French King Realty Inc.1 v. Interstate Fire

• Decision Date: 09 June 2011
• Docket Number: No. 10–P–1165.,10–P–1165.
• Citation: 948 N.E.2d 1244,79 Mass.App.Ct. 653
• Parties: FRENCH KING REALTY INC.1v.INTERSTATE FIRE AND CASUALTY COMPANY.
• Court: Appeals Court of Massachusetts

79 Mass.App.Ct. 653

948 N.E.2d 1244

FRENCH KING REALTY INC.1

v.INTERSTATE FIRE AND CASUALTY COMPANY.

No. 10–P–1165.

Appeals Court of Massachusetts, Franklin.

Argued March 4, 2011.Decided June 9, 2011.

Mark A. Tanner, Northampton, for the plaintiff.William A. Schneider (Richard W. Jensen with him), Boston, for the defendant.Present: CYPHER, FECTEAU, & MILKEY, JJ.FECTEAU, J.

The plaintiff, French King Realty Inc. (French King or plaintiff), appeals from the allowance of two motions for summary judgment in favor of the defendant, Interstate Fire and Casualty Company (Interstate or defendant), that dismissed the plaintiff's cause of action.² The first Superior Court judge ruled that the defendant had no obligation to indemnify French King under the relevant policy for a fire loss because it did not properly “maintain” a certain fire suppression system required by the policy. The second Superior Court judge ruled that French King was required to return to Interstate advance payments it made under the policy. The primary issue presented requires interpretation of an endorsement to the policy that requires, as a condition to coverage, that French King “maintain” a fire suppression system, and of its two exclusions from coverage. Specifically, the defendant contends that the duty to maintain the fire suppression system included a duty to upgrade the plaintiff's dry system, which the manufacturer considered to be obsolete. The plaintiff argues to the contrary, saying that the authorized suppression system maintenance company it hired continued to service the dry system and to certify it as operational. On the motion record submitted and viewed in a light most favorable to the plaintiff, the first judge agreed with the defendant that the plaintiff failed to maintain a fire suppression system.³ This appeal followed. We affirm, but upon grounds different than the first judge.

A. Background. French King owns real property and operates the French King Restaurant (restaurant) in Erving; at all times relevant Frank Prondecki had management responsibilities for the restaurant. A Kidde HDR 50 dry chemical fire suppression system (Kidde system) was installed in the kitchen before French King took ownership of the restaurant in 1974.⁴

On April 3, 2005, Interstate issued the commercial lines insurance policy in question to French King, effective until April 3, 2006. Relevant to the issue herein, the policy contained a protective safeguards endorsement (PSE) added to the commercial property coverage conditions, that provided, in pertinent part, that:

“As a condition of this insurance, you are required to maintain the protective devices or services listed in the Schedule above [e.g., ANSUL SYSTEM OR EQUIVALENT)....

“The following is added to the EXCLUSIONS section of ... CAUSES OF LOSS—SPECIAL FORM[:] ... We will not pay for loss or damage caused by or resulting from fire if, prior to the fire, you:

“1. Knew of any suspension or impairment in any protective safeguard listed in the Schedule above and failed to notify us of that fact; or

“2. Failed to maintain any protective safeguard listed in the Schedule above, and over which you had control, in complete working order.”

The defendant issued the policy pursuant to an application of insurance (application), dated March 7, 2005, submitted on behalf of the plaintiff and signed by Prondecki. In the general information section of the application the plaintiff was asked in question number 6 whether any insurer had declined coverage, or had canceled or not renewed an insurance policy in the prior three years; Prondecki answered in the affirmative, disclosing that on April 3, 2002, MassWest had done so because its “[u]nderwriting guideline required a ‘wet’ Ansul system.” Question number 9 asked if there were “any uncorrected fire code violations”; the application answer was, “No.” In the application's property section, specifically, the additional coverages, options, restrictions, endorsements and rating information section, Prondecki stated: “Ansul System in place”; ⁵ in a separate section of the application entitled “additional information section ‘E,’ ” Prondecki stated that the property did not “have [any] outstanding building, sanitary, fire or other code violations which have been brought to the attention of the property owner in writing by a state, city or town inspector.” Finally, Prondecki signed the application directly under the warning: “Any willful concealment or misrepresentation of material fact or circumstances hereon may void the policy. Signed under the pains and penalties of perjury.” ⁶

With respect to the Kidde system in place in the restaurant, Kidde Fire Systems had issued a bulletin to “All Kidde Pre–Engineered Distributors” dated February 11, 2002, advising that as of that date, Kidde Fire Systems would “no longer support the installation, inspection, service, recharge or repair of dry chemical systems protecting kitchen appliances and ventilation.” ⁷ The bulletin further stated that approximately two years prior to the date of the bulletin issue, i.e., in 2000, Kidde Fire Systems had recommended that the dry chemical systems be upgraded to the Kidde APC wet chemical (UL300) systems, and that Kidde Fire Systems had phased out the inventory of the HDR dry chemical systems parts. According to the bulletin, “[w]hen encountering a dry chemical system protecting kitchen appliances and ventilation, the only acceptable action is to upgrade to a UL300 wet chemical system.” Thus, as of February 11, 2002, the Kidde system present at the restaurant for the purposes of protecting the kitchen appliances could no longer be inspected, serviced, recharged, or repaired.⁸

Furthermore, the department of fire services for the Executive Office of Public Safety stated in an August 26, 2004, memorandum that in order for a fire suppression system to be in compliance with Massachusetts code (527 Code Mass. Regs. § 10.03[8] ), the “system is to be installed, maintained and tested in accordance with [National Fire Protection Association] NFPA 96, 2001 edition.... Section 10.2.3 [of NFPA 96] requires the fire suppression system to be compliant with UL300 standard.” The memorandum noted that “[d]ry chemical extinguishing systems ... are found to be ineffective on cooking oil fires (deep fat fryers) [and that] [t]hese systems no longer have parts available by the manufacturers and in some cases have been delisted by Underwriter's Laboratories.” As a result, such systems “will need to be upgraded to a UL300 compliant system.”

After a semiannual inspection by Fire Pro–Tec N.E., Inc.⁹ (Fire Pro–Tec), Fire Pro–Tec sent a letter dated November 14, 2003, to the “owner/manager” of the restaurant, warning that the fire suppression system at the restaurant was not in accordance with current NFPA requirements and not in accordance with the manufacturer's UL listing on the system.¹⁰ At that time, Fire Pro–Tec provided its first estimate for installing a compliant wet fire suppression system, at a cost of $3,250. Furthermore, on or about June 10, 2004, Fire Pro–Tec also had issued a “range hood systems inspection report” regarding the restaurant, at the top of which stated, “Noncompliance.” In this report, Fire Pro–Tec again advised that the fire suppression system was not UL300 listed, that certain testing was due to be performed, and that there were structural changes that were required to the system. Prondecki signed the report, acknowledging receipt of the report and, implicitly, that Fire Pro–Tec had informed him that the fire suppression system was determined to be in “Noncompliance” with the current NFPA requirements and not in accordance with the manufacturer's UL300 listing on this system. Prondecki asserts, however, that he never was informed by Fire Pro–Tec, orally or in writing, that his system was not operational and that Fire Pro–Tec did not explain the meaning of the term “noncompliance.” He considered the report and estimate for system upgrades as recommendations only.

Shortly after the issuance of the insurance policy at issue, the “manager” of the restaurant again was informed by Fire Pro–Tec, in a letter dated June 23, 2005, that the fire suppression system at the restaurant was not in accordance with the current NFPA requirements or the manufacturer's UL listing on the system. According to this letter, in order to bring the Kidde system into compliance with the current standards, installation of a new automatic liquid (wet) fire suppression system was required. At that time, Fire Pro–Tec provided a second estimate at installing the wet fire suppression system, for a cost of $3,695.

Finally, in June, 2005, the building inspector of Erving advised French King that the system previously had been “red tagged” ¹¹ as of June 10, 2004, and, as a result, he could not issue a certificate of inspection until French King had the system fixed.¹² While Prondecki claims not to have been informed previously of the presence of a “red tag” on the system, and that he did not know the meaning of a “red tag,” he knew from this inspector that if he did not get the system “fixed,” the restaurant would not be able to renew its liquor, food, and health licenses that were scheduled to expire in January of 2006. However, Prondecki never requested any other entity to reinspect the fire suppression system to confirm whether Fire Pro–Tec was correct in issuing a “red tag” on the system. Although Prondecki had obtained replacement quotes in November of 2003 and June of 2005 for a new fire suppression system, nothing further was done with respect to the system before the fire on October 12, 2005,¹³ and the system failed to function at that time.

In a letter dated February 28, 2006, French King, through counsel, made a demand, in writing, for payment under the policy. In a letter dated April 4, 2006, Interstate, also through counsel, declined, citing as reason that the plaintiff failed...