Plaintiff, a New Jersey corporation, sued 19 insurance companies for losses sustained as the result of a fire which occurred at its furniture store, 184 Market Street, Passaic, New Jersey, on November 6, 1956. The losses fall into three categories and there are three sets of policies. In the order set forth in the complaint, the first claim involves damage to the building; the second, damage to the stock and fixtures; and the third, the loss resulting from the interruption of business.
The defendants filed a joint answer containing six separate defenses, in which they allege that they have no liability to the plaintiff because of violations of several provisions of the policies. These defenses, in brief, charge that the plaintiff (1) willfully and fraudulently concealed and misrepresented (a) the origin and cause of the fire, (b) the amount and value of the property involved, (c) the business and financial affairs of the corporation, and (d) the financial transactions between the plaintiff and its officers, directors and stockholders; (2) failed, through its officers and directors,
to use reasonable means to preserve the property at and after the loss; (3) increased the hazard by means within the knowledge or control of the plaintiff; (4) caused the fire to be set by an officer, director and agent of the plaintiff; (5) concealed the fact that the fire had been intentionally set; and (6) caused the fire to be set by one Harry Miller, who owned or controlled a substantial amount of the stock of plaintiff, exercised substantial management and control of the business and financial affairs of plaintiff and was its secretary, treasurer and director, and who, with another stockholder, Abe Dobrin, actually operated the plaintiff corporation "substantially" as a partnership. At the close of the case the defense of increasing the hazard was withdrawn, there being no proof offered sustaining this charge.
The trial was a protracted one. The testimony and exhibits were voluminous, and no attempt will be made to discuss all of the evidence because to do so would inordinately extend the length of this opinion.
The fire, which occurred in the early morning of November 6, 1956, was of great intensity and caused extensive damage. Harry Miller, who was at the time of the fire, and had been for many years, secretary, treasurer, director and one of the principal stockholders of the plaintiff, had been seen in the store premises by two witnesses at between 5:15 and 5:45 on the morning of the fire. This apparently aroused the suspicions of the police and fire authorities of the City of Passaic, and Harry Miller was questioned on the day of the fire and then arrested for arson. He was indicted and tried in the Passaic County Court, where he was acquitted. Many of the witnesses who testified in this case had been witnesses in the criminal trial, and many of the exhibits placed in evidence here had been used in that trial.
The fire, which was reported first to the Passaic Fire Department by a still alarm at 5:59 A.M. on November 6, 1956, was of such severity that several other alarms were sent in by the fire department officers on the scene, and finally a general alarm was sounded at 6:17 A.M.
After the fire the plaintiff filed proofs of loss as to the building, merchandise and fixtures, and for business interruption. These claims total almost $166,000. Total insurance in force was $326,000. In its proofs of loss, dated January 2, 1957, sworn to by Abe Dobrin as president, plaintiff stated that the cause of fire was "Undetermined."
The first question to be determined is whether or not the defendants have established, by a preponderance of the evidence, their principal defenses -- that Harry Miller either set fire to the store premises or knew when he was in the building on the morning of November 6 that there was a fire burning and did not give the alarm. His acquittal in the criminal trial does not preclude a finding in this case that the fire was set by him. Even if he did not set the fire, but found it burning that morning and did nothing about it, this conduct, if established, could result in the defendants escaping liability under their policies because of the provisions which require the plaintiff to use all reasonable means to save and preserve the property insured.
But a finding that Harry Miller did set the fire would not of itself result in a verdict in favor of the defendants. In order to reach that result it must also be found that he was a person who would substantially benefit from the payment of the insurance, such as a principal stockholder; that he dominated the affairs of the plaintiff and that the other officers, directors and stockholders permitted him so to do, thereby becoming legally bound by his acts.
It is axiomatic that fraudulent losses are necessarily excepted from a fire policy upon the moral principle that no man can be permitted in a court of justice to allege his own turpitude as a ground for recovery in a suit. Cf. 14 R.C.L. 1223; 52 A.L.R. 805.
It seems clear from the testimony, the photographs and a physical inspection of the property by the court that the fire started in the basement in an area directly under the first-floor office. The area in the basement has been referred to throughout the trial as the "storage area" and will
be so referred to herein. Plaintiff endeavored to show that the fire might have started between the basement ceiling and the flooring on the first floor and burned downward and upward. The weight of the evidence does not support that theory. The fire department representatives gave as their opinion that the fire had its source in the basement storage area, burned upward into the first-floor office space and outward into the basement display area and up the stairway which leads to the first floor. The area of the greatest destruction was the storage area and the first floor immediately above it.
While the defendants have raised numerous objections to making payment under the policies, their principal defense is that Harry Miller set the fire or, alternatively, if he did not, he knew when he was in the building in the early morning of November 6, 1956 that a fire was raging in the basement and did nothing, but allowed the building to burn. In either case, under the terms of the policies, this could provide a basis for relieving the defendants from payment.
Did Harry Miller set the fire? There were no witnesses to the act and no direct evidence of his participation. The circumstantial evidence must therefore be examined.
Before analyzing this evidence, and bearing in mind that the defendants must carry the burden of proof of this defense, a statement of the ...