Key Points

  • The Third Department unanimously held that Cobleskill Enterprise breached its policy's protective safeguards endorsement by failing to keep operational smoke detectors in common areas, including the bowling alley.
  • The court held that detectors that might light up but would not sound an audible alarm, and nonfunctional dummy detectors, are not operational smoke detectors.
  • The court decided as a matter of law that the breach materially increased the risk of fire loss under Insurance Law § 3106 (b), and declared that Seneca owes no coverage for the December 23, 2018 fire.
  • Seneca's fraud claim against broker Links Insurance Services failed because an omission-based fraud claim requires a fiduciary duty, and its negligent misrepresentation claim failed because a sophisticated insurer's reliance on the broker's claim submission was unreasonable.
  • The owner's third-party claims against Links were dismissed because they depended on cancellation or application misrepresentations, not the safeguards breach on which the court ruled.

A New York appeals court ruled Thursday that Seneca Insurance Company Inc. does not have to pay for a December 2018 fire at a hotel and restaurant complex in Cobleskill. The court held that the owner broke a policy condition requiring working smoke detectors in the property's common areas, including its bowling alley.

The five-justice panel of the Appellate Division, Third Department, was unanimous. Justice Pritzker wrote for the court, which reversed a Schoharie County Supreme Court order that had denied the insurer summary judgment. The panel instead declared that Seneca is not obligated to cover the damage Cobleskill Enterprise LLP sustained in the fire.

The ruling applies Insurance Law § 3106, which bars an insurer from avoiding a policy over a breached warranty, a policy term requiring the insured to keep a risk-reducing condition in place, unless the breach "materially increases the risk of loss, damage or injury within the coverage of the contract." Materiality is generally a question of fact for trial, but the panel decided it as a matter of law. The court also threw out Seneca's fraud and negligent misrepresentation claims against the owner's retail broker, Links Insurance Services LLC, and dismissed the owner's own claims against the broker.

After the fire, Cobleskill Enterprise sought coverage under its commercial property policy. Seneca denied the claim on several grounds, including misrepresentations in the policy application and the claim, and breach of the policy's protective safeguards endorsement, a rider listing fire-safety measures the insured must maintain. Seneca then sued for fraud and for declarations that the policy was void and that it owed no coverage.

The owner counterclaimed for breach of the policy and filed a third-party action against Links. It argued that if a court found the policy had been cancelled for nonpayment or voided by misrepresentations in the application, Links would be to blame. Seneca later sued Links directly, alleging the broker filed the claim knowing that a third party, Premium Assignment Corporation, had cancelled the policy before the fire.

Supreme Court Justice James Ferreira denied Links' motion to dismiss and Seneca's cross-motion for summary judgment in an order entered March 4, 2025. He found that Seneca's own submissions raised triable issues over whether the owner breached the endorsement. Seneca and Links cross-appealed.

The endorsement, which no one disputed was a warranty, required "either operational hard wired or operational battery powered smoke detectors in each unit and common areas" of the premises. Seneca's evidence centered on a technician from a fire equipment firm the owner hired in November 2018, about a month after the Village of Cobleskill cited the property over its carbon monoxide detectors. The technician testified that the system relied on older detectors and two incompatible setups, and he concluded that "the entire system" needed replacing. He found no smoke detectors in the pool area, bowling alley, basement or dining room ceiling, and only heat detectors in the banquet room and kitchen.

He also found a few nonfunctional "dummy detectors" and a reporting panel for the restaurant, kitchen, banquet room and bowling alley that could not communicate with the main alarm panel in the lobby. Work stopped December 19, 2018, and the fire followed days later, leaving extensive burn damage in the basement.

Because the policy did not define "operational" or "common areas," the court turned to dictionaries. An operational detector, Justice Pritzker wrote, is one "ready for or in condition to undertake a destined function," which he described as detecting smoke and alerting people nearby. Detectors near the restaurant, bowling alley and banquet room "might have 'lit up' if they detected smoke but would not have triggered any audible alarm, rendering them, in effect, nonoperational," he wrote.

The court did not resolve whether every space qualified as a common area. "Even if there is ambiguity as to whether some of these spaces were common areas, other spaces lacking operational smoke detectors — in particular the bowling alley — were public spaces," Justice Pritzker wrote, and so fell within the endorsement.

On materiality, the panel quoted a 2018 federal decision from the Eastern District of New York. "The absence of operational smoke detectors in a public space is 'clearly material to the risk of loss by fire,'" Justice Pritzker wrote. He added that the property "ultimately suffered losses directly attributable to fire and smoke, including in areas lacking operational smoke detectors."

The owner never contested the evidence. "While defendant did oppose the cross-motion on procedural grounds, it did not make any substantive arguments or offer any proof in opposition to meet its shifted burden," the court wrote.

The claims against Links failed for different reasons. Seneca's complaint framed the fraud as intentional concealment, and the court held that a fraud claim based on an omission requires a fiduciary duty. Links acted essentially as the facilitator of an "arm's length commercial transaction," the panel wrote, a relationship that carried no such duty.

The negligent misrepresentation claim failed on reliance. Even assuming a close enough relationship existed, the court held that Seneca's reliance on the broker's claim submission was not reasonable. Seneca "was a sophisticated entity," the panel wrote, and nothing showed why the insurer could not have checked with the owner, whose contact information it had, to confirm "that defendant's policy was in force before commencing its investigation."

The owner's third-party case collapsed with the coverage ruling. The owner had tied its claims against Links to two outcomes: cancellation for nonpayment and misrepresentations in the application. The panel instead ruled against the owner "for a different reason, which is unrelated to actions undertaken by Links and is not asserted in the amended third-party cause of action."

Presiding Justice Garry and Justices Aarons, McShan and Mackey joined the opinion. Seneca was represented by Katherine Maguire Tedrick of Maguire Tedrick, PLLC; Links was represented by Howard S. Kronberg of Kaufman Dolowich LLP.

The order, issued without costs, granted Seneca summary judgment on the sixth cause of action in its August 2023 amended complaint, declared no coverage for the December 23, 2018 fire, dismissed Seneca's amended complaint against Links and dismissed the third-party amended complaint. The decision, 2026 NY Slip Op 06366, remains subject to revision before publication in the Official Reports.