UNITED STATES DISTRICT COURT 

SOUTHERN DISTRICT OF NEW YORK 

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ANIEREX GROUP, INC, 


AMEREX USA INC. 


Plaintiffs, 

- againstLEXINGTON INSURANCE COMPANY AND 

WESTCHESTER SURPLUS LINES INSURANCE 

COMPANY, 

Defendants. 

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Hon. Harold Baer, Jr., U.S.D.J.: 

USDSSDNY 

DOCUMENT 

ELECTRONICALTX FILED 

DOC#: ____~~~___ 

DATE FILED: 9-;&/#.J 

07 Civ. 3259 (HB) 

OPINION & 

ORDER 

The story behind this case began on August 3, 2001, when a rack system 

collapsed in the New Jersey warehouse of a clothing importer, causing serious damage to 

the storage facility and the merchandise inside. The clothing importer is comprised of 

two related entities, Amerex Group, Inc. and Amerex USA Inc. (together, "Amerex"), 

who commenced this action in 2007 to recover damages from their excess insurers, 

Defendants Lexington Insurance Company ("Lexington") and Westchester Surplus Lines 

Insurance Company ("Westchester"). Before the Court is Defendants' Motion for Partial 

Summary Judgment to Confirm the Appraisal Award. For the reasons that follow, 

Defendants' motion is granted. 

I. Procedural History 

Plaintiffs commenced this breach of contract case on April 23, 2007, seeking 

$6,312,000 from Defendants. On July 9, 2007, Defendants moved for partial summary 

judgment to enforce the appraisal clause ofthe insurance policy that governs the 

relationship between the parties in this action. By Order dated September 20, 2007, I 

Case 1:07-cv-03259-HB Document 45 Filed 09/28/10 Page 1 of 6
granted Defendants' motion to enforce the appraisal clauses in the insurance policies at 

issue. I Plaintiffs and Defendants each selected an appraiser to represent them in the 

appraisal proceedings, but could not agree upon the selection of an umpire. In 

accordance with the terms set forth in the insurance policies, and in consultation with the 

parties, I appointed Michael Hess as umpire of the appraisal panel, and directed the 

appraisers and umpire to arrange for swift resolution of this appraisal. See Order of Oct. 

10, 2007 (Docket No. 28). 

As it turns out, the appraisal process was hardly expeditious - in fact, the lengthy 

nature of the proceedings is the key reason why Plaintiffs believe that the appraisal 

process was unfair and the appraisal award should not be confirmed. On June 30, 2010, 

nearly three years after the appraisal process began, the Court received the Appraisal 

Report from Mr. Hess, the umpire. The appraiser for Defendants, Peter Fogarty, stated in 

the report that he agreed with the umpire's conclusions. The appraiser for Plaintiffs, 

Edwin Hochberg, abstained from stating his agreement or disagreement with the final 

decision ofthe umpire. Defendants subsequently moved for Partial Summary Judgment 

to Confirm the Appraisal Award. The motion was fully briefed on August 17,2010. 

II. Factual Background 

Amerex is a clothing distributor specializing in outerwear, and sells in the U.S. 

market garments manufactured in Asia and Europe. In August 2001, Amerex received 

shipments of merchandise in response to orders that had been placed by U.S. customers. 

When the merchandise arrived at Amerex's warehouse in Avenel, New Jersey, it was 

organized by style, color and size, and placed in Amerex's rack system to await 

shipment. On August 3, 2001, a significant portion of Amerex's rack system collapsed. 

The collapse activated the warehouse sprinkler system, which caused the flooding of the 

I When Plaintiffs filed their brief in opposition to Defendants' motion to compel appraisal, they also 

filed a cross-motion to strike Defendants' second affirmative defense, which reads, "Defendants have 

duly demanded appraisal proceedings to determine the amount ofloss, which would resolve all issues 

in controversy, and bar this suit." Answer ~ 57 (Docket No.7). When I granted Defendants' motion 

to compel appraisal, I also denied Plaintiffs cross-motion to strike. 

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Case 1:07-cv-03259-HB Document 45 Filed 09/28/10 Page 2 of 6
warehouse, and also led to an electrical outage that rendered Amerex's computer systems 

inoperable. See PI. Opp. Br. 2-3; Mallin Decl., Ex. B. The merchandise awaiting 

shipment was ruined, and Amerex fell behind on orders because of its downed computer 

systems and unuseable warehouse. 

At the time of the collapse, Amerex was covered by an insurance policy from 

Firemen's Fund Insurance Company, which provided primary coverage of up to 

$2,500,000 for the warehouse building, the personal property of the business, business 

income, and extra expense losses. 56.1 Stmt. ~ 1. To protect against losses that exceeded 

the $2.5 million in primary coverage, Amerex purchased excess insurance policies from 

Defendants Lexington and Westchester, each of which had a liability limit of $5,000,000, 

for a total excess insurance layer of$lO,OOO,OOO in coverage. Id. ~ 3. After the collapse, 

Amerex submitted a proof of loss to Firemen's Fund for property damage, business 

income loss, and extra expenses in the amount of$8,812,000. PI. Opp. Br. 3. Firemen's 

Fund paid the $2,500,000 limit of its policy, at which point Amerex sought 

reimbursement from its excess insurers, the Defendants, which led to the instant action 

and my eventual order that the parties proceed with appraisal. 56.1 Stmt. ~~ 2-8. 

The parties agree that the appraisal award was to state Amerex's gross loss, without 

taking into account the $2,500,000 payment made by Firemen's Fund. Id. at ~ 12. The 

Agreement to Appraise, which governed the appraisal proceedings, dictated that the 

Appraisal Panel, led by the umpire, would detennine the gross amount of Amerex's 

claim, and that this Court would then detennine the net claim, if any, payable under the 

excess policies issued by Defendants. Id. at ~ 13; Agreement to Appraise at ~ 12, Leavy 

Decl. Ex. 10. The Appraisal Award states that Amerex's loss of income was $389,137, 

while the amount of extra expenses was $848,661.68, for a total of $1 ,237,798.2 56.1 

2 The Appraisal Award provided a total in boldface type of$I,287,798.68, a figure which included the 

agreed-upon $50,000 appraisal fee. As I am concerned for the purposes of this motion with the 

Appraisal Panel's determination ofthe amount of Amerex's losses in income and extra expenses, I 

have excluded the $50,000 fee here. See Defs 56.1 Stmt. , 15-16. Plaintiffs do not address whether 

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Stmt. ~ 13. Thus, the losses calculated by the Appraisal Panel amount to significantly 

less than the $2.5 million that Amerex has already received from Firemen's Fund, the 

primary insurer. Accordingly, the effect ofthe appraisal on this litigation is that Plaintiffs 

are not entitled to any award of damages for loss of income or extra expenses. 

III.Discussion 

Pursuant to Fed. R. Civ. P. 56(c), a district court must grant summary judgment if the 

evidence demonstrates that "there is no genuine issue as to any material fact and [that] 

the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby 

Inc., 477 U.S. 242, 250 (1986). On this motion for summary judgment, the material 

dispute involves not the facts of the case, but rather, the law surrounding the approval of 

appraisal awards. 3 The critical question is whether the lengthy and contentious appraisal 

proceedings conducted in this case so exceeded the purview ofthe appraisal panel that I 

should refuse to confirm the panel's decision. 

"New York courts have long recognized the role of appraisals in resolving disputes 

between an insurer and insured where the disagreement is [only] over the value or the 

amount of the loss." Indian Chef, Inc. v. Fire and Cas. Ins. Co. o/Connecticut, 2003 WL 

329054 at *2 (S.D.N.Y. Feb. 13, 2003). Appraisal is a "comprehensive proceeding" 

which has the purpose of determining the losses at issue. S.R. Int'l Bus. Ins. Co., Ltd v. 

World Trade Ctr. Prop., LLC, 2004 WL 2979790 at *1 (S.D.N.Y. Dec. 1,2004). Indeed, 

the appraisal panel here evaluated only the amount ofloss of income suffered by Amerex, 

and the amount of extra expenses that it incurred. The appraisers did not evaluate, for 

example, the "scope of coverage provided by [the] insurance policy, a purely legal issue 

that cannot be determined by an appraisal." Duane Reade, Inc. v. St. Paul Fire and 

the $50,000 should be evaluated separately from the balance of the award, but either way, the total 


awarded by the appraisers is far less than the $2.5 million that Plaintiffs received from their primary 


insurers. 


3 Subject-matter jurisdiction over this dispute exists pursuant to the diversity statute, 28 U.S.C. § 


1332. Therefore, I apply New York law, which the parties appear to agree governs this dispute. See 


JA Apparel Corp. v. Abboud, 568 F.3d 390,396 (2d Cir. 2009). 


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Case 1:07-cv-03259-HB Document 45 Filed 09/28/10 Page 4 of 6
Marine Ins. Co., 503 F.Supp.2d 699, 704 (S.D.N.Y. 2007). Nor did they address liability 

of any party, another topic that is outside the ambit of an appraisal. Indian Chefat *3. 

Despite the fact that the appraisal panel answered only the question ofvaluation, 

Plaintiffs contend that the appraisal "morphed into an arbitration," because it involved the 

submission ofthousands of pages of documentary proofs, the taking ofthree days of 

testimony ofseven witnesses, 718 pages oftranscript, and the submission of several 

rounds of legal briefs. The parties do not dispute the facts ofthe appraisal proceeding. In 

fact, Plaintiff's description ofthe proceeding, intended to bolster Plaintiff's argument that 

the proceeding was inappropriate, borrows a quote from the Defendants' argument that 

the appraisal was conducted with great care and attention, and should therefore be 

confirmed. Compare PI. Opp. Br. 1 with Def. Mem. Law 3. Plaintiffs are simply 

mistaken that the appraisal process was improper. By limiting the inquiry-however 

complex-to the "factual disputes over the amount ofloss," the appraisal panel remained 

within the scope of its assignment. Duane Reade, 503 F.Supp. at 704. 

Furthermore, even ifthe appraisal proceeding here bore some resemblance to an 

arbitration, the mechanism to confirm the award would be the same. "Section 7601 of 

the New York Civil Practice Law and Rules provides in substance that appraisal 

agreements are to be enforced by the same methods as arbitration agreements." Questrom 

v. Federated Department Stores, 41 F.Supp.2d 294,302 (S.D.N.Y. 1999); see N.Y. 

C.P.L.R. § 7601 (McKinney 2010). Both state and federal courts have held that judicial 

review of an appraisal award is limited, "except where one of the grounds in C.P.L.R. § 

7511 is met." Questrom, 41 F.Supp.2d. at 302; see also Penn Central Corp. v. Consolo 

Rail Corp., 56 N.Y.2d 120, l28-30. 

Amerex does not even cite section 7511, and does not adduce any evidence in 

opposition to summary judgment to show that the appraisal here was affected by 

corruption, fraud, the impartiality of an appraiser, the lack of a final and definite award, 

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Case 1:07-cv-03259-HB Document 45 Filed 09/28/10 Page 5 of 6
or any other ground upon which a court could rely, pursuant to section 7511, to decline to 

confirm an appraisal award. See N.Y. C.P.L.R. § 7511 (McKinney 2010). 

IV. Conclusion 

Accordingly, Defendants' Motion to Confirm the Appraisal Award is hereby 

GRANTED. The amount of Amerex's losses and expenses is significantly less than the 

amount ofthe insurance payment already received by Amerex; therefore, there is no 

further relief for Plaintiff to seek, and the case must be closed. The Clerk of Court is 

instructed to remove this matter from my docket. 

SO ORDERED. 

New York, l..1' York 

September ,2010 

Hon. Harold Baer, Jr. 

U.S.D.J. 

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