New York Adopts a Broad Definition of Covered Vandalism

by Cozen O'Connor
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On October 17, New York’s highest court held that an insured could recover for a “vandalism” loss without showing that the vandal in question intended to damage the insured’s property. Indeed, proof of intent to cause property damage to anything is no longer required in the Empire State. Instead, to recover, a policyholder only needs to show that the conduct causing property damage reflected “such a conscious and deliberate disregard of the interests of others that it may be called willful or wanton.”

In Georgitsi Realty, LLC v. Penn-Star Ins. Co., – F. 3d –, 2013 WL 5637757 (N.Y. 2013), the policyholder owned a four-story apartment building in Brooklyn. Excavation activities on the adjacent property caused cracks in the walls and foundation of the insured structure. The excavation contractor ignored “stop work” orders issued by the New York City Department of Buildings and even a temporary restraining order from the state’s Supreme Court.

The insured made a claim under its Penn-Star property insurance policy that provided coverage for “[v]andalism, meaning willful and malicious damage to, or destruction of, the described property.” Penn-Star denied the claim and the policyholder filed suit. The Eastern District of New York entered summary judgment in favor of Penn-Star, and the policyholder appealed to the 2nd Circuit. The 2nd Circuit certified two questions to New York’s Court of Appeals: (1) “may malicious damage be found to result from an act not directed specifically at the covered property,” and (2) “[if] so, what state of mind is required?”

The New York Court of Appeals unanimously answered the first question in the affirmative. In the words of Justice Smith’s opinion:

We see no reason why the term “vandalism” should be limited to acts “directed specifically at the covered property.” Vandalism, as the term is ordinarily understood, need not imply a specific intent to accomplish any particular result; vandals may act simply out of a love of excitement, or an unfocused desire to do harm, or . . . out of a desire to enrich oneself without caring about the consequences to others.

* * *

An excavator who is paid to dig a hole, and does so in conscious disregard of likely damage to the building next door, is, for these purposes, not essentially different from an irresponsible youth who might dig a hole on the same property, with the same effect, whether in search of buried treasure or just for fun.

With respect to the requisite state of mind, six of the seven justices answered the certified question by:

adopting, insofar as it relates to property damage, the formulation we have used in reviewing awards of punitive damages. Conduct is “malicious” for these purposes when it reflects “such a conscious and deliberate disregard of the interests of others that it may be called willful or wanton.”

Having already held that it was not necessary to show an act “directed specifically at the covered property,” the majority thereby held that it was not even necessary to show that the act in question was directed at any property damage at all.

Justice Abdus-Salaam was the lone dissenter. In her opinion, the insured should be required to “prove that the damage was caused by a malicious act intended to damage property, even if not the insured’s specific property.”

The ramifications of this expansive definitive of the vandalism peril are unclear. The Penn-Star policy at issue defined the term “vandalism” as meaning “willful and malicious damage to, or destruction of, the described property,” but the Georgitsi Realty opinion held that intent to damage property – whether the insured property or indeed anyone’s property – is no longer a requisite to trigger such coverage. Instead, only a conscious disregard for the interests of others is required. The opinion could therefore mean that all sorts of damage incidental to other perils (“a desire to enrich oneself”) – such as damage caused in furtherance of a theft – could now qualify as a covered vandalism loss.

 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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