The New Jersey company that owned Mandee, Annie Sez and other retailing outfits has sued its insurer, claiming benefits withheld after Hurricane Sandy forced it into bankruptcy.
In an adversary action filed in federal bankruptcy court in Newark, Big M Inc. claims that despite its repeated requests, Westport Ins. Co. has failed to fully reimburse and “unreasonably delayed any payments that were made.”
According to court documents, at the time it entered bankruptcy last January, Big M of Totowa owned 129 stores in New Jersey, New York and six other states; employed 490 full-time, 710 part-time and 600 seasonal employees and anticipated 2013 revenues of $192 million. Mandee and Annie Sez market discount clothing to women, while Afaze sells jewelry and accessories.
In recent years, Big M was in financial trouble, though a 2012 restructuring improved its outlook. But in October 2012, Sandy battered many of its stores.
The locations, as well as its Totowa headquarters and distribution center, could not open for more than a week. Three stores were closed for more than a month, and operated on a limited basis after that. Business remained slow even after the operation was up and running, leading to an alleged $10 million loss.
Big M contends that within days of the storm, it filed claims with Westport, of Overland Park, Kan., where it had property-damage and business-interruption coverage. It emphasized it needed funds to buy holiday season inventory.
Westport “failed to reconcile the Debtor’s claim, choosing instead to be unresponsive,” the company alleged in its adversary complaint.
When Westport finally acted, it “advanced Big M a fraction of the claim amount,” which was insufficient, “particularly during the critical holiday season,” Big M claimed.
The company filed a bankruptcy petition on Jan. 6, estimating assets and liabilities each at $50 million to $100 million.
In May, U.S. Bankruptcy Judge Donald Steckroth in Newark approved a $22.5 million sale of Big M’s assets to YM Inc. of Toronto, a Canadian clothing retailer.
The stores have remained open in the interim.
In its complaint, Big M asserts claims of breach of contract and breach of the covenant of good faith and fair dealing. The company is seeking compensatory damages, interest, attorney fees and costs, and other relief.
Steckroth, who is overseeing the bankruptcy, also was assigned to the adversary action.
Big M’s lawyer, Warren Martin of Porzio, Bromberg & Newman in Morristown, could not be reached Friday.
No lawyer was listed on PACER for Westport as of Friday and a spokesman declines comment. •