Future Realty, Inc. v. Fireman's Fund Insurance Company, Civ. A. No. 3818.

• Decision Date: 09 March 1970
• Docket Number: Civ. A. No. 3818.
• Citation: 315 F. Supp. 1109
• Parties: FUTURE REALTY, INC., Plaintiff, v. FIREMAN'S FUND INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Mississippi

315 F. Supp. 1109

FUTURE REALTY, INC., Plaintiff, v. FIREMAN'S FUND INSURANCE COMPANY, Defendant.

Civ. A. No. 3818.

United States District Court, S. D. Mississippi, S. D.

March 9, 1970.

Knox Walker, Gulfport, Miss., I. Jay Krieger, New Orleans, La., for plaintiff.

Thomas H. Watkins, Jackson, Miss., Clyde Hurlbert, Biloxi, Miss., for defendant.

MEMORANDUM OPINION

NIXON, District Judge.

This is a diversity suit filed by plaintiff, a Mississippi corporation, against an incorporated California insurance company in the amount of $19,594.00 allegedly due under the terms of a fire insurance policy issued by defendant to plaintiff, insuring for a period of three years September 13, 1967 to September 13, 1970 (Exhibit P-3), plaintiff's therein described block and frame building situated on West Beach, Biloxi, Harrison County, Mississippi against fire and other perils in the amount of $25,000.00.

During the early morning of March 25, 1969, the plaintiff's frame building described in defendant's policy was partially damaged by fire of an unknown origin in the amount of $12,468.34, reasonable costs of repair and replacement of material of like kind and quality, applying reasonable depreciation (Ex. D-1).

Plaintiff contends that it is entitled to payment by the defendant under the terms and provisions of the issued policy inasmuch as the described building was partially damaged by fire, an insured risk; the fire occurred during the three year term of the policy; and the premium was paid. The defendant, in denying plaintiff's right to recover for the fire loss, contends that at the time thereof, March 25, 1969, coverage afforded by the policy sued on herein was suspended under the terms and provisions thereof for two reasons: (1) because at the time of the fire the building described in the policy had been vacant or unoccupied beyond a period of sixty consecutive days, and/or, (2) the moral and physical hazard had been increased by means within the control or knowledge of the insured.

The policy in question contained, among others, the following provisions:

"Conditions suspending or restricting insurance. Unless otherwise provided in writing added hereto this Company shall not be liable for loss occurring "(a) While the hazard is increased by any means within the control or knowledge of the insured; * * * "(b) While a described building, whether intended for occupancy by owner or tenant is vacant or unoccupied beyond a period of sixty consecutive days; * * *"

Therefore, the issue to be resolved by this Court, which has jurisdiction over the parties and the subject matter hereof, is whether at the time of the fire loss of March 25, 1969, coverage afforded by the policy in question was suspended under either of the above quoted terms and provisions thereof.

The building in question, which is referred to as "Chez Joey", which was the name of the last business operated therein prior to the fire, was constructed approximately ten or twelve years ago. At the time of the issuance of the insurance policy sued on herein on September 13, 1967 the subject premises were occupied and used partly as a beverage parlor wherein intoxicating liquors were sold, and partly as living quarters or apartments. On March 12, 1968, plaintiff leased the premises to Julia M. Mauffray by written lease for a period expiring January 1, 1973. However, Julia Mauffray vacated the premises in the early part of October, 1968, and this building remained vacant or unoccupied by anyone with no one living therein or conducting any business therein between that date and the date of the fire. Plaintiff's President, Samuel B. Katz, in testifying herein admitted to the "truthfulness" of the statement which he gave to the defendant's adjuster on April 11, 1969, that "* * * The building was vacant from November 1, 1968 until now * * *" (See Ex. 2 and 3 to Ex. D-5; and Response to Request No. 2 in Ex. D-6.) On October 5, 1968 gas service to the subject premises was disconnected and electric or power service thereto was discontinued on October 7, 1968. The premises was not thereafter served by either gas or electricity at any subsequent time and prior to the fire on March 23, 1969 (Ex. D-3 and 4).

Nothing of significance transpired with reference to the subject premises until a few days before the fire when, through the efforts of Robert A. "Bobby" Bennett (a former practicing attorney in Biloxi, Mississippi, first cousin of the President and stockholder of plaintiff, Samuel B. Katz, and brother of Bernard J. Bennett, Secretary-Treasurer and 50% stockholder in the plaintiff corporation), Katz and one Troy Garriga, a nightclub owner and convicted felon, allegedly agreed over long distance telephone to enter into a lease arrangement which was to be, but never was because of the fire, reduced to writing and was to begin on April 1, 1969 or seven days subsequent to the fire. According to Katz, this was to be a two-year lease, although Garriga stated it was to be a one-year lease with an option to renew for two years. The agreed rental, according to Katz, was to be $315.00 per month, but according to Garriga, was to be $315.00 per month for the first year with an increase of $25.00 per month for the remainder thereof. In this telephone conversation, Katz instructed his cousin, Robert Bennett, also a convicted felon, to accept ten dollars from Garriga as a deposit on the first month's rent, to give a receipt therefor, and to turn over the building keys to Garriga, all of which was accomplished at that time. Garriga was to open and operate a bar or lounge, utilizing the first floor of the two story frame building in question. He employed a part-time Biloxi fireman, Hudson Joseph Migues, who was already working as a "security guard" at one of Garriga's other nightclubs or lounges to "clean-up" the inside of the building. In the early morning of March 24, 1969, the day before the fire, Migues, his wife and another person, using the keys which had been delivered to them by Garriga, unlocked the front door, and entered "Chez Joey". They found that the back door to this building had been pried open at some previous time and was unlocked. The two air conditioning units, one on the east side and one on the west side of the building had been removed leaving two openings into the building, each of which was approximately two and one-half feet long and 18 to 20 inches wide located five and onehalf feet off the ground. In addition, they found a great amount of debris, including trash, empty wine bottles, newspapers and a tramp or vagrant sleeping under two blankets on the second floor. They proceeded to do some cleaning after having purchased wax and concluded their work for the day after a few hours, having entered the building, according to Migues' testimony, at approximately 9:00 A.M., although he previously testified under oath in his deposition that they had entered the building between noon and 1:00 P.M. The only furnishings inside the building at the time of the fire were a bar or counter, a bandstand and a few old chairs. The Court further finds, in accordance with the testimony of John Worwell, Jr., who worked at a service station located approximately ten feet north of the "Chez Joey", that this building had not been used or occupied by anyone "between Christmas time and the time of the fire" and that on four to six occasions he saw vagrants or tramps entering the building through the upstairs door on the west side, caused him to fear that a fire might be started therein close to his service station.

The Court finds, based upon the testimony of Norman W. Cowart, Deputy Fire Marshal of the State of Mississippi, H. T. Busby, Special Agent of the Fraud and Arson Department of the American Insurance Association, George Pete Clegg, Long Beach, Mississippi Fire Department Chief, and James 0. Ness, Fireman of the Biloxi Fire Department, who helped fight the fire in question, and all of whom are well qualified experts in this field, that there were three separate unrelated fires, which were not accidentally set, burning inside the building. One fire originated near the end of the bar or counter, one originated near the top of the bar in a different area thereof, and the third originated between the ceiling and false ceiling separating the first and second floors in the middle of the building some distance away from the other two. This Court further finds in accordance with the testimony of all these witnesses that there was a great deal of debris, including papers and rags, found on the first and second floors of this building shortly after the fire, in addition to empty wine bottles. When the State Deputy Fire Marshal and the Special Agent of the American Insurance Association were finally able to contact Troy Garriga after having made several unsuccessful efforts to do so, he refused to discuss the fire or any aspect thereof with these witnesses, and, after initially denying that he had ever seen them or talked to them, finally admitted that they perhaps could be the two gentlemen who called on him, but denied that he refused to discuss the fire with them but merely told them he was late for a dental appointment or some other appointment.

The first question which this Court must resolve is whether the coverage of the policy issued by defendant to plaintiff on September 13, 1967 insuring the burned premises for three years in the amount of $25,000.00 against fire and other perils and upon which the premium was paid, was suspended by virtue of the fact that the building was vacant or unoccupied beyond the period of sixty consecutive days immediately prior to the fire of March 25, 1969.

In its post-trial brief filed with the Court plaintiff principally relies on the opinion of the St. Louis, Missouri Court of Appeals rendered on June 14, 1963 in the case of Limbaugh v. Columbia Insurance Company of New York, 368 S.W.2d 921, in which it was held that a building which...