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Georgitsi Realty, LLC v. Penn-Star Insurance Company

December 21, 2012

GEORGITSI REALTY, LLC, PLAINTIFF-APPELLANT,
v.
PENN-STAR INSURANCE COMPANY, DEFENDANT-APPELLEE.



The opinion of the court was delivered by: Droney, Circuit Judge:

11-4444-cv

Georgitsi Realty, LLC v. Penn-Star Insurance Company

Argued: October 11, 2012

25 Before: WALKER, LIVINGSTON, AND DRONEY, Circuit Judges.

29 Apartment building owner appeals from grant of summary judgment to its insurer under a 30 policy covering acts of vandalism. The United States District Court for the Eastern District of New 31 York (Irizarry, J.) concluded that the required malice could not be found from actions directed only 32 at an adjacent building. We hold that certification of the malice issue to the New York Court of 33 Appeals is warranted.

QUESTION CERTIFIED.

6 Plaintiff-Appellant Georgitsi Realty, LLC ("Georgitsi") appeals from a judgment of the 7 United States District Court for the Eastern District of New York (Irizarry, J.), granting summary 8 judgment to Defendant-Appellee Penn-Star Insurance Company ("Penn-Star"). The primary 9 question presented by this appeal is whether an act performed on adjacent property that causes 10 damage to the plaintiff's property may constitute "vandalism" under the plaintiff's property 11 insurance policy. The subsidiary question of whether "malicious damage" may be found to result 12 from an act not directed specifically at the insured property is critical to resolving this issue. 13 Because this question has not been decided by the New York Court of Appeals, and because it is 14 dispositive of this appeal, and because the answer to this question will likely have broad implications 15 for insurance disputes under New York law, we believe that the New York Court of Appeals should 16 have the opportunity to address it. We therefore CERTIFY this question to the New York Court of 17 Appeals.

18 BACKGROUND

19 Georgitsi owns an apartment building (the "Building"), which is located on Eighth Avenue 20 in Brooklyn, New York. On October 28, 2007, Georgitsi obtained a "Broad Form" insurance policy 21 (the "Policy") from Penn-Star to insure the Building from July 9, 2007, to July 9, 2008. The Policy, 22 which is governed by New York law, included coverage for a variety of perils, including fire, 23 windstorm, smoke, riots, and vandalism. The Policy defines "vandalism" as the "willful and 24 malicious damage to, or destruction of, the described property."

1 Beginning in 2007, the Building sustained significant damage as a result of construction and 2 excavation work performed on the property adjacent to the Building owned by Armory Plaza, Inc. 3 (the "Adjacent Parcel"). The excavation work was performed as part of a plan to construct an 4 underground parking garage. Georgitsi had previously notified Armory Plaza and the excavators, 5 engineers, and architect working on the Adjacent Parcel (collectively, "the Excavators") about the 6 damage to the Building. Georgitsi had also notified the New York City Department of Buildings, 7 which issued numerous "stop work" orders and summonses to the Excavators. The stop work orders 8 specifically referenced the damage caused to the Building and other neighboring properties by the 9 work being done on the Adjacent Parcel. Georgitsi also obtained a temporary restraining order from 10 the Kings County Supreme Court enjoining the Excavators from continuing their construction work 11 on the Adjacent Parcel. The Excavators nonetheless continued the construction work and ultimately 12 admitted to many violations of the stop work orders, paying $36,500 in fines to the city. 13 On December 20, 2007, Georgitsi notified Penn-Star of its claim under the Policy for damage 14 that the excavation on the Adjacent Parcel had caused the Building. Georgitsi requested 15 reimbursement pursuant to the Policy's coverage for vandalism. Penn-Star refused on the ground 16 that the excavation damage did not constitute vandalism under the Policy. Georgitsi then brought 17 suit against Penn-Star in the Kings County Supreme Court, which Penn-Star then removed to the 18 United States District Court for the Eastern District of New York based on the complete diversity 19 of citizenship of the parties and amount in controversy in excess of $75,000. The district court 20 subsequently granted summary judgment in favor of Penn-Star.*fn1

The magistrate judge, in its report 1 and recommendation to the district court, found that the Excavators had not committed vandalism 2 within the meaning of the Policy because their actions were directed only to the Adjacent Parcel, 3 not the Building, and that proof of recklessness would not satisfy the malice requirement of the 4 Policy as a matter of law. The district court adopted the recommended ruling of the magistrate 5 judge.*fn2 We conclude that this appeal turns on the unsettled and important question of New York law 6 of whether "malicious damage" within the meaning of an insurance policy covering vandalism may 7 be found to result from an act not directed at the policyholder's property but causing damage thereto 8 and undertaken with knowing disregard for the policyholder's rights.

9 DISCUSSION

10 I. Legal Standard

11 On appeal, Georgitsi seeks review of only one issue: Whether, in granting summary 12 judgment to the defendant, the district court erred when it held that malice may not be found from 13 an action not specifically directed towards the covered property. We review de novo an order 14 granting summary judgment. Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d 292, 300 (2d Cir. 15 2003). "Summary judgment is appropriate only if the moving party shows that there ...


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