Vandalism coverage in a named-peril policy could include physical damages caused by third parties even if the loss-producing act occurred off premises and there was no intent to damage any property. In Georgitsi Realty, LLC v. Penn-Star Insurance Company,the New York Court of Appeals acknowledged that vandalism requires an element of malice for which the prototypical example is “smashing and looting.” The court went further and ruled that the malice element can be satisfied based on a “conscious disregard” of the interests of others. A dissenting opinion noted that the majority failed to require that the vandal have a specific intent to damage any property and that the definition adopted was unduly broad.
In Georgitsi Realty, the policyholder’s building was allegedly damaged by excavation of an adjacent lot, which caused cracks in the walls and foundation. The policyholder obtained a stop work order and temporary restraining order in an effort to prevent further damage, which were ignored. After the cracks became so pronounced that the policyholder feared the building would collapse, a claim was submitted to Penn-Star Insurance Company for vandalism coverage, defined by the policy as “willful and malicious damage to, or destruction of” property. The claim was denied and litigation ensued resulting in summary judgment in favor of the insurer. An appeal was taken to the U.S. Court of Appeals for the Second Circuit
On appeal, the Second Circuit sought guidance from the New York Court of Appeals on the scope of vandalism coverage due to the dearth of reported judicial opinions on the issue in the state. The Second Circuit asked the Court of Appeals to clarify whether, under New York law, “malicious damage [may] be found to result from an act not directed at the specific property” and “if so, what state of mind is required.”
The Court of Appeals, noting that authority on the topic was sparse, equated malice with the tort standard of recklessness, holding that malice was “a conscious and deliberate disregard of the interests of others.” According to Georgitsi Realty, the person committing the malicious act need not have a specific intent to accomplish a particular result. In a brief dissent, Judge Abdus Salaam noted that a vandal’s primary purpose is the damage of some property, and that the majority improperly failed to apply this limit.
The Court of Appeals was only asked to determine whether malice may be found to result from an act not directed at specific property. The court was not asked to determine whether the other contractually required element at issue in Georgitsi Realty, willfulness, could be found from the same facts. And perhaps more importantly, the Court of Appeals did not render an opinion on the ultimate issue of whether the policy provided coverage for the claimed loss. While at first blush the court’s opinion appears to broadly expand the scope of vandalism coverage, Georgitsi Realty’s impact may be less severe than policyholders may contend, especially where the elements of vandalism are contractually defined.