Ice cream maker Asael Farr & Sons Co. is going to have to eat losses of more than $1.5 million at its cold storage facility in Salt Lake City due to an equipment failure that caused an ammonia leak.

In a Thursday ruling by the Utah Court of Appeals, justices upheld a lower court's decision dismissing a lawsuit filed by Farr over the May 29, 2003, accident.

Although Farr officials claimed losses of more than $1.5 million, the insurance policy afterward capped the recovery limit for "spoilage" at $25,000.

The company, formed in 1920 and a local producer and distributor of ice cream products, filed suit against its insurance carriers, underwriters and agents to recover its losses.

Ironically, according to the ruling, multiple defendants in the lawsuit were in the midst of finalizing applications for coverage and quotes — some specifically covering losses due to spoilage — the same day the release of ammonia happened.

It was only two weeks later, Farr claimed, that the company learned of the policy's $25,000 limit for inventory loss due to spoilage.

The subsequent suit sought to recover losses based on a number of factors, including policy ambiguities and breach of contract on the part of the insurance agent.

In its claim, the company said the agent promised full-coverage but failed to follow through by adequately determining the risks.

The court disagreed, based on a number of factors, including Farr testimony that the company did not ask the agent to conduct an independent investigation to determine if coverage limits were adequate.


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