insurance Company with interest computed from January 5, 2001 to the date of payment.” 1 They also agreed that there were no compensatory damages in dispute. 2 They further agreed that the only damages in dispute were those sought by Ittella Foods for attorneys’ fees, litigation costs, and punitive *690 damages. 3 Thus, the parties did not contest any money owed on the policy; the only question was whether Northern Insurance’s initial denials of coverage, prior to the subsequent payments, were in such egregious bad faith as to make it liable for punitive damages.

Bad faith can be refuted if no money is owed on a policy, or if, even though money is owed, the insurer’s refusal to pay was reasonable and based upon a good faith dispute about the existence or extent of coverage. 4 In this…