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petitioner in May of 1995, Mr. Stewart informed petitioner that
Atlas was denying coverage. This letter (denial letter) alleges,
as the primary reason for denying coverage, that Julicher Sports
or its representatives had misrepresented or concealed material
facts concerning the loss. The denial letter further alleges
that, among other things, Julicher Sports overvalued, and
overstated the quantity of, the damaged property, misrepresented
the obsolescence of damaged property, and misrepresented the
condition of the building prior to the collapse. In addition to
misrepresentation, the denial letter alleges other grounds for
denying coverage, including certain exclusions in the policy and
the policy’s coinsurance provision.
Following the denial letter, on or about July 24, 1995,
petitioner and Julicher Sports initiated a lawsuit against Atlas
in Federal District Court. The complaint filed in the lawsuit
asserts that the value of plaintiffs’ loss due to the roof
collapse was $138,4606 and claims damages of $137,460 (the
asserted value of the loss minus $1,000 deductible).
Atlas, through Mr. Stewart, responded by filing an answer to
the complaint, a counterclaim against petitioner and Julicher
Sports, and joinder complaints against unrelated third parties.
6 Although the complaint does not describe how this amount
was determined, we note that it is the same as in the sworn proof
of loss; i.e., the sum of the second contents claim of $70,095
and the original claim for damage to the building of $68,365.
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