SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK: IAS PART 56
TAUNUS CORPORATION,
Plaintiff
Index No. 602519/03
Against
ALLIANZ INSURANCE COMPANY, AXA CORPORATE SOLUTIONS INSURANCE COMPANY and AXA GLOBAL RISKS US INSURANCE COMPANY,
Defendants
Richard B. Lowe, III J.:
In this action, motions designated by sequence numbers 003, 004 and 006 are consolidated for disposition. In motion sequence number 003, the defendant Allianz Insurance Company (Allianz) moves, pursuant to section 602.2(a) of the Rules of the Supreme Court, Appellate Division, First Department (22 NYCRR 602.2[a]), to admit Lawrence T. Hofmann, john B. Massopust, Thomas M. Darden, Paul L. Gingras, Karl L. Vasiloff and Christopher R. Paar to the bar of this court, pro hac vice.
In motion sequence number 004, the defendant AXA Corporate Solutions Insurance Company, in its own capacity and as successor in interest to AXA Global Risks US Insurance Company (AXA), moves, pursuant to CPLR 7601, to compel the plaintiff Taurus Corporation (Taurus) to participate in an appraisal, AXA also moves, pursuant to CPLR 2201, to stay this litigation until an award is rendered in the appraisal. In addition, AXA moves, pursuant to CPLR 3211 to dismiss the complaint in its entirety.
In motion sequence number 005, Allianz moves, pursuant to CPLR 7503, to compel Taunus to submit all issues in dispute relating to the amount of its losses to appraisal. Allianz also moves, pursuant to CPLR 2201, to stay this action until appraisal on those issues has been completed.
In motion sequence number 006, Taunus moves for an order for expedited discovery from Allianz and AXA.
BACKGROUND
The underlying facts incorporate facts from the court's prior decision in this action, dated September 23, 2003. Taunus owns the site, building and other improvements located at 130 Liberty Street, New York, New York. Due to the events of September 11, 2001, the subject property suffered physical damage. Allianz and AXA are two of four insurance companies which provided Taunus coverage for the subject property.
The Allianz and AXA insurance policies provide that Taunus is entitled to : (1) the costs to repair the subject building if it is reasonably feasible to do so at the time of the loss; or (2) if repair is not reasonably feasible, Taunus is entitled to replacement costs, and to be indemnified for demolition and reconstruction costs. The Allianz and AXA Policies aso state, in the event that the insured and the insurer disagree "on the amount of the loss" that:
[E]ach, upon the written demand either of the Insured or of this Company made within 60 days after receipt of proof of loss by this company, shall select a competent and disinterested appraiser. The appraisers shall then select a competent and disinterested umpire. … Then at a reasonable time and place, the appraisers shall appraise the loss, stating separately the value at the time of the loss and the amount of the loss. If the appraisers fail to agree, they shall submit their differences to the umpire. An award in writing of any two shall determine the amount of loss …
See Frederick W. Reif Affirmation in Support (Reif Affirmation), Ex. A 33. After September 11, 2001, Taunus subsequently notified the defendants of the property damage and the business interruption losses it allegedly sustained. On May 14, 2003, the defendants demanded sworn proofs of loss in compliance with New York Insurance law § 3407. The parties agreed to extend the 60 days to August 11, 2003. On August 8, 2003, Taunus submitted an interim proof of law for approximately $1,862,703,463.
On August 11, 2003, Taunus commenced this action, pursuant to CPLR 3001, seeking certain declaratory judgments. On August 25, 2003, AXA served a written demand on Taunus to submit the dispute to an appraisal panel, as required by the insurance contract. Taunus refused to participate in the appraisal. On August 28, 2003, after reviewing Taunus' purported proof of loss, AXA rejected it on various grounds. See Reif Affirmation, Ex. B.
The main dispute between the parties in whether the building is a total loss. Taunus argues that the building is a total loss, and that the only reasonable solution if to demolish the building and replace it, which would cost over $1 billion. The defendants allege that they do not deny coverage for the property damage at issue (see Thomas M. Darden Affidavit in Support [Darden Affidavit], 2; Reif Affirmation, 10), However, defendants argue that the building is not a total loss, and that it is reasonably feasible to repair for approximately $170 million. The immediate question is whether an appraisal panel or the court should determine whether a total loss exists.
DISCUSSION
Pro Hac Vice Motion
In accordance with Allianz's pro hac vice motion, the movants have established qualification, expertise, good standing, and Taunus had offered no relevant facts to the contrary. Therefore, the applications of Lawrence T. Hofmann, John B. Massopust, Thomas M. Darden, Paul L,. Gingras, Karl L. Vasiloff and Christopher R. Paar for leave to appear herein pro hac vice on behalf of Allianz, are granted.
Motion to Compel Taunus to Participate in Appraisal
The present question is ho should determine the amount of Taunus' loss (whether it be a partial loss or a total loss). Taunus argues that issues of total loss require judicial adjudication and should not be submitted to appraisal. The defendants argue that, pursuant to the appraisal provision contained in the insurance policies, if the amount of loss is in dispute the issue should be submitted in appraisal.
First, the court finds that AXA's motion to compel Taunus to participate in an appraisal proceeding was properly brought under CPLR 7601, which allows the commencement of special proceedings to enforce provisions, such as those regarding valuation or appraisal. See Luxottica Group v. Bausch & Lomb, Inc. 160 F Supp 2d 552, 556 (SD NY 2001) (finding agreements with valuation, appraisal or other clauses that provide a procedure for specific controversy to be determined by a third person enforceable under CPLR 7601); see also Zar Realty Mgmt. Corp. v. Allianz Ins. Co., 2003 WL 1744288, *3 (SD NY Mar. 31, 2003) (finding that, pursuant to a provision in a fire insurance policy, CPLR 7601 and Insurance Law § 3404, the court had authority to compel an appraisal of issues regarding the amount of damage or loss resulting from damage caused by the World trade Center collapse). In addition, Allianz's motion to compel was also properly brought under CPLR 7503, since CPLR 7601 provides that the court may enforce an agreement to seek appraisal as if it were an arbitration agreement under CPLR article 74. See Liberty Fabrics, Inc. v. Corporate Props. Assocs. 5 223 AD2d 457 (1st Dept 1996).
Second, the court finds that the disputes over the extent of damage to the subject property are appropriate for appraisal. It is well-established that where parties of an insurance policy dispute coverage, such that the issues can only be resolved by analysis and application of the policy, appraisal should be denied. See Indian Chef, Inc. v. Fire & Cas. Ins. Co. of Connecticut, 2003 WL 329054, *3 (SD NY Feb. 13, 2003); Zar Realty Mgmt. Corp. v. Allianz Ins. Co., 2003 WL 1744288, at *4. However, ‘New York courts have long recognized the role of appraisals in resolving disputes between and insurer and insured where the disagreement is over the value or amount of loss." Id.
The court finds that the cases cited by Taunus are distinguishable. Taunus cites several cases, which involve "valued" policies. Valued policies state the value of the property or the amount of total loss, which conclusively fixes the liability of the insurer. See Lee v. Hamilton Fire Ins. Co., 251 NY 230, 234 (1929). In a valued policy, the appraisal clause is inoperative when a total loss exists because there is nothing for the appraisers to decide. See Id. The amount to be recovered for a total loss is the amount in the policy, without regard to other elements. See id. It is undisputed that the Allianz and AXA insurance policies are not "valued" policies. Therefore, the court finds that the valued policy cases cited by Taunus are distinguishable from the present action. See Zar Realty Mgmt. Corp. v. Allianz Ins. Co., 2003 WL 1744288, at *4; Foreign Credit Corp. v. Aetna Cas. & Surety Co., 276 F Supp 791, 793-94 (SD NY 1967). Here, after the incidents of September 11, 2001, Taunus notified defendants of the property damage and business interruption losses it allegedly sustained. The defendants have not denied liability as to those losses. Therefore, the cases on which Taunus relies, where the insurer clearly denies liability, are distinguishable from the present action.
In cases where the insurance policy is not a "valued policy" and where the insurer does not deny liability, the court finds that, pursuant to an appraisal clause in the policy, it is appropriate for appraisers to determine whether partial or total loss exists and the cost of repair or replacement of a damaged building. See e.g. Littrell v. Allemannia Fire Ins. Co. of Pittsburgh, Penn, (222 AD 302 (3rd Dept 1928) (stating that appraisers can make the appropriate estimates with respect to property totally or partially destroyed)1 (rev'd on other grounds by 250 NY 628 (1929); Yendel v. Western Assur. Co., 21 Misc 348, 351 (Sup Ct App Term 1897) (involving an insurer who did not deny liability and finding that condition in a fire insurance policy, which referred determination of loss to appraisers, fully covered "a case where there is a dispute as to whether or not there was a total destruction") 2
Courts of other jurisdictions have also found it appropriate for appraisers to determine partial or toal loss and the cost of repair or replacement. See e.g. Williamson v. Liverpool & London & Globe Ins. Co., 122 F 59, 61 (8th Cir 1903) (finding the policy authorized appraisers to determine "entire loss" and whether or not loss was total); Geary v. CNA Ins. Co., 2003 WL 21920902, 1-3 (US Dist Ct, ED La Aug. 7, 2003) (finding that, where insurer did not deny liability for damage to roof caused by hail storm, pursuant to an appraisal clause in the policy, appraisers could determine estimate to replace roof, value of property and amount of loss); Drescher v. Excelsior Ins. Co. of New York, 1888 F Supp 158, 159 (US Dist Ct, D NJ 1960) (involving insurer who did not deny liability but refused appraisal arguing a total loss existed, court held "an appraisal will lie where there is a total loss"); Stout v. Phoenix Assur. Co. of London, 56 A 691 (Ct Chancery NJ 1904) (deciding that "amount of loss" language in appraisal provision clearly included appraisal of all loss and held that, "although the personal property was an entire loss and the dwelling, excepting the cellar walls, was also a total loss," appraisers had authority to estimate amount of loss for the insured property).
Furthermore, Taunus argues that, pursuant to paragraph 33 of the defendants' insurance policies, a demand for appraisal can only be made after the insurer's receipt of proof of loss. Taunus argues that the interim proof of loss that it submitted on August 8, 2003 is only a preliminary proof of loss and that the initiation of an appraisal proceeding is premature. The court finds that the issue of whether Taunus' building is a "total loss" directly impacts Taunus' submission of its final proof of loss. Therefore, given the circumstances of this case, the court has already resolved to accept Taunus' interimj proof of loss, in satisfaction of the 60 day requirement in paragraph 33 of the insurance policies requiring receipt of proof of loss before either party may demand appraisal. Taunus may make the necessary adjustments to its proof of loss submission upon the rendering of a decision as to whether Taunus' building is a total loss. 3
Motion to Stay Action
As discussed above, the defendants properly moved for a motion to compel appraisal under CPLR 7601 and CPLR 7503. The court finds that the motion to stay is authorized by CPLR 7503, which specifically provides that "f the application is granted, the order shall operate to stay a pending or subsequent action, or so much of it as is referable to arbitration" and CPLR 2201, which generally provides that the court may grant a stay, "upon such terms as may be just." Since the appraisal will determine the amount of loss and may render the present action moot, a stay of the action is in order. The defendants' motions to stay the action pending appraisal are granted. For the reasons stated above, the court also elects to defer rendering a decision on AXA's motion to dismiss.
Motion for Preliminary Injunction to Stay Appraisal
A motion for a preliminary injunction should be granted where the movant shows: 1) a likelihood of success on the merits of its claim; 2) the potential for irreparable injury should the injunction not be granted; and 3) a balance of equities in the movant's favor. See American Para Prof'l Svs. v. Examination Mgmt. Serv. 5 214 AD2d 413 (1* Dept 1995) (citations omitted). Taunus's motion for a preliminary injunction to stay appraisal is denied. The defendants' insurance policies, in paragraph 33, specifically provide that if there is a failure to agree on "the amount of loss," either party may, upon a written demand submit the dispute to appraisal. The appraisal panel will determine the amount of loss (whether the loss is total or partial) and Taunus fails to make the requisite showing of irreparable injury if the injunction were not granted.
Motions for Expedited Discovery
In support of its motion for expedited discovery, Taunus submits a joint affidavit by the Port Authority of New York and New Jersey (Port Authority) and the Lower Manhattan Development Corporation (LMDC) stating that the agencies adopted a World Trade Center Memorial and Redevelopment Plan incorporating the 130 Liberty Street site. See Kevin M. Rampe and Anthony G. Cracchiolo in Support (Joint Affidavit), 4,5. No commencement date for the redevelopment at 130 Liberty Street is mentioned in the Joint Affidavit.
As stated above, the disputed issues in this section will be submitted for appraisal. Therefore, the court will not now render decisions concerning the discovery process of the action. Taunus' submission of the Joint Affidavit showing that Port Authority and LMDC adopted a redevelopment plan incorporating the 130 Liberty Street site (see Joint Affidavit, 4,5), does not alter this decision. Taunus' motions for expedited discovery are stayed pending the appraisal outcome.
Accordingly it is
ORDERED that the defendant Allianz Insurance Company's motion to admit Lawrence T. Hofmann, John B. Massopust, Thomas M. Darden, Paul L. Gingras, Karl L. Vasiloff and Christopher R. Paar, to the bar of this court, pro hac vice is granted; further it is
ORDERED that the defendant AXA Corporate Solutions Insurance Company's motion to compel the plaintiff Taunus Corporation to participate in an appraisal is granted; it is further
ORDERED that the defendant AXA's motion to stay litigation until an award is rendered in the appraisal is granted; it is further
ORDERED that Allianz's motion to compel Taunus to participate in appraisal is granted; it is further
ORDERED that Allianz's motion to stay this action until appraisal has been completed is granted; it is further
ORDERED that AXA's motion to dismiss the complaint in its entirety is held in abeyance pending the completion of the appraisal; it is further
ORDERED that Taunus' motion for expedited discovery from Allianz and AXA is held in abeyance pending the completion of the appraisal.
Dated: November 14, 2003
Enter:
____
J.S.C.
Richard B. Lowe III
1 The above decision, Littrell v. Allemannia Fire Ins. Co. of Pittsburgh, Penn., (222 AD 302 [3rd Dept 1928]) was reviewed by the Court of Appeals, which answered certain certified questions, (250 NY 628 [1929]). The Court of Appeals reversed on other grounds finding that plaintiffs demanded appraisal after the complaint was already dismissed, which was not permitted by the policy.
2 Note that the Yendel case includes a statement that "moreover, it may be said that while an appraisal cannot properly extend to goods which are conceded to have been totally destroyed," which may appear contrary to the above point. However, this case still offers supporting authority because the court in Yendel made this statement in reference to cases where an insurer denies all liability, as evidenced by its citation to Lang v. Eagle Fire Co., (12 AD 39[4th Dept 1896]). As stated above, the court already established that cases where and insurer clearly denies liability are distinguishable from the present action. Furthermore, there is not concession by Allianz or AXA that the property has been completely destroyed.
3 The Court also finds that Taunus' estimated proof of loss satisfies the proof of loss requirements in paragraph 31 of the insurance policies, which should be read in conjunction with paragraph 38 providing that "[n]o suit or actionon the policy for the recovery of any claim shall be sustainable in any court or equity unless the insured shall have fully complied with all the requirements of this policy.
