Fine v. Bellefonte Underwriters Insurance Co.

Martin Fine (Fine) (plaintiff) owned commercial buildings that had a sprinkler system in case of fire. Bellefonte Underwriters Insurance Co. (Bellefonte) (defendant) provided fire insurance coverage for the buildings. The insurance contract contained a statutorily mandated false-swearing clause that voided coverage if the insured “willfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof . . . or in case of any fraud or false swearing by the insured relating thereto.” During the time the insurance contract was in effect, Fine planned to change the buildings from commercial use to residential use. To induce the commercial tenants to leave, Fine implemented a plan to reduce the heat in the buildings. The heat switch on the boiler was set to activate only when the outdoor temperature was 30 degrees or lower. One night when the outdoor temperature was about 10 degrees, the buildings caught fire. The sprinkler system pipes were frozen, and the sprinklers did not activate. As a result, the fire essentially destroyed the buildings. Fine sought insurance coverage for the loss from Bellefonte. As part of the fire investigation, Bellefonte examined Fine and his agent under oath. During the examination, Fine and the agent attested that they had delegated responsibility to maintain the sprinkler system to the building superintendent. Fine and the agent also attested that the boiler was set to activate at an outdoor temperature of 40 degrees. Bellefonte concluded that Fine had breached the false-swearing clause, so Bellefonte denied coverage. Fine then sued Bellefonte for coverage. After a weeks-long bench trial, the judge found that Fine and Fine’s agent had lied to Bellefonte during Bellefonte’s investigation. The judge found that neither Fine nor the agent had delegated sprinkler-system responsibility to the superintendent. The judge also found that Fine’s agent had instructed the superintendent to set the boiler for an outdoor temperature of 25 degrees, and that the superintendent had instead set the boiler for 30 degrees. The judge found, however, that the false statements of Fine and his agent were immaterial to the insured loss. The judge apparently reasoned that Bellefonte had not fulfilled the burden of proving that the boiler setting or the lack of sprinkler-system maintenance had caused the sprinklers to fail. The judge entered judgment in favor of Fine. Bellefonte appealed.