The opinion of the court was delivered by: DUFFY
KEVIN THOMAS DUFFY, D.J.:
On the morning of Thursday, November 6, 1980, at approximately 7:30 a.m., Paul Walsh, a local Glen Wild, New York gas station owner and chief of the local volunteer fire department sat down to his breakfast at the Rockhill Diner. At the same time, Robert Hankins was jogging past East Glen Wild Road when he noticed heavy smoke rising from among the trees. Responding quickly, he telephoned the volunteer fire department, which handled all fires in the area. The postman, also notified of the fire, hastened over to the Rockhill Diner, knowing that Paul Walsh would still be there enjoying his breakfast. Upon being alerted by the postman to the probable fire, Walsh dashed for his car. The alarm sounded at approximately 7:44 a.m.
Walsh, a member of the fire department for over eight years, was the first volunteer fireman to arrive at the East Glen Wild Road home of Stanley and Victoria Zaitchick. Upon his arrival he noticed heavy black smoke billowing out of the left hand side of the single story home. Mr. Resnick, a nearby neighbor, had arrived at the burning house one minute before Mr. Walsh. As Walsh arrived, Resnick was attempting to enter the Zaitchick home on the right-hand side by the garage to determine whether anyone was in the house. Fortunately, no one was home. Within minutes, thirty volunteer firemen were battling the fire with five pieces of apparatus. Despite their strenuous efforts, nearly eight hours elapsed before the fire was extinguished. The house and its contents were completely destroyed.
The home owners, Stanley and Victoria Zaitchick, were first notified of this disaster three days later, on November 9, 1980, while they were vacationing in Sierra Vista, Arizona. The Zaitchicks had left Glen Wild, New York on October 31, 1980, to spend part of Mr. Zaitchick's hard-earned sabbatical with their son. Their son was stationed in Arizona, and had a one week leave from the armed services. The morning after he learned of the fire, Mr. Zaitchick contacted his insurance broker, Max Gersten of the Gersten Hillman Agency, Inc. in Monticello, New York. Within an hour, Mr. Gersten reported back to Zaitchick that his home and its contents were totally lost. With Mr. Zaitchick's daughter in New York taking care of most of the pressing matters, the Zaitchicks tried to enjoy the remainder of their visit with their son. After their son's one week leave ended, the Zaitchicks flew to a relative's home in Florida on November 24 to continue their vacation.
During this same time, on November 11, 1980, the fire insurer of the Zaitchick home, American Motorists Insurance Company of Kemper Insurance, had sent its general adjustor, William Parish, and a cause and origin of fires expert, George O'Dell, to investigate the premises. They took several photographs, made measurements, and attempted to examine the remains, a procedure rendered difficult by the freezing weather and the lack of adequate tools. Amid the debris they were able to find the remains of a stereophonic high fidelity sound system, two television sets, a washer and dryer, a refrigerator, a freezer, some electrical tools, and other valuable goods. They decided to return later.
The insurance investigators returned to the Zaitchick home on November 17, 1980. Since their earlier visit, warmer temperatures had loosened the frozen remains of the home and now allowed the investigators to dig into the burned debris. They began digging in the front of the home in the basement and continued to the oil burner in the back of the house. In their exploration, they uncovered a powdered layer of cement near the burner. The powdered concrete crossed the floor from the oil burner to the back wall. It was near the back wall that the investigators apparently discovered a large clump of rags that Parish stated at trial had a strong odor of a petroleum product. Mr. O'Dell gathered a few of the rags and placed them in a clean, empty paint can, a commonly-used receptacle for potential evidence collected by insurance investigators. A few pieces of charred board, burned at the base of the back wall were also placed in the paint cans for future analysis. Mr. O'Dell and Parish then placed a tarp over the excavated area.
The New York State Police Bureau of Criminal Investigation ("BCI") also investigated the Zaitchick fire after being contacted by Paul Walsh on the day of the fire. Walsh's suspicions, which resulted in his calling in this state agency, had been aroused by various factors: first, he found "dogs" or tags in the power box indicating that the electrical power had been shut off; second, because the fire occurred during the winter months, the possibility of spontaneous combustion was minimized; third, the home was vacant at the time of the fire, and fourth, there was no obvious accidental source of the fire.
Unfortunately, the state police investigators apparently were prevented from searching the premises in depth on the day of the fire due to the heat and unsafe condition of the smoldering remains. It was not until eighteen days later, on November 24th, that BCI Officer Robert Hughes made his first extensive on-site investigation. Meeting insurance investigators O'Dell and Parish at the scene, Officer Hughes inspected the charred debris, including the clump of rags uncovered by Parish and O'Dell. Hughes also noted the petroleum odor exuded by the rags. O'Dell and Parish stated that they would send Officer Hughes the results of the laboratory tests conducted on the rags already sent off for analysis.
The following day, Officer Hughes called Zaitchick in Florida to find out when he would be returning to New York so that they could discuss the fire. Zaitchick stated that possibly he could return in April. Officer Hughes, however, "explained to him that it would be necessary to speak to him before that because [he] had determined that the possibility existed that the fire was not accidental in nature, but possibly purposely set . . . ." Trial Transcript of Officer Hughes at 11. Zaitchick responded that he would try to return sooner. Becoming suspicious of Zaitchick's calm reaction to the devastating fire, Officer Hughes asked Zaitchick why he did not return immediately to New York upon learning that he had lost his residence and his belongings. Zaitchick replied that "he had not seen his son for a while and he wanted to spend a few more days with his son." Id. 12. Moreover, because the fire had completely destroyed his home, Zaitchick said "'well, what can you do?'" Id. 13.
One week later, Stanley Zaitchick travelled to the New York State Police facility at Ferndale, New York. The interview provided "no helpful information" or leads to the police. Defendant's Exhibit K. Zaitchick knew of no enemies, and confirmed that the electricity and the oil burner had been shut off before the fire occurred. Officer Hughes continued his investigation over the following six months, interviewing various witnesses and periodically checking with Parish. Hughes never received the laboratory results from Parish concerning the possibility that gasoline or some other accelerant was discovered in the clump of rags. On May 28, 1981, with "no new leads, suspects, evidence [and with] all avenues of possible investigation . . . exhausted," Officer Hughes closed the case. Id. O'Dell, the cause and origins expert, also left the cause of the fire undetermined before leaving the employ of Kemper. Last, Chief Walsh was unable to determine the cause of the fire.
On February 19, 1981, Stanley and Victoria Zaitchick filed sworn proof of loss statements for the limits of their policy coverage of the house ($70,000) and its contents ($49,000).
Defendant's Exhibits B & C. Defendant demurred on the insured's request for payment. This suit followed to recover the maximum amounts under the insurance policy.
It is undisputed that plaintiffs have met their various contractual duties required by the insurance contract, such as timely notice of the fire and sworn statements documenting proof of loss. Thus, defendant is liable under the insurance contract unless it is able to prove either of the two defenses it has asserted: fraudulent exaggeration ...