COMMERCIAL PROPERTY – VANDALISM – INTENT & STATE OF MIND OF THE VANDAL – MALICE
Georgitsi Realty, LLC v Penn-Star Ins. Co.
(Ct. Apps., decided 10/17/2013)
Till Goths, and Vandals, a rude Northern race, Did all the matchless Monuments deface.
John Dryden, "To Sir Godfrey Kneller" 47-48 (1694)
If Valentinian III had not been assassinated in 455 AD, his daughter Eudocia had not married Petronius Maximus' son Palladius instead of her original betrothed, Vandal king Genseric's son Huneric, and the Vandals had not then
sacked Rome, marking the end of the Roman Empire, what term would we be using for the willful and malicious or mischievous damage or destruction of property without permission? Hunnism? Gothism? Visigothism?
Since its
first appearance in 1530 or 1794, the term "vandalism" has meant the willful and malicious or mischievous damage to or destruction of someone else's property without permission. King Genseric's intent and state of mind was never in doubt. He intended to and reportedly did "sack" Rome, even if that sacking included the burning of only one church. But it was the stripping and thieving of the gold and bronze roof shingles of the Temple of Jupiter Optimus Maximus, and the intentional defacement of Rome's artwork, statues and monuments that reportedly prompted
French Bishop Henri Grégoire to coin the term vandalism to describe the destruction of artwork following the French Revolution.
Criminological research into vandalism reportedly has found that it serves many purposes for those who engage in it and stems from a variety of motives.
Sociologist Stanley Cohen and criminologist Mike Sutton have enumerated seven different types of vandalism:
- Acquisitive vandalism (looting and petty theft).
- Tactical vandalism (to advance some end other than acquiring money or property – such as breaking a window to be arrested and get a bed for the night in a police cell).
- Ideological vandalism (carried out to further an explicit ideological cause or deliver a message).
- Vindictive vandalism (for revenge).
- Play vandalism (damage resulting from children’s games).
- Malicious vandalism (damage caused by a violent outpouring of diffuse frustration and rage that often occurs in public settings).
- Peer status motivated vandalism.
So what if your neighbor hires a contractor to build a new building on the lot right next to yours, and the contractor's excavation of that adjacent lot, which continued in spite of the issuance of "stop work" orders by the local building department and a temporary restraining order by a local court, causes your building's foundation and walls to crack? Is that vandalism? To your building? Covered vandalism? In this case, the New York Court of Appeals said yes, it could be.
Penn-Star Insurance Company issued a broad form, named perils policy of commercial insurance to the plaintiff, Georgitsi Realty, LLC, covering "
direct physical loss ... or damage ... caused by or resulting from" any of 14 kinds of events or perils, including vandalism, which the policy defined as "
meaning willful and malicious damage to, or destruction of, the described property." The policy covered plaintiff's four-story apartment building in Park Slope, Brooklyn, New York. Armory Plaza, Inc., the owner of the lot adjacent to plaintiff's property, decided to build a new building and underground parking garage on its property and hired a contractor to excavate for that new construction. According to the plaintiff, the excavation caused cracks in the walls and foundations of plaintiff's building. As the cracks became more pronounced and the building began to settle, plaintiff feared the building would collapse. Plaintiff complained to the New York City Department of Buildings, which issued a series of violations and "stop work" orders. Plaintiff alleged that the violations resulted in guilty pleas or defaults and fines totaling more than $36,000, but that the stop work orders were ignored and the contractors kept working. Plaintiff obtained a temporary restraining order from New York Supreme Court, directing the adjacent property owner and its contractors "to cease all construction and/or excavation work." This order too was ignored, according to plaintiff.
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| Plaintiff's building on left; Armory Plaza's new building on right after completion. |
Plaintiff made a claim for damage to its building caused by the excavation contractor, contending that the damage was covered due to that contractor's vandalism. Penn-Star denied coverage on the basis that there was no willful and malicious damage "to the described property" because there was no evidence that the excavation contractor intended to and did maliciously damage plaintiff's property. Plaintiff sued for breach of contract and the New York Supreme Court action was removed to federal court.
In granting Penn-Star's motion for summary judgment, the
US Eastern District Court held that because the policy clearly stated that the willful and malicious damage or destruction must be to "the described property," and plaintiff was not alleging that the adjacent property owner or excavator acted with deliberate intent to damage or destroy the plaintiff's building, the policy did not afford vandalism coverage for plaintiff's building damage.
Plaintiff appealed that decision to the US Court of Appeals for the Second Circuit, which, based on its finding that "New York case law on the circumstances under which activities conducted on adjacent property can constitute vandalism is unclear",
certified two questions to the New York Court of Appeals:
- For 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?
- If so, what state of mind is required?
In a 6-1 opinion authored by
Judge Robert Smith, the New York Court of Appeals answered the two certified questions as follows:
- Yes.
- The state of mind is the same that would be required to award punitive damages against the alleged vandal: such a conscious and deliberate disregard of the interests of others that the conduct in question may be called willful or wanton.
Relying on a
1976 Appellate Division, Second Department decision, and a
1985 6th Circuit US Court of Appeals' decision, the majority reasoned:
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 (as in
Cresthill,
Louisville, and in the present case) out of a desire to enrich oneself without caring about the consequences to others. Nor does it seem relevant that the alleged act of vandalism here—as in
Cresthill and
Louisville—did not bring the alleged vandals in direct contact with the covered property.
Where damage naturally and foreseeably results from an act of vandalism, a vandalism clause in an insurance policy should cover it.
With respect to the Second Circuit's second certified question -- concerning what state of mind is required for vandalism to be said to have occurred -- the majority held:
In common speech, and by the express terms of the policy in suit, vandalism is "malicious" damage to property. The Second Circuit's second question asks, in essence, what state of mind amounts to "malice" for these purposes. We answer 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 wilful or wanton" (Marinaccio v Town of Clarence, 20 NY3d 506, 511 [2013], quoting Dupree v Giugliano, 20 NY3d 921, 924 [2012]; see also Prozeralik v Capital Cities Communications, 82 NY2d 466, 479 [1993]; Carvel Corp. v Noonan, 350 F3d 6, 24 [2d Cir 2003]; Prosser & Keeton, Torts § 2 at 9 [5th ed 1984]). This familiar test, we believe, will serve to distinguish between acts that may fairly be called vandalism and ordinary tortious conduct. Insurance against vandalism should not be converted into something approaching general coverage for property damage. Insureds who want broader coverage should obtain it and pay an appropriate premium.
It is important to understand that the New York Court of Appeals did not decide plaintiff's appeal of the federal district court's grant of summary judgment to Penn-Star; it only answered the two certified questions put to it. If the case continues (is not settled), the Second Circuit will decide the pending appeal based on the New York Court of Appeals' answers to the certified question. What that means is that the Second Circuit may reverse the grant of summary judgment to Penn-Star based on there being questions of fact as to whether the excavation contractor's conduct was both "willful and malicious".
In her dissent,
Judge Sheila Abdus-Salaam did not disagree with the majority's answer to the first certified question, but did disagree somewhat with how majority answered the second certified question:
I would hold that, to recover under a policy insuring against a loss caused by vandalism, the insured must prove that the damage was caused by a malicious act intended to damage property, even if not the insured's specific property. Such an evidentiary requirement would better confine vandalism coverage to the bounds contracted for by the parties to an insurance contract, and prevent coverage from extending to willful and malicious acts not properly categorized as vandalism because property damage was not the actor's primary intent.
The outcome of this case is likely explained by the excavation contractor's continued work in spite of the stop work orders and TRO. Regardless of whether you believe that the New York Court of Appeals has broadened the scope of vandalism coverage in New York with this decision, absent explicit policy language addressing the issue, New York insurers must now consider vandalism claims that stem from conduct not specifically directed at and occurring off or away from the insured property.
