Georgitsi Realty, LLC v. Penn-Star Ins. Co.

This appeal addressed two issues of first impression related to whether a property insurance policy covering acts of “vandalism” included the damage suffered. Plaintiff owned an apartment building in Brooklyn, which was damaged when excavation of a parking garage took place on the adjacent lot. Cracks were discovered in the foundation and walls of the apartment building eventually leading the New York City Department of Buildings to issue violations and stop-work orders against the owner of the adjacent lot, Armory Plaza. Plaintiff alleged that the stop-work orders and a temporary restraining order from the supreme court were ignored.

Prior to the discovery of damage, Plaintiff obtained from Defendant a “named perils” property insurance policy that protected against loss stemming from different events, including acts of vandalism. Under the policy, “vandalism” is defined as “willful and malicious damage to, or destruction of, the described property.” 2013 N.Y. Slip Op. 06731 at 2. Subsequent to the damage, Plaintiff made a claim under its insurance policy. Defendant rejected the claim, and Plaintiff filed suit. The suit was initially brought in the Supreme Court, Kings County, and removed to the United States District Court for the Eastern District of New York. The district court granted summary judgment for Defendant, holding that the alleged conduct of Armory Plaza did not constitute “vandalism” within the meaning of the policy. After summary judgment was granted, Plaintiff appealed to the United States Court of Appeals for the Second Circuit.

The Second Circuit certified two questions to the New York Court of Appeals. The first question was, “[f]or purposes of construing a property insurance policy covering acts of vandalism, may malicious damage be found to result from an act not directed specifically at the covered property?” Georgitsi Realty, LLC v. Penn-Star Ins. Co., 702 F.3d 152, 159 (2d Cir. 2012). The second question certified was, “[i]f so, what state of mind is required?” Id.

The Court held (1) that an act of vandalism does not have to be directed specifically toward a particular covered property in order for malicious damage to be found, and (2) that conduct is malicious when it reflects “such a conscious and deliberate disregard of the interests of others that it may be called wil[l]ful or wanton.” Marinaccio v. Town of Clarence, 20 N.Y.3d 506, 511 (2013) (citations omitted). The Court explained that there is no principled distinction between conscious disregard by construction workers and classic vandalism from irresponsible youth.

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2013 WL 5637757, 2013 N.Y. Slip Op. 06731

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