Western Consolidated Premium Properties, Inc. et al v. Westchester Surplus Lines Insurance Company et al

Filing 166

ORDER AND OPINION denying 147 Amended MOTION to Vacate Appraisal Award filed by 2700 Whitney LLC, 1500 Lorene LLC, Western Consolidated Premium Properties, Inc. Signed by Judge Stanwood R. Duval, Jr on 12/12/2011.(blg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA

WESTERN CONSOLIDATED PREMIUM
PROPERTIES, INC., 1500 LORENE, LLC,
AND 2700 WHITNEY, LLC

CIVIL ACTION

VERSUS

NO. 06-4845

WESTCHESTER SURPLUS LINES
INSURANCE COMPANY AND
TRAVELERS PROPERTY CASUALTY
COMPANY OF AMERICA

SECTION ‘K”(5)

ORDER AND OPINION
Before the Court is the “Motion to Vacate the Appraisal Award” filed on behalf of plaintiffs
Western Consolidated Premium Properties, Inc., 1500 Lorene, LLC, and 2700 Whitney, LLC (Doc.
147). Having reviewed the pleadings, memoranda, and relevant law, the Court, for the reasons
assigned, DENIES the motion.
Plaintiffs filed suit against Westchester Surplus Lines Insurance Company1(“Westchester”)
and Travelers Insurance Company2 (“Travelers”) seeking to recover damages sustained by three
apartment complexes in the New Orleans area as a result of Hurricane Katrina. Plaintiffs also sought
penalties and attorneys fees under Louisiana law for the insurers alleged arbitrary and capricious
failure to timely tender funds reasonably due under the various policies insuring the properties.
After plaintiffs filed suit, the parties focused their efforts on settlement. Westchester

1

Westchester provided insurance covering property damage and business interruption
losses between $10,000,000.00 and $30,000,000.00.
2

Travelers Insurance Company provided the third layer of coverage and provided
coverage for property damage and business interruption losses between $30,000,000.00 and
$300,000,000.00.

tendered its policy limits in December 2006. Thereafter Travelers and plaintiffs began mediation
that resulted in a settlement agreement resolving certain claims, not relevant to this motion. The
settlement did not affect the plaintiffs’ claim under the “Business Interruption, Extra Expense and
Rental Value/Rental Income coverages. However, with respect to those claims the settlement
agreement provided:
The parties agree to attempt to resolve the insureds’ Business
Interruption, Extra Expense and Rental Value/Rental Income claims
by first attempting to further negotiate and adjust the loss between
them and if that is unsuccessful they agree to mediate the dispute, in
a non-binding mediation, before a mediator agreed to by the parties.
In the event the mediation does not result in a settlement of the
claims, the parties agree to appraise the Business Interruption, Extra
Expense and Rental value/Rental Income claims pursuant to the terms
of the insurance policy, subject to any modifications the parties agree
upon.
Doc. 9-3, Exhibit A.
The parties proved unable to resolve the matter. Before the appraisal process began
Travelers filed a motion seeking determinations with respect to several insurance coverage issues.
The Court held a hearing on Travelers’ motion. Following oral argument, the Court ruled that
Travelers had not waived its right to contend that the North Carolina properties were replacements
for the Louisiana properties. Additionally the Court stated:
I have found that as a general matter of law, ultimately the North
Carolina properties replace the Louisiana properties, as I understand
the facts presented.
But as to when that occurred in full is a matter for the Appraisal
Board. And the accounting, as to what credits go to the – what
credits go to the benefit of the insurance company, Travelers vis-a-vis
the North Carolina replacement property will of course have to be
determined by the Appraisal Board as well.
Transcript of July 15, 2009 Hearing, p. 70. In response to a request from counsel for plaintiffs that
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the Court clarify its ruling concerning the latitude that the appraiser would have with respect to the
replacement property issue, the Court issued an order stating, in pertinent part: 1) “the North
Carolina properties purchased by plaintiffs constituted replacement property for the Louisiana
property damaged by Hurricane Katrina”; 2) “the replacement of the properties commenced with
the purchase of the first North Carolina property”; 3) “the issue of when the replacement of the
properties ended was to be determined by the appraisers”; and 4) “[i]f any party desired to revisit
the issue of when the replacement of the properties commenced, then the appraisers could []make
alternative findings on that issue.” Doc. 96.
In October 2011, the Appraisal Board rendered its findings which resulted in an award to
plaintiffs, of $2,863,455.00.3 Less than three weeks later, Travelers tendered a check to plaintiffs
for $143,979.68, the difference between the appraisal award and the amount previously paid by
Travelers for loss of business income/rental value/rental income.
Plaintiffs move to vacate the appraisal award urging that the Appraisal Board “made an
erroneous award” and “imperfectly executed their powers.” Doc. 159, p. 1. The essence of
plaintiffs’ motion is that the Court’s July rulings are incorrect and that because the Appraisal Board
“felt constrained” by the Court’s July 15, 2011 ruling, it did not make alternative findings
concerning when the replacement of the Louisiana properties commenced and failed to consider a
number of positions urged by plaintiffs during the appraisal process.
Under Louisiana law, appraisal awards are considered to be arbitration awards. See Musso’s
Corner, Inc. v. A & R Underwriters, Inc., 539 So.2d 919 (La. App. 4th Cir. 1989). The parties agree

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The award of the Appraisal Board acknowledged that it did not take into account the
sums already paid by Travelers or any credits that Travelers may have be entitled to claim.
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that La. Rev. Stat. §9:4210 sets forth the applicable grounds for vacating the award of the Appraisal
Board. The statute provides that an award maybe vacated:
A. Where the award was procured by corruption, fraud, or undue
means.
B. Where there was evident partiality or corruption on the part of the
arbitrators or any of them.
C. Where the arbitrators were guilty of misconduct in refusing to postpone
the hearing, upon sufficient cause shown, or in refusing to hear evidence
pertinent and material to the controversy, or of any other misbehavior by
which the rights of any party have been prejudiced.
D. Where the arbitrators exceeded their powers or so imperfectly executed
them that a mutual, final, and definite award upon the subject matter submitted
was not made
La. Rev. Stat. 9:4120.
Plaintiffs have not established any of the grounds provided for in the statute for vacating
the award. The Court has previously concluded that its July rulings were not based on any manifest
error of law or fact and declined to alter or amend those rulings. Thus, plaintiffs’ contention that
the July 15, 2009 order was in error and needs to be modified is not persuasive. Nor is there any
indication that the Appraisal Board felt “constrained” by the Court’s July 15, 2009 ruling. The
Court notes that plaintiffs proceeded with the appraisal process following the Court’s July 15, 2009
ruling and made no attempt to stay the appraisal process pending resolution of plaintiffs’ “Motion
for New Trial or to Alter or Amen the Court’s Findings.” Nothing in the Appraisal Award itself

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indicates that the appraisers felt “constrained,” and the award includes no details concerning how
the appraisers arrived at the award. Considering the record before the Court, there is no basis upon
which the Court can conclude that the appraisers felt “constrained” as plaintiff speculates.

Accordingly, the motion is DENIED.
New Orleans, Louisiana, this 12th day of December, 2011.

STANWOOD R. DUVAL, JR.
UNITED STATES DISTRICT JUDGE

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