Peter Max v. Great American Security Insurance Company, No. BER-L-7136-18 (N.J. Super. Ct., Law Div., May 21, 2019)
In this summary action, the insureds sought judicial review of the terms of an appraisal award that established the amount of loss they sustained as a result of Superstorm Sandy. The insureds had submitted an insurance claim in excess of $300 million under their fine art dealer’s policy issued by Great American Security Insurance Company and their excess policy issued by Certain Underwriters at Lloyd’s, London to recover the value of artwork created by artist Peter Max that was damaged by flood waters while in storage at a warehouse in Lyndhurst, New Jersey. Because the parties could not agree on the amount of the loss, Great American invoked the appraisal provision in its policy. Following a three-year appraisal process overseen by retired New Jersey Supreme Court Justice Helen E. Hoens as umpire, the insureds were awarded $48,876,014, which was substantially less than the amount initially claimed.
In their action to vacate the award, the insureds pointed to five alleged errors of law and fact that they contended warranted modifying the terms of the appraisal award. Applying the relevant legal standard, the court agreed with the insurers, finding that there was no basis to disturb the legal rulings and factual findings made by the umpire. The court rejected the insureds’ argument that the umpire mistakenly found that the doctrine of contra proferentem did not apply under the circumstances, and found that the controlling legal principles were correctly set forth by the umpire and that there was substantial evidence to support her determination that the parties possessed equal bargaining power. The court also rejected the insureds’ argument that the valuation method used by the umpire did not comply with the terms of the policies. The court agreed with the insurers that determining the retail value of the artwork was a question of fact and not one fixed by precise definition in the law as suggested by the insureds. Consequently, the court held that “retail value” could only be understood by reference to and consideration of the insureds’ past sales history. The court further held that it was not a mistake for the umpire to apply a blockage discount to determine the value of certain categories of damaged artwork.
In a subsequent decision, the court denied the insureds’ motion for reconsideration, finding that they had failed to satisfy the standard for reconsideration by identifying any legal precedent the court misapplied or facts that it failed to consider in reaching its decision and, instead, merely sought another opportunity to argue the merits of their initial application.