Elberon Bathing Co. v. Ambassador Insurance Co.

Ambassador Insurance Company (Ambassador Insurance) (defendant) issued a $125,000 fire insurance policy to indemnify Elberon Bathing Co. (Elberon) (plaintiff) against loss by fire. Elberon also had a $25,000 insurance policy through Great Southwest Fire Insurance Company, and the policy through Ambassador Insurance provided excess coverage. On January 8, 1975, a fire damaged the Elberon Bathing Club, a property owned by Elberon and covered by both insurance policies. Although Great Southwest Fire Insurance Company paid Elberon promptly, Ambassador Insurance and Elberon disagreed on how much Ambassador Insurance owed Elberon under the excess-coverage policy. Ambassador Insurance and Elberon each appointed an appraiser as required under the excess-coverage insurance policy. After two appraisers conducted an inspection of the property with a neutral umpire, Elberon’s appraiser concluded Elberon was owed $77,000 from Ambassador Insurance; the appraiser from Ambassador Insurance refused to sign the award. When Elberon filed for an entry of judgment based on the appraisal, Ambassador Insurance Company contested the entry, arguing the umpire had not assessed all the evidence and disclaiming liability due to fraud by Elberon. Ambassador Insurance also demanded a full jury trial and consideration of discovery, including loss estimates and other documentation held by Elberon. The trial court found the appraisers correctly found the replacement cost was the appropriate measure of the actual loss. The trial court held that there was no manifest mistake justifying setting aside the award set by the appraiser and entered a judgment of $52,000 for Elberon. Ambassador Insurance appealed to the appellate division. The appellate division affirmed, holding that the trial court correctly refused to vacate the award. Ambassador Insurance appealed to the supreme court, arguing that the trial court incorrectly entered the award pursuant to the New Jersey Arbitration Act. Ambassador Insurance further argued that even if the New Jersey Arbitration Act was applicable, the trial court’s award should be vacated.