Exhibit (c)(1)






                                FAIRNESS OPINION
                                 AND LOGIC MEMO
                                       FOR
                            ALLCITY INSURANCE COMPANY
















                             SANDERS MORRIS HARRIS


                                 HOUSTON, TEXAS

                                 MARCH 31, 2003




March 31, 2003

The Special Committee                                   G. CLYDE BUCK
Allcity Insurance Company                               SENIOR VICE PRESIDENT &
45 Main Street, 3rd Floor                               MANAGING DIRECTOR
Brooklyn, NY 11201


Gentlemen:

           You have advised Sanders Morris Harris ("SMH") that Leucadia National
Corporation ("Leucadia") has proposed a tender offer by Leucadia to acquire the
publicly held outstanding common stock of Allcity Insurance Company ("Allcity")
(approximately 9% of the total shares outstanding) at a price of approximately
$2.75 per share in cash (the "Transaction"). The Special Committee has retained
SMH as its financial advisor, which assignment includes SMH issuing a written
opinion ("Opinion") as to the fairness, from a financial point of view, to the
public shareholders of Allcity of the financial terms of the proposed
Transaction.

           SMH, as part of its investment banking business, is frequently
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, secondary distributions of
listed and unlisted securities, private placements, and valuations for estate,
corporate and other purposes.

           In arriving at our Opinion, we have, among other things:

           1.         Reviewed Allcity's publicly available audited annual and
                      unaudited quarterly GAAP financial statements from
                      December 31, 1998 to December 31, 2002;

           2.         Reviewed Allcity's annual and quarterly statutory
                      financial statements from December 31, 1998 to December
                      31, 2002;

           3.         Reviewed Allcity's recent press releases dated January 15,
                      2003, November 14, 2002, August 14, 2002, July 25, 2002,
                      May 13, 2002, April 1, 2002, November 14, 2001, August 14,
                      2001, May 15, 2001, and April 2, 2001;



Allcity Insurance Company
March 31, 2003
Page -2-


           4.         Reviewed Empire Insurance Group's "Discussion Memorandum"
                      dated July 1, 2002;

           5.         Reviewed Empire Insurance Group's "Leucadia Operations
                      Meeting" Presentation dated December 11, 2001;

           6.         Reviewed Empire Insurance Group's "Board of Directors
                      Meeting Financial and Operations Summary" Presentation
                      dated December 17, 2001;

           7.         Reviewed Empire Insurance Group's "Operating Plan During
                      Runoff" Presentation dated December 2001;

           8.         Reviewed Empire Insurance Group's "Board of Directors
                      Meeting" Presentations dated March, August, September and
                      December 2002 and March 2003;

           9.         Reviewed and discussed with management the unaudited
                      preliminary December 31, 2002 balance sheet and adjusted
                      net book value of the Company and the related assumptions;

           10.        Reviewed the Company's budgeted statement of income for
                      the Company's projected runoff period, dated February 13,
                      2003;

           11.        Reviewed a memo from the Company's actuary, David
                      Christhilf, regarding loss and loss adjustment expense
                      reserves as of December 31, 2002, dated February 13, 2003;

           12.        Discussed with management of Allcity the outlook for
                      future operating results, the assets and liabilities of
                      Allcity, materials in the foregoing documents, and other
                      matters we considered relevant to our inquiry; and

           13.        Considered such other information, financial studies,
                      analyses and investigations, as we deemed relevant under
                      the circumstances.


           In our review and in arriving at our Opinion, we have, with your
permission, (i) not independently verified any of the foregoing information and
have relied upon its being complete and accurate in all material respects, (ii)
with respect to any estimates, evaluations and projections furnished to us,
assumed that such information was reasonably prepared and based upon the best



Allcity Insurance Company
March 31, 2003
Page - 3 -


currently available information and good faith judgement of the person
furnishing the same, and (iii) not made an independent evaluation or appraisal
of specific assets or liabilities of Allcity.

We are not experts in the evaluation of insurance reserves. In rendering our
Opinion, we have relied upon the reserve information furnished by Allcity.

Our Opinion is based upon market, economic and other conditions as they exist
and can be evaluated as of the date of this letter. SMH consents to the
inclusion of the text of this Opinion in any notice or appropriate disclosure to
the public shareholders of Allcity and in any filing Allcity is required by law
to make.

           Based upon and subject to the foregoing, it is our Opinion that, as
of the date hereof, the proposed Transaction is fair to the public shareholders
of Allcity from a financial point of view.



                                         SANDERS MORRIS HARRIS, INC.

                                         By: /s/ G. Clyde Buck
                                             ----------------------------
                                             G. Clyde Buck
                                             Managing Director