New York Court of Appeals Confirms that a “Strict Liability” Standard Under Local NYC Law will be Imposed Upon Excavators who Cause Damage to Adjoining Property

On February 14, 2012, New York’s highest court, the Court of Appeals, in an effort to preserve the legislative intent and the integrity of a plain reading of the language of Administrative Code of the City of New York Section 27-1031(b) (1) (“the Code”), decided in consolidated appeals, Yenem Corp. v. 281 Broadway Holdings, et al. and Randall Co. v. 281 Broadway Holdings, et al., that strict liability will be imposed upon those performing excavation work more than ten feet in depth who cause damage to adjoining property where a violation of the Code is found. The court’s holding is consistent with its interpretation of the Code’s predecessor state law, which imposed a standard of strict liability, and ensures that those who undertake excavation work in New York City should bear the risks associated with such work should harm result to the property of the neighboring landowner.

The Administrative Code of the City of New York Section 27-1031 (b)(1) addressed in both Yenem and Randall provides:

When an excavation is carried to a depth of more than ten feet below the legally established curb level the person who causes such excavation to be made shall, at all times and at his or her own expense, preserve and protect from injury any adjoining structures, the safety of which may be affected by such part of the excavation as exceeds ten feet below the legally established curb level provided such person is afforded a license to enter and inspect the adjoining buildings and property.

The Code provision originated from an 1855 statute reenacted in 1882. Its purpose was to protect adjoining landowners against harm from excavation work on neighboring property, thereby imposing strict liability upon the excavator when a violation of the statute was found. The statute was recodified as a municipal ordinance under the New York City Building Code in 1899. In 1985, the ordinance became section 27-1031 (b)(1) set forth above and its language is virtually identical to its state law predecessors.

In Yenem, a commercial tenant was forced to vacate its premises and close its business as a result of excavation work that was being conducted on an adjoining lot. The excavation work occurred at a depth of 18 feet below curb level causing damage to the adjoining premises, which resulted in the Department of Buildings deeming the premises unsafe for occupancy. Yenem commenced an action against the owner of the adjoining lot and the entity it hired to perform the excavation work under the Code, claiming that the defendants were negligent and strictly liable for causing damage to the premises resulting in Yenem’s loss of business profits. Plaintiff Randall, the owner of the premises occupied by Yemen, commenced a separate action against the same parties asserting similar claims. Both plaintiffs eventually moved for summary judgment on their claims.

In the Yenem action, the trial court rejected plaintiff’s argument that because section 27-1031 (b)(1) was originally enacted as a state law imposing absolute liability, it should continue to be so construed. The Yenem court found that violation of the Code did not result in strict liability but constituted some evidence of negligence. In the Randall action, a different trial court judge granted Randall’s motion for partial summary judgment and held that defendants were strictly liable under the Code. In consolidated appeals, a divided Appellate Division, First Department, upheld the Order denying plaintiff’s motion for summary judgment in the Yenem action and reversed the order granting plaintiff summary judgment in the Randall action. The Appellate Division found that as a municipal ordinance, the Code provision was an “unsuitable candidate for elevation to the status of a state statute imposing per se liability.” The issue of what liability standard to apply under the Code was granted review on appeal by the New York Court of Appeals.

Finding no reason to depart from interpretation of the original state law and defeat the legislation’s goal of shifting the risk of injury from the injured property owner to the excavator of adjoining land, the Court of Appeals held that the Code, having its origins in state law, imposes strict liability where a plaintiff demonstrates that a violation of the provision proximately caused injuries to plaintiff’s property.

As a result of the court’s holding in Yenem and Randall, excavators who dig more than 10 feet below curb level causing damage to an adjoining property and the owners of the property where the excavation work is performed will be held strictly liable for such damages pursuant to the Administrative Code of the City of New York Section 25-1031 (b)(1). By confirming a standard of strict liability, the court’s holding certainly increases the risk undertaken by insurance carriers providing property damage coverage to its insureds for excavation work in New York City.