## Facts

- Owners operated three contiguous Manhattan buildings as a single economic unit and insured them under a New York standard fire policy.
- The owners pursued a “freeze-out” plan to reduce occupancy and costs, including running heat at very low levels during winter.
- A fire of unknown origin began on February 14, 1979, heavily damaging two buildings and substantially damaging the third.
- The premises had a wet-pipe sprinkler system, but it did not operate during the fire; an investigation suggested parts of the system were frozen and in poor condition.
- The owners claimed policy benefits for building damage, rental loss, and debris removal.
- The policy included a false-swearing clause voiding coverage if the insured willfully concealed or misrepresented any material fact or committed fraud or false swearing relating to the insurance.
- During examinations under oath, the owners and their agent stated that sprinkler-system maintenance responsibility had been delegated to the superintendent and that the boiler/heat settings would activate around 40°F.
- The trial court found those statements were knowingly false: responsibility had not been delegated, and the heat settings were substantially lower (about 25–30°F).

## Issues

1. Whether intentional misstatements during an insurer’s investigation are “material” under a fire policy’s false-swearing clause when the insurer cannot prove the misrepresented facts caused the loss.
2. Whether the insured could recover additional pre-judgment interest if coverage was upheld.

## Decision

- The Second Circuit reversed the judgment for the insureds and remanded with instructions to enter judgment for the insurer.
- The court held the insureds’ knowingly false statements about sprinkler maintenance responsibility and heat settings were material as a matter of law.
- Because the false-swearing clause was triggered, the policy was void and the insureds were barred from any recovery.
- The insureds’ cross-appeal for additional interest was moot.

## Legal Principles

- Under a standard false-swearing clause, a misrepresentation is material if it is reasonably relevant to the insurer’s investigation and might affect the insurer’s attitude or actions in handling the claim.
- Materiality is evaluated from the insurer’s investigative perspective at the time of the investigation, not solely by whether the fact later proves causally connected to the loss.
- Intentional falsehoods that tend to mislead the insurer or deflect a full and fair investigation void coverage, even if the insurer cannot ultimately prove the misstated facts caused the claimed damage.
- Once coverage is voided for false swearing, other policy defenses and disputes over interest need not be reached.

## Conclusion

The court held that deliberate false statements made during the insurer’s investigation about matters relevant to potential policy defenses are material as a matter of law, and such false swearing voids the policy and forfeits the insured’s claim.


Fine v. Bellefonte Underwriters Ins. Co., 725 F.2d 179 (2d Cir. 1984)