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Failure to Fulfill Protective Safeguards Endorsement Defeats Fire Claim 

 In Frankenmuth Mutual Insurance Company v. Fun F/X II, Inc. and Cao Enterprises II, LLC, No. 22-1933, United States Court of Appeals, Seventh Circuit (February 28, 2023) the insurer rejected a fire claim because the named insured knew, and didn\'t tell, Frankenmuth, that the sprinklers in his warehouse had no water, a material condition precedent of the policy.  Fun F/X II, Inc. and Cao Enterprises II, LLC (collectively "FUN\\u201d) sought insurance coverage after a warehouse fire. The relevant insurance policy issued by appellee Frankenmuth Mutual Insurance Company provides that it does not cover losses if prior to the fire the policy holder knew of a suspension or impairment in an automatic sprinkler system yet failed to notify Frankenmuth of the issue. Based on this policy exclusion, the district court granted summary judgment for Frankenmuth.  UNDISPUTED FACTS  FUN is a costume and theatrical supply retailer that stored its inventory in a warehouse in South Bend, Indiana owned by Cao Enterprises II, LLC. Victor Cao is the sole member of Cao Enterprises II, LLC and the sole stockholder of FUN. Cao purchased the warehouse in 1999. It then had a Functional sprinkler system with a working supply of water. Cao replaced the sprinkler heads around 2004 and hired inspection companies for routine system testing. In 2016, an inspector from Legacy Fire Protection found no problems.  THE FIRE  A fire destroyed the warehouse and all of its contents on July 26, 2019. FUN claimed losses exceeding $7 million. The sprinkler system still did not have any water flowing to it. After the fire, the source of the problem was discovered:  The city apparently had cut and capped the pipe supplying the sprinkler system in April 2017 when the building next door was demolished. Cao was told that the worker cutting the pipe incorrectly believed the FUN warehouse was being demolished as well.  Frankenmuth Mutual Insurance Company\\u2019s policy contained an exclusion providing that Frankenmuth "will not pay for loss or damage caused by or resulting from fire if, prior to the fire, you: 1. Knew of any suspension or impairment in any protective safeguard listed in the Schedule above and failed to notify us of that fact."  It was undisputed that Cao never notified the insurer after he learned in September 2017 that the sprinkler system lacked a working water supply. It is also undisputed that no one ever told Cao before the fire that the water flow had been restored.  Frankenmuth sued seeking a declaratory judgment that it did not owe insurance coverage to FUN for losses from the fire.  The court found the sprinkler system had no water flowing to it-and that FUN, through Cao, knew of this impairment yet failed to notify Frankenmuth.