Georgitsi Realty, LLC v. Penn-Star Ins. Co. 1

11-4444-cv
Georgitsi Realty, LLC v. Penn-Star Ins. Co.
1
UNITED STATES COURT OF APPEALS 2
FOR THE SECOND CIRCUIT 3
4
August Term, 2012 5
6
(Argued: October 11, 2012 Question Certified: December 21, 2012 7
Certified Question Answered: October 17, 2013 Decided: March 12, 2014) 8
9
_____________________________________ 10
11
GEORGITSI REALTY, LLC, 12
13
Plaintiff-Appellant, 14
15
v. No. 11-4444-cv 16
17
PENN-STAR INSURANCE COMPANY, 18
19
Defendant-Appellee. 20
_____________________________________ 21
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Before: WALKER, LIVINGSTON, and DRONEY, Circuit Judges. 23
24
Appeal from a judgment of the United States District Court for the Eastern 25
District of New York (Irizarry, J.) granting summary judgment to insurer in suit brought 26
by insured, based on a finding that malicious conduct must be directed at the covered 27
property to fall under the policy’s vandalism coverage. In response to a certified 28
question from this Court, the New York Court of Appeals held that, under New York 29
law, malicious damage within the meaning of the policy may result from malicious acts 30
not directed at the covered property, and that an insured may establish malice by 31
showing that the vandals exhibited “a conscious and deliberate disregard of the interests 32
of others.” Georgitsi Realty, LLC v. Penn-Star Ins. Co., 21 N.Y.3d 606, 608 (2013). 33
Accordingly, the judgment of the district court is VACATED and the matter 34
REMANDED for further proceedings consistent with this opinion. 35
36
J ACK S. DWECK , The Dweck Law Firm, LLP, 37
New York, New York, for Plaintiff-Appellant 38
Georgitsi Realty, LLC. 39
40
STEVEN VERVENIOTIS , Miranda Sambursky Slone 41
Sklarin Verveniotis LLP, Mineola, New York, for 42

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Defendant-Appellee Penn-Star Insurance 1
Company. 2
3
PER CURIAM: 4
5
Plaintiff-Appellant Georgitsi Realty, LLC, (“Georgitsi”) appeals from a judgment 6
of the United States District Court for the Eastern District of New York (Irizarry, J.) 7
granting Defendant-Appellee’s motion for summary judgment. Georgitsi Realty, LLC v. 8
Penn Star Ins. Co., No. 08-cv-4462 (DLI)(RML), 2011 WL 4889251, at *1 (E.D.N.Y. Sept. 30, 9
2011). We assume familiarity with the underlying facts and procedural history of this 10
case, which are set forth in our prior opinion filed in this case on December 21, 2012. 11
Georgitsi Realty, LLC v. Penn-Star Ins. Co., 702 F.3d 152, 158 (2d Cir. 2012). 12
At the time of filing the instant action, Georgitsi owned an apartment building in 13
Brooklyn, New York. The building sustained substantial damage as a result of 14
construction and excavation work performed in building an underground parking lot on 15
the adjacent property. Although Georgitsi complained to the owner of the adjacent 16
property, and acquired numerous “stop work” orders from the New York City 17
Department of Buildings, the construction continued unabated. On December 20, 2007, 18
Georgitsi made a claim under its insurance policy (the “Policy”), issued by Defendant- 19
Appellee Penn-Star Insurance Co. (“Penn-Star”), for damage arising out of the 20
construction. Penn-Star denied the claim, asserting that the damage was not caused by 21
any of the perils for which the Policy provided coverage. Georgitsi then commenced this 22
action against Penn-Star in New York State Supreme Court, Kings County. Penn-Star, 23

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invoking the court’s diversity jurisdiction, removed the case to the United States District 1
Court for the Eastern District of New York, and moved for summary judgment. 1 2
United States Magistrate Judge Robert M. Levy recommended that the district 3
court grant Penn-Star’s motion for summary judgment. Georgitsi Realty, LLC v. Penn Star 4
Ins. Co., No. 08-cv-4462 (DLI)(RML), 2011 WL 4804873 (E.D.N.Y. Aug. 30, 2011). The 5
magistrate judge rejected Georgitsi’s contentions that the damage fell into two of the 6
Policy’s covered perils—vandalism and sinkhole collapse. Id. at *3-4. As to the coverage 7
for vandalism, the magistrate judge noted in his Report & Recommendation (“R&R”) 8
that the Policy defined vandalism as “willful and malicious damage to, or destruction of, 9
the described property.” Id. at *3. The magistrate judge observed that, even if malice 10
could be inferred from the excavators’ reckless conduct, this malice would not have been 11
directed at the insured building, which the magistrate judge found to be required to qualify 12
for the Policy’s vandalism coverage. Id. Over Georgitsi’s objections to the R&R’s 13
conclusions regarding the vandalism coverage, the district court adopted the magistrate 14
judge’s recommendations. 2011 WL 4889251, at *1. The district court found that, because 15
“Plaintiff does not allege that the adjacent property owner or excavator acted with 16
deliberate intent to damage or destroy the Building, . . . under the undisputed facts of the 17
instant action and clear language of the Policy, Plaintiff is not entitled to coverage under 18
the vandalism provision of the Policy.” Id. at *2 (emphasis original). 19
On appeal, we found that the New York Court of Appeals had not resolved the 20
question of whether an act must be directed at the policyholder’s property to fall under 21
1 Georgitsi also brought an action against Amory Plaza, the owner of the adjacent site, and the excavators in New
York State Supreme Court, Kings County.

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this type of an insurance policy’s coverage for vandalism. 702 F.3d at 158. Accordingly, 1
under Second Circuit Local Rule 27.2 and title 22, section 500.27(a), of the New York 2
Compilation of Codes, Rules and Regulations, we certified two questions to the New 3
York Court of Appeals: 4
For purposes of construing a property insurance policy covering acts of 5
vandalism, may malicious damage be found to result from an act not 6
directed specifically at the covered property? If so, what state of mind is 7
required? 8
9
Id. at 159. 10
The New York Court of Appeals answered our first question in the affirmative, 11
stating that “malicious damage within the coverage of such a policy may be found to 12
result from acts not directed specifically at the covered property.” 21 N.Y.3d 606, 608 13
(2013). As to our second question, the Court of Appeals stated that “to obtain coverage 14
under such a policy the insured must show malice, defined as such a conscious and 15
deliberate disregard of the interests of others that the conduct in question may be called 16
willful or wanton.” Id. at 608. 17
Accordingly, we VACATE the judgment of the district court and REMAND the 18
matter to the district court for further proceedings consistent with this opinion and with 19
the opinion of the Court of Appeals. We thank the New York Court of Appeals for its 20
assistance in resolving this question of New York law.2 21
2 After the New York Court of Appeals’ decision, the parties cross-moved for summary judgment before this Court.
We deny these motions without prejudice.

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