The judges of the Seventh Circuit affirmed summary judgment in favor of an insurer that refused to cover a fire loss because the insurer had not been notified of an issue with the fire sprinkler system on the insured property. The case is Frankenmuth Mut. Ins. Co. v. Fun F/X II Inc., 61 F.4th 514 (7th Cir. 2023). 

The Sprinklers

Victor Cao was the sole stockholder of Fun F/X II Inc., a retailer for costumes and other theatrical supplies. The company's entire inventory was stored in a warehouse owned by an LLC, whose only member was Cao. A routine fire inspection in September 2017 revealed that the sprinkler system had no water pressure. When Cao contacted the water company, they told him there was no record of a water shutoff to the warehouse and could not explain the lack of water. When Cao followed up with the city fire inspector two months later, there was still no water, and the inspector did not know how to restore the water. Cao called the water company again and asked the person who answered to restore the water to his warehouse. Cao admitted he assumed the problem would be brought to the attention of higher-level management and addressed. Cao was not present for the routine fire inspection in 2018 and was not informed of any problems it had revealed or whether the water had been restored.