Georgitsi Realty, LLC, Appellant,v.Penn-Star Insurance Company, Respondent.

Brief

N.Y.September 10, 2013

To be Argued by: JACK S. DWECK TIME REQUESTED: 20 MINUTES STATE OF NEW YORK GEORGITSI REALTY, LLC, Appellant, - against - PENN-STAR INSURANCE COMPANY, Respondent. BRIEF FOR APPELLANT JACK S. DWECK CHRISTOPHER F ASER of Counsel Dated: March 14,2013 THE DWECK LAW FIRM LLP Attorneys for Appellant 75 Rockefeller Plaza, 16th Floor New York, New York 10019 (212) 687-8200 (212) 697-2521 Facsimile Press of Fremont Payne, Inc. 55 Broad Street, Third Floor, New York, NY 10004 . (212) 966-6570 COURT OF APPEALS STATE OF NEW YORK ....................................... X GEORGITSI REALTY, LLC, Plaintiff-Appellant, - against - PENN-STAR INSURANCE COMPANY, CORPORATE DISCLOSURE STATEMENT PURSUANT TO RULE 500.1 (c) Defendant-Respondent. ....................................... X Pursuant to 5 500.l(c) of the Rules of the Court of Appeals, Plaintiff-Appellant, Georgitsi, LLC advises the Court that it has no corporate parents, subsidiaries, or affiliates. Dated: New York, New York March 14, 2013 New York, NY 10016 (212) 687-8200 S:\Secretary 2\Client Docs\Georgitsi-Penn-Star\Appeal - State of NY\Corporate Disclosure 3-13-139.wpd TABLE OF CONTENTS . . . . . . . . . . . . . . . . . . . . TABLE OF AUTHORITIES ii . . . . . . . . . . . . . . . . . . . . . PRELIMINARY STATEMENT 1 . . . . . . . . . . THE FACTS GIVING RISE TO THE PRESENT APPEAL 1 ARGUMENT POINT I THE VANDALISM PROVISION ENCOMPASSES DAMAGE TO THE COVERED PROPERTY BASED UPON THE INTENTIONAL CONDUCT BY THE ADJACENT OWNER AND ITS EXCAVATOR, EVEN THOUGH THE DAMAGE INFLICTED BY THE PERPETRATORS WAS NOT DIRECTLY TO . . . . . . . . . . . . . . . . . THE INSURED'S PROPERTY. 6 POINT I1 THE FINDING OF WILLFULNESS FROM INTENTIONAL ILLEGAL CONDUCT . . . . . . . . . . . . . . . . . . CONSTITUTES MALICE 14 CONCLUSION . . . . . . . . . . . . . . . . . . . . . . . . . 28 TABLE OF AUTHORITIES CASES : Alliance v. World Farm Inc., 300 A.D.2d 22 (1st Dept. 2002) . 22, 25 American Fire & Casualtv Co. v. Barfield, 60 S.E.2d 383, 388 (Ga. . . . . . . . . . . . . . . . . . . . . . . . Ct.App.(1950) 20 American Telephone and Telesraph Company v. the Citv of New York, 83 F.3d 556 (2nd Cir. 1996) . . . . . . . . . . . . . . . . . 25 Bowers v. Farmers Insurance Exchanse, 991 F.2d 734, 737 (Wash. Ct. App. 2000) . . . . . . . . . . . . . . . . . . . . . . . . . 25 Breed v. Ins. Co. of N. Am., 46 N.Y.2d 351, 355 (1978) . . . 12 Bretton v. Mutual of Omaha Ins. Co., 110 A.D.2d 46, 48 (ISt Dept. 1985) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Caporino v. Travelers Ins. Co., 62 N.Y.2d 234, 239 (1984) . . . 9 Casavecchia v. Mizrahi, 57 A.D.3d 702 (2ndDept. 2008) . 21 Cole v. Countrv Mutual Insurance Co., 282 N.E.2d 216 (Ill. App. Ct. 1972) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Colnaghi v. U. S. Ltd. v. Jewelers Protection Servs. Ltd., 81 N.Y. 2d 821, 823-4 (1993) . . . . . . . . . . . . . . . . . . . . . . 25 Cordiario v. Metacon Gun Club Inc., 575 F. 3d 199 (2nd Cir. 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Crass v. Allstate Indemnitv Corp., 17 N.Y.3d 118, 122 (2011) 20 Cresthill Industries Inc. v. Providence Washinston Insurance Companv, 53 A.D.2d 488 (2nd Dept. 1976) . . . . . . . . . . . 17 Fanbers Realtv Cor~oration v. The Travelers Companies, 117 A.D.2d 582 (2d Dept. 1986) . . . . . . . . . . . . . . . . . . . . . 24 Federal Insurance Co. v. International Business Machines Cor~., 18 N.Y.3d 642, 646 (2012) . . . . . . . . . . . . . . . . . . . 12 Georqitsi Realitv, LLC v. Penn Star Insurance Co., 2011 WL 4804873, 3 (E.D.N.Y. 2011) . . . . . . . . . . . . . . . . . . . . . 17 Handelsman v. Sea Insurance Co., Ltd., 85 N.Y.2d 96, 101 (1994) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Home Ins. Co. v. American Home Products Corp., 75 N.Y.2d 196 (1990) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Kins v. North River Insurance Co., 297 S.E.2d 637, 638 (Sup. Ct. . . . . . . . . . . . . . . . . . . . . . . . So.Car.1982) 10 Lamb v. Chenev & Son, 227 N.Y. 418 (1920) . . . . . . . . . 19 Lanza Enterprises Inc. v. Continental Insurance Co., 142 So.2d 580 (La. App. 3d Cir. 1962) . . . . . . . . . . . . . . . . . 11 Lavanant v. General Accident Insurance Co. of America, 79 N.Y.2d 623, 629 (1992) . . . . . . . . . . . . . . . . . . . 13 Lazar v. Leavitt, 770 F. Supp. 2d 579, 586 (S.D.N.Y. 2011) . . 9 Livaditis v. American Cas. Co. of Readins, Pa., 160 S.E.2d 449 (Ga. Ct. of App. 1968) . . . . . . . . . . . . . . . . . . 19 Long Is. Lisht. Co. v. Hartford 'Acc. & Ind. Co., 76 Misc.2d 832, . . . . . . . . . . . . . . . . . 834 (Sup. Ct., Nas. Co. 1973) 9 Louisville and Jefferson Countv Metropolitan Sewer District v. . . . . . . . Travelers Ins. Co., 753 F.2d 533 (6th~ir. 1985) 10 Maurice Goldman & Sons, Inc. v. Hanover Ins. Co., 80 N. Y. 2d 986 (1992) . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 MBIA Inc. v. Federal Insurance Companv, 652 F.3d 152, 165 (2nd Cir. 2011) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 McGroartv v. Great American Insurance Com~anv, 36 N.Y. 2d 358 (1975) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Pennsvlvania Millers Mutual Ins. Co. v. Riso, 256 A.D.2d 769, 770-1 (3rd Dept. 1998) . . . . . . . . . . . . . . . . . . . . . . 26 Pioneer Tower Owners Ass'n v. State Farm Fire & Cas. Co., 51 A.D. 3d 649 (2nd Dept. 2008) . . . . . . . . . . . . . . . . . . . . 20 Pistolesi v. Nationwide Mut. Fire Ins. Co., 223 A.D.2d 94, lv. den. 88 N.Y.2d 816 (1996) . . . . . . . . . . . . . . . . . . . . 26 Quaker Citv Gun Club v. St. Paul and Marine Ins. Co., 1986 WL 3561 (E.D. Pa., 1986) . . . . . . . . . . . . . . . . . . . . . . 14 Ravmond Corp. v. National Union Fire Insurance Co. of Pittsburqh, 5 N.Y.3d 157, 162 (2005) . . . . . . . . . . . . . . . . . . . 8 Romanvch v. The Liverpool and London and Globe Insurance Companv, Ltd., 8 Misc.2d 269 (Franklin Co. 1957) . . . . . . . . . . . 17 Ruder & Finn, Inc. v. Seaboard Co., 52 N.Y.2d 663, 66 (1931) 12 S. Cole v. Countrv Mutual Insurance Companv, 282 N.E.2d 216 (Ill. . . . . . . . . . . . . . . . . . . . . App. 4thDist. 1972) 15 State Auto Mutual Insurance Co. v. Trautwein, 414 S.W.2d 587 (Ky. 1967) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Vill. of Svlvan Beach v. Travelers Indem. Co., 55 F. 3d 114, 115 (2nd Cir. 1995) . . . . . . . . . . . . . . . . . . . . . . . . . 20 STATE OF NEW YORK COURT OF APPEALS .......................................... X GEORGITSI REALTY, LLC, Appellant, PENN-STAR INSURANCE COMPANY, Respondent. .......................................... X APPELLANT' S BRIEF PRELIMINARY STATEMENT This appeal is based upon a question certified to, and accepted by, this Court from the United States Court of Appeals for the Second Circuit. This certification is pursuant to Local Rule 27.2 of the Rules of the United States Court of Appeals. THE FACTS GIVING RISE TO THE PRESENT APPEAL The Appellant Georgitsi Realty, LLC ("Appellant" or "Georgitsi"), is the owner of an apartment building (the "Building") in Brooklyn. The Appellant secured a "Broad Form" insurance policy (the "Policy") from Penn-Star Insurance Company ("Penn-Star1' or "Respondent") and insured its Building for multiple perils, including coverage for vandalism and malicious mischief ("V&MM") . The Policy defined "vandalism" as the "willful and malicious damage to, or destruction of, the described property. " The Policy term was from July 9, 2007 to July 9, 2008 (A.62)'. In 2007, Armory Plaza Inc. ("Armory Plaza"), which owned a parcel adjacent to that of the Appellant, engaged in construction and excavation work which caused extensive damage to the Appellant's Building. The Appellant had notified Armory Plaza and its contractors about the damage to its Building, which was ignored. Georgitsi then notified the New York City Department of Buildings ("DOB") of the damage, which issued numerous Stop Work Orders and Summonses to Armory Plaza and its excavator (A.318-374). These Stop Work Orders and Summonses were also ignored. Although the Stop Work Orders and Summonses specifically referenced the damage sustained by, and inflicted upon, the Appellant's Building, as well as neighboring properties, the excavation work was defiantly continued without interruption. Armory Plaza and its excavators pleaded guilty to more than twenty-one such Summonses and paid more than $36,500 in fines (A.209, 320, 327, 332, 335, 340, 343, 344, 358, 361, 367, 371). It was economically cheaper for Armory Plaza to pay the fines and continue the excavation, rather than stop work on the project and idle its workmen and excavators. h he numbers in parentheses preceded by the letter "A" refer to the page numbers in the Appendix. The Appellant also obtained a Temporary Restraining Order ("TRO") from a Justice of the Kings County Supreme Court (A.214-217). The Court proceedings ultimately resulted in the Armory Defendants being ordered to erect a steel support to stabilize the Appellant's Building while the excavation continued to a depth of 60 feet below street level. Georgitsi notified Penn-Star within days of having obtained the TRO in the Kings County Supreme Court, which initially ordered the Armory Defendants to cease all construction and excavation. The Appellant filed a claim with Penn-Star and requested reimbursement for the damage to the Building attributable to vandalism and malicious mischief. Penn-Star disclaimed coverage on the grounds that the damage did not arise from vandalism or malicious mischief. Suit against Penn-Star was brought in the Kings County Supreme Court after which it was removed to the United States District Court, for the Eastern District of New York, based upon diversity and the amount in controversy being in excess of $75,000. On a Motion for Summary Judgment by Penn-Star, the District Court Judge ruled that Penn-Star was not liable, because the damage was not inflicted directly to the Appellantf s property, but only on the adjacent parcel. It held that the conduct of the adjacent owners and their excavators, while reckless and intentional, did not constitute V&MM (A.430-432). On appeal to the United States Court of Appeals, the Appellant cited decisions from the Sixth Circuit Court of Appeals, as well as from Courts of States other than New York, that the insurance coverage was available under the V&MM provisions of its policy with Penn-Star. The reasoning by the Appellant was that damage inflicted, caused or set in motion elsewhere than directly onto the insured property, was a covered peril. Conduct that was intentional and malicious was evidenced by multiple pleas of guilty to summonses, Stop Work Orders, and the TRO (which was ignored), all of which was cornpensable under the Appellant's V&MM coverage. In its decision, the Circuit Court of Appeals certified the question of coverage for determination by this Court (CA3). The certification was based upon the absence of decisions in New York which interpreted the V&MM clause where damage to the insured property is not inflicted directly to the property, along with the subsidiary question regarding the state of mind of the perpetrators who caused the damage. It is respectfully submitted that based upon the decisions of State Appellate Courts and United States Circuit Court of Appeals, this Court should find coverage for the losses sustained by the Appellant. The V&MM clause provides for indemnity for the damage. There is no writing or provision in Appellant's insurance policy that the damage is required to be sustained directly upon the i n s u r e d p r o p e r t y r e g a r d l e s s o f i t s o r i g i n . I f damage i s s u s t a i n e d due t o V&MM, i r r e s p e c t i v e of i t s sou rce , i t shou ld be covered. POINT I THE VANDALISM PROVISION ENCOMPASSES DAMAGE TO THE COVERED PROPERTY BASED UPON THE INTENTIONAL CONDUCT BY THE ADJACENT OWNER AND ITS EXCAVATOR, EVEN THOUGH THE DAMAGE INFLICTED BY THE PERPETRATORS WAS NOT DIRECTLY TO THE INSURED ' S PROPERTY Vandalism is specifically listed in paragraph 8 of the Policy and is defined as "willful and malicious damage to, or destruction of, the described property" (A. 137) . The facts in the present lawsuit are not in dispute. The cause of the damage to the Appellant's Building is conceded to have come from the construction and excavation on the adjacent property and the failure of that owner and its excavator to shore up the Appellant's Building. The adjacent owner and its excavators and contractors inflicted damage to the Appellant's Building due to willful, reckless, and wanton conduct. This is pleaded in Appellant's Complaint against the adjacent owners and their excavators (A.15- 19). The Appellant's Building was in danger of collapse and rendered unstable. There were criminal Summonses from the City of New York, to which the owner and excavator consistently pleaded guilty. These criminal charges included unsafe excavation, failure to shore up, violation of Stop Work Orders and proceeding without proper permits. Many of the violations and Stop Work Orders were issued with the specific statement of concern about protecting the Appellant's and the neighborr s respective Buildings (A. 333, 339, 341, 348, 350, 352, 373). The Lower Court missed, or misinterpreted, the cases which defined the vandalism and malicious mischief clauses of insurance policies. The District Court took a very narrow view that the wrongdoer must have acted with deliberate intent to damage "the described property" of the Appellant and inflicted the damage directly to the insured property (A. 431-432) . In doing so, the District Court was reading language into the coverage that was not described or listed in the Policy. In certifying the question to this Court, the Second Circuit correctly determined that the question of coverage is comprised of two parts: (1) whether damage inflicted on real property adjacent to the insured property may be covered by a vandalism and malicious mischief clause (the "Conduct Component"); and (2) what state of mind is required of the actor whose conduct caused the damage (the "Mental Component"). In certifying the two-part question to this Court, the Second Circuit was able to parse the distinctions from Magistrate Levy's Report and Recommendation (the "Report"), which was adopted in its entirety by the District Court. It recognized that the question is one of first impression in this state. This Court must look to the language of the insurance policy and sister State and Federal decisions, all of which favor the Appellant's entitlement to coverage under the Policy's V&MM clause. In holding that the damage must take place directly upon the insured property, the District Court used a strict construction of the V&MM clause. In Ravmond Corp. v. National Union Fire Insurance Co. of Pittsbursh, 5 N.Y.3d 157, 162 (2005), this Court stated, when "determining a dispute over insurance coverage, we first look to the language of the policy." Looking to the words of the Policy in the present action, the V&MM clause does not state that the conduct giving rise to the damage must take place directly upon the insured property. The Policy expressly sets forth within the "Causes of Loss-Broad Form" section those limited and enumerated circumstances in which "direct physical contact" with the insured property is necessary in order for damage to be covered. Section A(6) therein defines insured loss caused by "Aircraft or Vehicles" as "meaning only physical contact (A. 137) of an aircraft, a spacecraft, a self- propelled missile . . . with the described property or with the building or structure containing the described property." On the same page of the Policy, within Paragraph A(8), loss caused by "Vandalism" is defined as "meaning willful and malicious damage to, or destruction of, the described property." By expressly setting forth circumstances in which direct physical contact with the insured property is a necessary requisite to coverage, the absence of such a limitation in the V&MM clause demonstrates that it is not a component of the coverage. Insurance policies must be taken as "an integrated whole" in which the "meaning of one clause may be sharpened by reference to another." Bretton v. Mutual of Omaha Ins. Co., 110 A.D.2d 46, 48 (ISt Dept. 1985) (quoting Lons Is. Liuht. Co. v. Hartford Acc. & Ind. Co., 76 Misc.2d 832, 834 (Sup. Ct., Nas. Co. 1973)). The language of Appellant's Policy demonstrates that when coverage is conditioned upon damage caused by "direct physical contact" with the insured property, Penn-Star stated so unequivocally. Therefore, since the language of the vandalism and malicious mischief clause does not contain the limitation which the District Court read into it, and, because courts "will 'not disregard clear provisions which the insurer[] inserted in the [Policy] and the insured accepted,'" there was no basis for the District Court to conclude that conduct on adjacent property to that of the insured precludes the insured from coverage under the V&MM clause; Raymond Corp., 5 N.Y.3d at 162 (quoting Caporino v. Travelers Ins. Co., 62 N.Y.2d 234, 239 (1984) ) . This forms the basis for interpretation of the Policy language with the principle expressio unius est exclusio alterious, "the mention of one thing implies the exclusion of the other"; Lazar v. Leavitt, 770 F. Supp. 2d 579, 586 (S.D.N.Y. 2011) (quoting Cordiario v. Metacon Gun Club Inc., 575 F.3d 199 (2nd Cir. 2009)). In Louisville and Jefferson Countv Metropolitan Sewer District v. Travelers Ins. Co., 753 F.2d 533 (6th Cir. 1985), damage was inflicted upon the insuredf s property as a result of dumping toxic waste materials into a sewer system a great distance upstream. In a logically reasoned opinion, the Court ruled that it was not a material consideration that the toxic matter was dumped into the stream miles away, since the natural flow of the water would expectedly carry the toxic material along the sewer lines to the treatment plant where it damaged the plaintiff's equipment and machinery. The focus of the decision was that the damage sustained by the plaintiff in Louisville, supra, did not have to be inflicted directly to its property because the loss was direct! It did not have to be 'immediate", or "expected", or the result of any animosity against the owner of the damaged property. The Sixth Circuit, relied upon State Auto Mutual Insurance Co. v. Trautwein, 414 S.W.2d 587 (Ky. 1967) which ruled that malice may be presumed from unlawful conduct. In Trautwein, supra, malice was held by the Supreme Court of Kentucky to be presumed from the unlawful removal of fixtures from a building and within the V&MM coverage of the plaintiff's insurance policy. The Court noted that no personal animosity against the property owner need be shown as a pre-condition to recovery under the V&MM clause. (See 414 S. W. 2d at 589) . The same reasoning was utilized in Kinq v. North River Insurance Co., 297 S.E.2d 637, 638 (Sup. Ct. So. Car. 1982), where vandalism was found to have occurred outside of any "open view." See, also, Lanza Enterprises Inc. v. Continental Insurance Co., 142 So.2d 580 (La. App. 3d Cir. 1962). In the action at bar, the applicability of the facts and the reasoning from the Louisville case is compelling. The owner and excavator of the property adjacent to that of the Appellant must be held to have acted willfully since their continued excavation was illegal. They ignored repeated demands by and on behalf of the Appellant to stop work until they shored up Appellant's Building. In addition, they repeatedly disobeyed more than twelve separate Stop Work Orders from the New York City Department of Buildings (A.322, 324, 326, 328, 331, 333, 339, 348, 352, 357, 362, 366, 370). They ignored multiple criminal and Buildings Department Summonses with respect to the unsafe conditions created by their failure to shore up the foundation (A.333, 336, 339, 340, 341, 343, 348, 349, 350, 352, 353, 367, 368, 379, 370, 372, 373). They continued to excavate, preferring to plead guilty and pay the fines than to cease work. They even continued to excavate in violation of the Temporary Restraining Order issued on December 17, 2007 (A.214-217), by a Justice of the Supreme Court until they were forced to erect a steel girder to prevent further damage to the Appellant's Building. The Court, in Louisville, followed the reasoning from State Auto Mutual Insurance Co. v. Trautwein, supra, in which it was held that an unlawful act by the Defendant gave rise to a presumption of malice under the V&MM coverage of an insurance policy. In the action at bar, the District Court ruled that there had to be damage directly to the Appellant's "described property" (A.431). Such a ruling was in error. The District Court was apparently unaware of, or elected to disregard, the Louisville decision, which it should have followed. It was not necessary for the Appellant to show any deliberate intent by the adjacent owner to damage or destroy its Building; Breed v. Ins. Co. of N. Am., 46 N.Y.2d 351, 355 (1978); Ruder & Finn, Inc. v. Seaboard Co., 52 N.Y.2d 663, 66 (1931). The statement by the District Court that it interpreted the policy language for coverage to be only from "willful and malicious damage to the described property" is not consonant with existing precedent from the Sixth Circuit ruling in Louisville. This issue, long since decided in other jurisdictions, presents the opportunity for this Court to update the law in New York and establish solid precedent on this issue. To do otherwise continues the overly narrow interpretation of this coverage. The law provides that the interpretation of language in insurance policies should be against the insurance company since it drafts the wording; Federal Insurance Co. v. International Business Machines Corp., 18 N.Y.3d 642, 646 (2012) ; Handelsman v. Sea Insurance Co., Ltd., 85 N.Y.2d 96, 101 (1994); Lavanant v. General Accident Insurance Co. of America, 79 N.Y .2d 623, 629 (1992) . POINT I1 THE FINDING OF WILLFULNESS FROM INTENTIONAL ILLEGAL CONDUCT CONSTITUTES MALICE. Malice can be inferred where the wrongdoer has engaged in an intentional or wanton disregard of the rights of others. The decisions from other jurisdictions have been definite on this legal principle; Louisville and Jefferson Countv Metropolitan Sewer District v. Travelers Insurance Com~anv, supra; Ouaker Citv Gun Club v. St. Paul and Marine Ins. Co., 1986 WL 3561 (E.D. Pa., 1986) ; King v. No. River Ins. Co., supra. The Courts have found coverage even if the conduct was not directed against the property damaged, but which takes place on adjacent or other property. The decision in Louisville, supra, has been unchallenged for over 28 years and addressed this issue directly. That Court dealt with the question of whether property damage caused by the unlawful act of a third person, having no proven or demonstrated animosity against the owner of an insured property, was covered under the V&MM provisions of the property owner's insurance. This Court need look no further than the Louisville, supra, decision to find a case with analogous facts. The Magistrate's Report expressly contradicts the holding in Louisville, supra. In Louisville, the Sixth Circuit explained that there are two necessary elements for coverage under a vandalism and malicious mischief clause: (1) direct loss to the insured property; and (2) a deliberate act causing the damage. The court determined that Travelersf argument that the damage occurred some distance from the point of the dumping was immaterial. The court explained that "there is no requirement that the loss be 'immediatef or 'expectedf for the vandalism provision to be applicable. Louisville, s u p r a , at 537. The damage to the treatment plant "was direct because there was no intervening act or agency; the toxic waste moved in the normal operation of the sewer system from the manhole to the treatment plant." Id. For all intents and purposes the sewer lines in Louisville are comparable to the facts with the Appellant in this case where the excavation was performed on the property adjacent to Appellant's Building. The excavation caused direct and foreseeable damage to the Appellant's Building, without any intervening act, just as the toxic waste did in Louisville, s u p r a . The waste was dumped under conditions where it was obvious that damage to the treatment plant would result. Louisville, s u p r a , cited S. Cole v. Countrv Mutual Insurance Company, 282 N.E.2d 216 (Ill. App. 4 th Dist. 1972), as authority for the proposition that an insuredf s property damage may be covered under the policyf s vandalism provision despite the fact that the malicious conduct was not performed directly to, or on the insured property. The plaintiffs in S. Cole, s u p r a , were pig farmers who insured their hogs for loss from vandalism and malicious mischief. The plaintiffs submitted a claim to their insurance company for the loss of 485 hogs who suffocated when the electricity to plaintiffs' barn was unexpectedly turned off. The plaintiffs claimed that the electricity was shut-off when an unknown person pulled the master switch located on a utility pole 80 to 90 feet away from the barn. The court held in favor of the insured farmers and determined that in shutting the electrical switch, the unknown person committed a willful act of vandalism to the insured property. S. Cole, supra, further stands for the proposition that conduct which gives rise to damage need not occur on the insured property in order for the vandalism coverage to be triggered. In the instant action, the conduct giving rise Appellant's property damage is more immediate and direct in relation to its property, than was the case in the Louisville and S. Cole actions. By digging to a depth of sixty feet below street level along the boundary line separating Appellant's Building from the adjacent property, the damage to the Appellant's property was immediate and direct. This is all that is required in order to satisfy the Conduct Component. Furthermore, by failing to shore-up Appellant's Building as required by law and violating the TRO by the Kings County Supreme Court, the adjacent property owner and excavators' continued excavation must be deemed to have been with full notice. This constituted an intentional disregard of a duty to protect the Appellant's property. The facts of this case emphasize that the out-of-state decisions did not construe the vandalism and malicious mischief clauses narrowly. Such an interpretation could not have been intended by the parties and was not warranted under the circumstances. This case demonstrates that an act, which was not performed directly against the insured property, can result in malicious damage to that property when the act directly causes damage to the property. Appellant's Policy defines vandalism as "willful and malicious damage to, or destruction of, the described property." The District Court erroneously ruled that . . . the vandal must have acted with deliberate intent to damage or destroy the Building" in order for coverage to apply under the V&MM clause; Georqitsi Realitv, LLC v. Penn-Star Insurance Co., 2011 WL 4804873, 3 (E.D.N.Y. 2011). Appellant has cited numerous cases, both state and federal, which support the proposition that in the context of an insurance policy, malice does not require ill will, hatred, or vindictiveness. It may be inferred where the actor is guilty of wanton, or an intentional, disregard of the rights of others; Louisville, supra; guaker Citv Gun Club, supra; and Kinq v. North River Ins. Co., supra; Romanvch v. The Liverpool and London and Globe Insurance Com~anv, Ltd., 8 Misc.2d 269 (Franklin Co. 1957) . With respect to the definition of vandalism and malicious mischief under the policy language, in Cresthill Industries Inc. v. Providence Washington Insurance Company, 53 A. D. 2d 488 (Znd Dept . 1976), the court was called upon to determine if activity directed at property adjacent to that of an insured, which caused damage to the property of the insured, fell within the coverage for "willful and malicious damage to, or destruction of, the property covered." The Court held that the occurrence was within the policy definition, since maliciousness may be predicated upon conduct marked by an intentional and willful disregard of the rights of others. In that case, thieves broke into a building, uncoupled and stole pipes which carried water. The result was flooding on a lower floor. The Lower Court had dismissed the complaint on the ground that the loss was "indirect", as distinguished from a "direct" loss which was the language of the policy. The Appellate Division reversed and held that the plaintiff had fulfilled the three elements necessary to establish coverage: (1) the occurrence of an act of vandalism or malicious mischief within the meaning of the policy, (2) proximate cause which results in a direct loss to plaintiff s property, and (3) the inapplicability of the exclusionary clause (the burden of proof on exclusion is on the insurance company). See page 496 of 53 A.D.2d. Applying the first two requirements to the action at bar, the Appellant demonstrated that there was willful conduct by the adjacent property owner and its excavator. This was based upon the multiple Summonses (more than twenty six), issued to them for repeated illegal conduct which included failing to shore up Appellant's Building, continuing to excavate without a permit, continuing to excavate while they ignored Appellant's demands to shore up its Building, in their repeated violations of official Stop Work Orders, and violation of the TRO issued by a Justice of the Supreme Court (A.209, A.222, A.226, A.319, A. 320, A. 322, A.324, A.326, A.327, A.328, A.331, A.332, A.333, A.335, A.337, A.339, A.340, A.341, A.343, A.344, A.348, A.349, A.350, A.352, A.353, A.357, A.358, A.359, A.361, A.362, A.366, A.367, A.368, A.369, A. 370, A. 371, A. 372, A. 373) . Clear, convincing and irrefutable evidence of intentional conduct is reflected by multiple pleas of guilty to every one of the criminal Summonses issued to the adjacent property owner, its architects, engineers and excavators, with payment of fines and penalties by them in excess of $36,500 (A.209, A.320, A.327, A.332, A.335, A.340, A.343, A.344, A.358, A. 361, A. 367, A. 371) . The continued illegal and intentional conduct constituted vandalism and malicious mischief. Repeated criminal acts to which there are repeated pleas of guilty, by definition, constitutes willful, intentional, reckless and wanton conduct. This manifests a wanton and callous disregard of the rights of others; Lamb v. Chenev & Son, 227 N.Y. 418 (1920); Romanych v. Liverpool & London & Globe Insurance Co., supra; Livaditis v. American Cas. Co. of Readina, Pa., 160 S.E.2d 449 (Ga. Ct. of App. 1968). The second element of proximate cause is clearly fulfilled by the affidavits of a professional engineer, George Gennakakos (A.238, A.245), who stated that the excavation and failure to shore up the Appellant's Building were the direct cause of the damage to the Appellant's Building (A. 242-243, A. 250-251) . The conduct of the adjacent owner and its excavators directly resulted in the damage to the Appellant's Building. Lastly, the Respondent herein has utterly failed to sustain its burden of demonstrating that the facts of the Appellant's loss fell within any exclusionary language; Cragg v. Allstate Indemnitv Cor~., 17 N.Y.3d 118, 122 (2011); Maurice Goldman & Sons, Inc. v. Hanover Ins. Co., 80 N.Y.2d 986 (1992); Pioneer Tower Owners Ass'n v. State Farm Fire & Cas. Co., 51 A.D.3d 649 (2nd Dept. 2008); MBIA Inc. v. Federal Insurance Companv, 652 F.3d 152, 165 (2nd Cir. 2011), citing Vill. of Svlvan Beach v. Travelers Indem. Co., 55 F.3d 114, 115 (2nd Cir. 1995) ; American Fire & Casualtv Co. v. Barfield, 60 S.E.2d 383, 388 (Ga. Ct. App. (1950). The Respondent limits its argument to intentional conduct as a covered loss under the vandalism and malicious mischief provision. This argument ignores the decisions in other states, which have included within the coverage of V&MM, reckless and wanton conduct, or that which evidences a complete disregard of the rights of others. The narrow, restricted and limited definition of vandalism being confined to willful or intentional conduct is archaic and not consonant with our current jurisprudence. Under New York law, it is well established that malice may be found, presumed or inferred from unlawful conduct; Casavecchia v. Mizrahi, 57 A. D.3d 702 (2nd Dept. 2008) . This is true in other states, as well; State Automobile Mutual Insurance Com~anv v. Trautwein, supra. (Coverage found where damage resulted from a burglary). The District Court Judge erroneously applied the language of the Policy issued by the Respondent, strictly, when it stated that the coverage was only for intentional or willful conduct which had to cause damage directly to the Appellantf s property (A. 431) . The Louisville, Cresthill and Trautwein decisions represent the present state of the law on the interpretation and applicability of coverage for vandalism and malicious mischief. They reflect the proper interpretation of the V&MM coverage in the Appellant's Policy, which should be made the law in New York. In holding the adjacent property owner's conduct to have resulted in willful and malicious damage to Appellant's Building, it is important to note that the excavation by the adjacent property owner was only for its benefit. The Temporary Restraining Order and Stop Work Orders issued by the City were for the benefit of the Appellant and the other adjacent property owners. In violating the TRO, the adjacent property owner's conduct was intentional. The multiple guilty pleas to the criminal Summonses and the fines paid by the owner and its excavators evidences an admission of, and conviction for, intentional conduct. The intentional and reckless acts constitute vandalism in every sense of the phrase "V&MMff. It is obvious that it was economically cheaper for the adjacent owner and its contractors to plead guilty and pay the fines by ignoring the Stop Work Orders and the Temporary Restraining Order and continuing the illegal work, than to stop the job and pay the employees or the contractor for idle time. It is evident that the adjacent owner chose the less expensive alternative. How much more is necessary to prove the conduct of the adjacent owner to be willful and malicious? Just as the parties in Louisville, supra, stipulated that the act of dumping the toxic substances into the sewer system was unlawful, the parties in the present action must concede that the adjacent property ownerf s continued excavation in violation of a court ordered Temporary Restraining Order was unlawful and willful. Conduct in violation of a clear and unequivocal mandate of the court can only be interpreted as willful; Alliance v. World Farm Inc., 300 A. D. 2d 22 (1st Dept. 2002) . The law, as it was applied in Louisville, supra, found intent to damage the property to be presumed from circumstantial evidence of a deliberate act which ordinarily would cause such damage; see page 538 of 753 F.2df citing Lanza Enterprises, Inc. v. Continental Insurance Co., supra; Cole v. Countrv Mutual Insurance Co., 282 N.E.2d 216 (Ill. App. Ct. 1972). While the Magistrate Judge and the District Judge accepted the foregoing as true, the Report states, "even assuming that the adjacent property owner and his excavator acted in a reckless manner, malicious and willful intent toward [Appellant's] Building cannot be inferred from their actions" Georsitsi Realty, LLC v. Penn-Star Insurance Co., s u p r a . Put simply and respectfully, the Report is incorrect. In reaching the subsidiary question concerning the Mental Component of coverage pursuant to a V&MM clause, the Court must answer the primary question affirmatively as it concerns the conduct of the adjacent property owner which caused the damage to the Appellant's Building. As such, the Mental Component of the inquiry requires the Court to analyze circumstances in which malicious and willful intent toward the insured property can be inferred from conduct which takes place on the adjacent property. The Second Circuit correctly pointed out that "[nlo court in New York has clearly held that a finding of malicious intent is foreclosed simply because the acts of vandalism did not occur on the insured property itself." Instead, New York courts have construed the definition of malice and held that it may be evidenced by "the intentional doing of a wrongful act without legal justification." Lamb v. S. Chenev & Son, 227 N.Y. at 422, and may be found, presumed or inferred from unlawful conduct; Casavecchia v. Mizrahi, s u p r a . This is true in other states as well. State Automobile Mutual Insurance Com~anv v. Trautwein, supra. (Coverage found where damage resulted from a burglary.) The facts in the instant action demonstrate that the adjacent property owner continued to excavate with knowledge of a clear and unequivocal mandate of the court, which prohibited the very conduct engaged in by them. Such a conscious disregard of the prior restraints, in addition to the empty reassurances to the Appellant by the adjacent property owner that the Building would not be damaged, evidence a willful and malicious intent towards the insured property. This is the key fact which distinguishes the case from Fanberq Realtv Corporation v. The Travelers Com~anies, 117 A.D.2d 582 (2d Dept. 1986). In Fanberq, supra, there was no evidence that the excavators were on notice that their activities were causing damage to the insured's property. However, the adjacent property owner and excavators in the case at bar were on notice from multiple governmental and judicial agencies to Stop Work. This was from the Temporary Restraining Order, multiple Stop Work Orders and Summonses which were all issued for the benefit of the Appellant and the other adjacent property owners. Applying the law as set forth in the above cited decisions, the conduct of the adjacent property owner and its excavators as described herein represents a deliberate defiance and flouting of the law, Court Orders and New York City Buildings Department regulations. This gives rise to only one conclusion - the conduct of the adjacent owner and its agents supports a finding of damage caused by their intentional conduct which falls within the coverage of vandalism and malicious mischief; Alliance v. World Farm Inc., supra, (violation of Court Order supports a finding of intentional conduct). The Appellant's loss was direct because there was no intervening act or agency. The excavation caused the Appellant's Building to become unstable and unsafe. There was no requirement of animosity by the adjacent property owners before recovery on the Appellant's policy could be had; Bowers v. Farmers Insurance Exchanse, 991 F.2d 734, 737 (Wash. Ct. App. 2000); State Auto Mutual Insurance Co. v. Trautwein, supra, 414 S.W.2d at 589. Other cases have also resulted in findings of intentional conduct where there was gross negligence; American Tele~hone and Telegraph Companv v. the Citv of New York, 83 F.3d 556 (2nd Cir. 1996) ; Colnaghi v. U. S. Ltd. v. Jewelers Protection Servs. Ltd., 81 N. Y. 2d 821, 823-4 (1993) ; McGroartv v. Great American Insurance Com~anv, 36 N.Y.2d 358 (1975). The District Court erroneously interpreted these cases to require that the damage be inflicted directly upon the described property. That decision is in conflict with the holding in Louisville, supra. Thus, when conduct, whether intentional or grossly negligent, wanton or reckless is evident, it amounts to a conscious disregard of the rights of others and has been held to be willful; Home Ins. Co. v. American Home Products Cor~., 75 N.Y.2d 196 (1990); Giblin v. Murphv, 73 N.Y.2d 769, 772 (1988). Whether it is gross negligence or intentional conduct, the same conclusion is reached when a court is asked to address an agreed upon limitation of liability in a commercial contract. The conduct must "smack" of intentional wrongdoing; Kalisch-Jarcho, Inc. v. Citv of New York, 58 N.Y.2d 377, 385 (1983); Pistolesi v. Nationwide Mut. Fire Ins. Co., 223 A. D. 2d 94, lv. den. 88 N.Y. 2d 816 (1996); Pennsvlvania Millers Mutual Ins. Co. v. Ricro, 256 A.D.2d 769, 770-1 (3rd Dept. 1998); Utica Fire Ins. Co. v. Shelton, 226 A.D.2d 705 (2nd Dept. 1996). Our jurisprudence has gone even further, and held that evidence of an insured's conviction proved that "whatever injuries resulted were, as a matter of law, intentionally caused; Town of Moreau v. Orlin Exterminatins Co., 165 A.D.2d 415 (3rd Dept. 1991). Malicious mischief coverage applies since the intent is clear from the guilty pleas which is the equivalent of an admission or conviction of an intentional act giving rise to the damage. Under these circumstances, the Appellant is entitled to be paid for damage under the V&MM provision of its policy with the Respondent. The questions certified to this Court should be answered with a finding of coverage under the V&MM clause of the Appellant's policy with the Respondent based upon damage sustained by the Appellant's property not directly inflicted thereon from the intentional conduct of the adjacent property owner and its excavator. In finding in favor of coverage, this Court should base its decision on the intentional and malicious conduct of the adjacent property owner and excavators, which was performed on that property with full notice of the damage it was causing to Appellant's insured property. CONCLUSION THIS COURT SHOULD FIND IN FAVOR OF THE APPELLANT ON THE CERTIFIED QUESTION. By: Jack S. Dweck Attorneys for Appellant ./ i 75 Rockefeller Plaza, 16~' F1. New York, New York 10019 (212) 687-8200 S:\Secretary 2\Client Docs\Georgitsi-Penn-Star\Appeal - State of NY\Appellant Brief 3-13-13 JSD-EG Final with t-a.wpd