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

• Decision Date: 21 December 2012
• Docket Number: Docket No. 11–4444–cv.
• Citation: 702 F.3d 152
• Parties: GEORGITSI REALTY, LLC, Plaintiff–Appellant, v. PENN–STAR INSURANCE COMPANY, Defendant–Appellee.
• Court: U.S. Court of Appeals — Second Circuit

702 F.3d 152

GEORGITSI REALTY, LLC, Plaintiff–Appellant,

v.PENN–STAR INSURANCE COMPANY, Defendant–Appellee.

Docket No. 11–4444–cv.

United States Court of Appeals,

Second Circuit.

Argued: Oct. 11, 2012.

Decided: Dec. 21, 2012.

Jack S. Dweck, The Dweck Law Firm LLP, New York, NY, for Plaintiff–Appellant.

Steven Verveniotis, Miranda Sambursky Slone Sklarin Verveniotis LLP, Mineola, NY, for Defendant–Appellee.

Before: WALKER, LIVINGSTON, and DRONEY, Circuit Judges.

DRONEY, Circuit Judge:

Plaintiff–Appellant Georgitsi Realty, LLC (“Georgitsi”) appeals from a judgment of the United States District Court for the Eastern District of New York (Irizarry, J.), granting summary judgment to Defendant–Appellee Penn–Star Insurance Company (“Penn–Star”). The primary question presented by this appeal is whether an act performed on adjacent property that causes damage to the plaintiff's property may constitute “vandalism” under the plaintiff's property insurance policy. The subsidiary question of whether “malicious damage” may be found to result from an act not directed specifically at the insured property is critical to resolving this issue. Because this question has not been decided by the New York Court of Appeals, and because it is dispositive of this appeal, and because the answer to this question will likely have broad implications for insurance disputes under New York law, we believe that the New York Court of Appeals should have the opportunity to address it. We therefore CERTIFY this question to the New York Court of Appeals.

BACKGROUND

Georgitsi owns an apartment building (the “Building”), which is located on Eighth Avenue in Brooklyn, New York. On October 28, 2007, Georgitsi obtained a “Broad Form” insurance policy (the “Policy”) from Penn–Star to insure the Building from July 9, 2007, to July 9, 2008. The Policy, which is governed by New York law, included coverage for a variety of perils, including fire, windstorm, smoke, riots, and vandalism. The Policy defines “vandalism” as the “willful and malicious damage to, or destruction of, the described property.”

Beginning in 2007, the Building sustained significant damage as a result of construction and excavation work performed on the property adjacent to the Building owned by Armory Plaza, Inc. (the “Adjacent Parcel”). The excavation work was performed as part of a plan to construct an underground parking garage. Georgitsi had previously notified Armory Plaza and the excavators, engineers, and architect working on the Adjacent Parcel (collectively, “the Excavators”) about the damage to the Building. Georgitsi had also notified the New York City Department of Buildings, which issued numerous “stop work” orders and summonses to the Excavators. The stop work orders specifically referenced the damage caused to the Building and other neighboring properties by the work being done on the Adjacent Parcel. Georgitsi also obtained a temporary restraining order from the Kings County Supreme Court enjoining the Excavators from continuing their construction work on the Adjacent Parcel. The Excavators nonetheless continued the construction work and ultimately admitted to many violations of the stop work orders, paying $36,500 in fines to the city.

On December 20, 2007, Georgitsi notified Penn–Star of its claim under the Policy for damage that the excavation on the Adjacent Parcel had caused the Building. Georgitsi requested reimbursement pursuant to the Policy's coverage for vandalism. Penn–Star refused on the ground that the excavation damage did not constitute vandalism under the Policy. Georgitsi then brought suit against Penn–Star in the Kings County Supreme Court, which Penn–Star then removed to the United States District Court for the Eastern District of New York based on the complete diversity of citizenship of the parties and amount in controversy in excess of $75,000. The district court subsequently granted summary judgment in favor of Penn–Star.¹ The magistrate judge, in its report and recommendation to the district court, found that the Excavators had not committed vandalism within the meaning of the Policy because their actions were directed only to the Adjacent Parcel, not the Building, and that proof of recklessness would not satisfy the malice requirement of the Policy as a matter of law. The district court adopted the recommended ruling of the magistrate judge.² We conclude that this appeal turns on the unsettled and important question of New York law of whether “malicious damage” within the meaning of an insurance policy covering vandalism may be found to result from an act not directed at the policyholder's property but causing damage thereto and undertaken with knowing disregard for the policyholder's rights.

DISCUSSION

I. Legal Standard

On appeal, Georgitsi seeks review of only one issue: Whether, in granting summary judgment to the defendant, the district court erred when it held that malice may not be found from an action not specifically directed towards the covered property. We review de novo an order granting summary judgment. Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d 292, 300 (2d Cir.2003). “Summary judgment is appropriate only if the moving party shows that there are no genuine issues of material fact and that the moving party is entitled to judgment as a matter of law.” Id.

II. Malice as an Element of Vandalism Under the Policy

Because the New York Court of Appeals has yet to resolve the issue before us, we turn to the decisions of the trial and intermediate appellate courts of New York state. See Windsor v. United States, 699 F.3d 169, 177 (2d Cir.2012) ( “When we are faced with a question of New York law that is decisive but unsettled, we may ‘predict’ what the state's law is, consulting any rulings of its intermediate appellate courts and trial courts, or we may certify the question to the New York Court of Appeals.”).

Under New York law, “courts bear the responsibility of determining the rights or obligations of parties under insurance contracts based on the specific language of the policies.” Cali v. Merrimack Mut. Fire Ins. Co., 43 A.D.3d 415, 416, 841 N.Y.S.2d 128 (2d Dep't 2007) (quoting Sanabria v. Am. Home Assurance Co., 68 N.Y.2d 866, 508 N.Y.S.2d 416, 501 N.E.2d 24, 24 (1986)). When interpreting an insurance policy, courts “should refrain from rewriting the agreement.” Progressive Halcyon Ins. Co. v. Giacometti, 72 A.D.3d 1503, 1505, 899 N.Y.S.2d 783 (4th Dep't 2010) (quoting U.S. Fid. & Guar. Co. v. Annunziata, 67 N.Y.2d 229, 501 N.Y.S.2d 790, 492 N.E.2d 1206, 1207 (1986)). In particular, the court “may not write into a contract conditions the parties did not insert by adding or excising terms under the guise of construction, nor may it construe the language in such a way as would distort the contract's apparent meaning.” In re Matco–Norca, Inc., 22 A.D.3d 495, 496, 802 N.Y.S.2d 707 (2d Dep't 2005).

To prevail in an action against an insurer for coverage of vandalism, the plaintiff-insured must show: “(1) the occurrence of an act of vandalism or malicious mischief within the meaning of the policy, (2) proximate cause resulting in a ‘direct loss' to his property and (3) the inapplicability of the cited exclusionary clause....” Cresthill Indus., Inc. v. Providence Wash. Ins. Co., 53 A.D.2d 488, 496, 385 N.Y.S.2d 797 (2d Dep't 1976). The burden of proof rests on the plaintiff-insured regarding the first two issues, while the burden rests on the defendant-insurer to prove the third issue. See id. at 496–97, 385 N.Y.S.2d 797 (citing Sincoff v. Liberty Mut. Fire Ins. Co., 11 N.Y.2d 386, 230 N.Y.S.2d 13, 183 N.E.2d 899, 901 (1962)). The parties here appear to agree that the Excavators caused the damage to the Building. In addition, neither party argues that the only exclusionary clause in the Policy that applies to coverage for vandalism is relevant in this case.³ As a result, only the first issue—whether the Excavators had committed “an act of vandalism or malicious mischief within the meaning of the policy”—is dispositive of this appeal.

Malicious mischief has been defined as “the wilful injury or destruction of property from ill will toward its owner or from mere wantonness.” Cresthill, 53 A.D.2d at 498, 385 N.Y.S.2d 797 (emphasis omitted) (quoting Romanych v. Liverpool & London & Globe Ins. Co., 8 Misc.2d 269, 167 N.Y.S.2d 398, 401 (Sup.Ct.1957)). New York courts ascribe to malice “a liberal meaning” not confined to merely “actual malice or ill will, but [also] the intentional doing of a wrongful act without legal justification.” Lamb v. S. Cheney & Son, 227 N.Y. 418, 125 N.E. 817, 818 (1920); see also id. (“The act is malicious when the thing done is with the knowledge of plaintiff's rights, and with the intent to interfere therewith.”). Malice may be found either from a party's “actual malice toward all those who might foreseeably be affected” or from the nature of the act itself. Cresthill, 53 A.D.2d at 498, 385 N.Y.S.2d 797;see also Roselli v. Royal Ins. Co. of Am., 142 Misc.2d 857, 538 N.Y.S.2d 898, 899 (Sup.Ct.1989) (“Malice does not necessarily mean hatred. It may be inferred from unjustifiable conduct. In a legal sense, it means a wrongful act, done intentionally, without just cause or excuse.” (internal quotation marks omitted)); cf. Benson Holding Corp. v. N.Y. Prop. Ins. Underwriting Ass'n, 124 Misc.2d 955, 478 N.Y.S.2d 570, 571 (Civ.Ct.1984) (holding that “any forceful or violent severing and removal of property that had been affixed to the premises constitutes vandalism” (citing Cresthill, 53 A.D.2d at 488, 385 N.Y.S.2d 797)). However, these decisions discussing malice do not elucidate the state of mind required when the conduct is not directed at the insured property.

Penn–Star argues that the Second Department's holding in Fanberg Realty Corp. v. Travelers Cos., 117 A.D.2d 582, 498 N.Y.S.2d 53 (2d Dep't 1986), is dispositive of this appeal. In Fanberg, the owner of an apartment building sought payment for...