On August 3, 2000, Joshua Margulies and Dennis Hough engaged in what has fairly been described as a slow-moving game of chicken on a Manhattan street. Margulies drove forward in his car at a slow rate of speed toward Hough, a pedestrian, expecting him to get out of the way. Instead, Hough stood his ground. When traffic prevented Margulies from veering around Hough, Margulies hit Hough with his car. In 2003, Hough obtained a $4.8 million default judgment after filing a lawsuit accusing Margulies of negligence. Despite more than a decade of legal proceedings between and among Hough, Mar-gulies, and Margulies’s insurer at the time, USAA Casualty Company (“USAA”), Hough has yet to collect on that judgment.
The instant action arises from an adversary proceeding filed by Hough in Margu-lies’s Chapter 7 bankruptcy proceedings; the proceeding was initiated to prevent Margulies from discharging his debt to Hough, and alternatively to force USAA to indemnify Margulies for the judgment. After trial, the United States Bankruptcy Court for the Southern District of New York (Bernstein, J.) determined that Mar-gulies’s debt was not dischargeable pursuant to 11 U.S.C. § 523(a)(6), because it arose from his willful and malicious conduct; Margulies appeals from this determination. Hough cross-appeals from the Bankruptcy Court’s determination that USAA was not liable for the judgment pursuant to New York Insurance Law § 3420, since Margulies intentionally hit Hough. For the reasons set forth below, the judgment of the Bankruptcy Court is vacated, and the matter is remanded for further proceedings consistent with this Opinion.
BACKGROUND
The complex and lengthy history of the instant litigation is set forth in the Bankruptcy Court’s previous decisions in Hough v. Margulies (In re Margulies),
A. The August 2000 Incident
The Bankruptcy Court made the following factual findings after a trial at which Hough, Margulies, and Kristopher Zdyb, who was a passenger in Margulies’s car, each testified. Margulies III,
As Margulies reached Hough’s position on Sixth Avenue, Hough came into the roadway and stopped traffic; Margulies’s car was the first in line of the cars Hough stopped, and was positioned in a middle lane. Margulies III,
Sometime thereafter, Margulies made eye contact with Hough and tapped or pointed at his watch, signifying his intention to move forward when the light turned green at 23rd Street. Margulies III,
As to Margulies’s state of mind at the time, he testified as follows:
Q [By counsel for USAA]: What was— what was your judgment processes in terms of driving when you decided not to apply the brakes but continue to roll forward? ...
A: I thought Mr. Hough would move out of the way.
Q: So [it] ... wasn’t an act to hurt Mr. Hough?
A: Of course not, no.
THE COURT: What did you think would happen if he didn’t move out of the way?
A: Frankly if he hadn’t moved out of the way I would think that what happened is what happened, and I know we’re not allowed to discuss the civil judgment, but from having looked at everything he wasn’t hurt very much.
THE COURT: Well that’s — that’s after the fact.
A: No. I understand, Your Honor, at the speed that I was — what I’m saying is that at the speed that I was going to my mind — I’m not saying — and please, I’m not defending that I continued to move the car, but I was very certain3 that he would move out of the way, and if I had stopped and somebody had said gee, what would happen if he moved out of — didn’t move out of the way all of the way I would think that it would be exactly what did happen ... which was the slight contact and then he stumbled and fell.
(Tr. 257-58).
The Bankruptcy Court noted the significant divergence in Hough’s and Margu-lies’s stories about what happened after the point of impact, and ultimately credited Margulies’s over Hough’s. Hough testified that Margulies hit him in his right leg, and that he thereafter grabbed the top of the hood near the windshield wipers, holding on for “dear life,” while Margulies jerked the car to the left and to the right for nearly one half-block in an attempt to dislodge him. Margulies then slammed on his brakes and Hough flew off the car, ultimately landing on his shoulders. The Bankruptcy Court found this testimony incredible and uncorroborated by Hough’s medical records. Margulies III,
Zdyb testified that Margulies’s car only “touched” Hough, and that Hough never fell to the ground; however, Zdyb also testified that he averted his eyes at the moment of impact, in order to avoid viewing such a “Seinfeldian” episode. (Tr. 164). Margulies III,
Nearly three years later, on March 10, 2003, Margulies pleaded guilty to misdemeanor assault in the third degree under New York Penal Law § 120.00(2). (No. 10-04050, Dkt. # 1, ¶ 17).
B. Proceedings in New York State Court
1. Hough v. Margulies
Hough initiated a civil action against Margulies on August 4, 2003, in New York State Supreme Court, alleging that Mar-gulies was negligent or grossly negligent in hitting Hough with his car. Hough v. Margulies, Index No. 114030/03 (N.Y. County Sup.Ct.). (No. 10-04050, Dkt.# 1, ¶ 18). The factual allegations in the state court complaint largely echo Hough’s testimony at trial before the Bankruptcy Court. Neither Margulies nor USAA
As a result, Hough obtained a default judgment against Margulies in 2003. (No. 10-04050, Dkt. # 1, at ¶ 22). Following a damages inquest, Hough was awarded a $3.5 million judgment, including interest and costs, for a total of $4,868,263.56 (the “Judgment”). (Id. at ¶¶ 23-24). Hough has yet to collect on the Judgment.
2. Hough v. USAA
On December 24, 2007, Hough initiated a proceeding against USAA under New York Insurance Law § 3420, seeking a declaratory judgment that USAA was liable to indemnify Margulies for any damages arising out of the Incident. (See No. 10-04050, Dkt. # 1, ¶ 29). Hough moved for summary judgment, and USAA opposed the motion on the basis that the insurance policies carried by Margulies at the time (the “Policies”) did not cover the Judgment, because Margulies had intentionally caused Hough’s injuries. (Id. at ¶¶ 30-33).
By a July 1, 2010 Order, the New York State Supreme Court, New York County, concluded that (i) USAA had breached its duty to defend and was therefore precluded from raising defenses to Hough’s underlying claim against Margulies; (ii) because Margulies’s intent had not in fact been litigated, USAA was not collaterally estopped from raising that issue; (Hi) Mar-gulies’s plea to a recklessness-based offense did not foreclose a finding that Mar-gulies’s actions were “intentional” within the meaning of the Policies; and (iv) material issues of fact precluded summary judgment as to whether Margulies intended to injure Hough. (No. 10-14012, Dkt. # 1, Ex. A). Hough appealed the July 1, 2010 Order; after hearing reargument, on May 13, 2011, the state trial court vacated the July 1, 2010 Order only to the extent of dismissing USAA’s defense that Margu-lies failed to cooperate. (No. 10-04050, Dkt.# 138-2). The Appellate Division, First Department, affirmed the May 13, 2011 Order in 2012. See Hough v. USAA Cas. Ins. Co.,
C. Proceedings Before the Bankruptcy Court
Margulies filed a Chapter 7 bankruptcy petition on July 26, 2010, and received his discharge on March 17, 2011. (No. 10-14012, Dkt. # 1, 34). Hough initiated the instant adversary proceeding (the “Adversary Proceeding,” initiated by the “Adversary Complaint”) on October 25, 2010, asserting a single claim for alternative relief. (See No. 10-04050, Dkt. # 1). First, Hough argued that Margulies caused his injuries willfully and maliciously, such that the Judgment was not dischargeable pursuant to 11 U.S.C. § 523(a) (the “Dis-chargeability Claim”). Second and alternatively, Hough alleged that Margulies did not intentionally cause his injuries, such that Hough was entitled to recover under the Policies pursuant to New York Insurance Law § 3420 (the “§ 3420 Claim”). (Id.).
On January 11, 2011, USAA moved to dismiss the Complaint based upon lack of subject matter jurisdiction, for permissive abstention, to stay the adversary proceeding, and to dismiss for failure to state a claim. (No. 10-04050, Dkt.# 8). Specifically, USAA asked the Bankruptcy Court to decline to exercise jurisdiction over the
Margulies moved for judgment on the pleadings and summary judgment on November 23, 2011, arguing that his debt should be discharged because his actions were neither willful nor malicious. (No. 10-04050, Dkt. # 20, 23). Specifically, Margulies argued that Hough was collaterally estopped from asserting that Margu-lies had acted willfully, having already obtained a Judgment based upon Margulies’s negligence. (Id.). USAA joined in Mar-gulies’s motion, also arguing that Hough’s Adversary Complaint was barred by collateral estoppel. (No. 10-04050, Dkt. #25). Hough argued in response that (i) he was not collaterally estopped from asserting willfulness because the issue of Margulies’s intent had not actually been litigated in state court; and (ii) “[djetermination of willfulness in the context of dischargeability necessarily involves a determination of the identical issue of ‘intentional’ act for the purposes of coverage under the [Policies].” (No. 10-04050, Dkt. #29). The Bankruptcy Court agreed with Hough, and denied Margulies’s motion by Opinion and Order dated March 1, 2012, holding that (i) Margulies’s willfulness and malice had not actually been litigated below; and (ii) the Adversary Complaint properly stated a claim. (No. 10-04050, Dkt. #42).
Subsequently, the Bankruptcy Court decided USAA’s motion to dismiss. By Opinion and Order dated August 13, 2012, the Bankruptcy Court held that (i) it had subject matter jurisdiction over the § 3420 claim; (ii) it would not exercise its jurisdiction to abstain from adjudicating that claim; and (iii) Hough’s Adversary Complaint stated a claim upon which relief could be granted. See Margulies I,
Thereafter, Hough and USAA expressly consented to the Bankruptcy Court’s ability to enter final judgment on the § 3420 Claim, and the parties proceeded to discovery on both claims. (See No. 10-04050, Dkt. # 63, 112). The Bankruptcy Court held trial on December 14, 2012. The parties submitted pretrial memoranda of law. As to the Dischargeability Claim, Margulies argued that the proper legal standard was whether he intended to injure Hough, and whether that injury resulted from conduct committed without just cause or excuse. (No. 10-04050, Dkt. # 66). As to the § 3420 Claim, USAA argued that the Incident did not trigger coverage under the Policies because it was not an “accident”; USAA defined “accident” as an unexpected, unforeseen, or unusual occurrence from the point of view of the insured. (No. 10-04050, Dkt. # 67).
At trial, the Bankruptcy Court heard testimony from Margulies, Hough, and Zdyb. (No. 10-04050, Dkt.# 74). Thereaf
The Bankruptcy Court issued its post-trial findings of fact and conclusions of law in Margulies III, dated May 16, 2013. (No. 10-04050, Dkt.# 115). The Bankruptcy Court first found that the default judgment was not subject to discharge because it resulted from Margulies’s willful and malicious conduct. Margulies appeals from this determination, arguing that the Bankruptcy Court improperly applied an objective standard, rather than a subjective standard, in determining that his actions were willful. Second, the Bankruptcy Court found that USAA was not liable to indemnify Margulies for the Judgment, because his actions were intentional. In reaching that determination, the Bankruptcy Court found that the standard for “willful” as applied to the dischargeability claim was identical to the standard for “intentional” applied to the insurance coverage claim. Hough cross-appeals from this determination.
The Bankruptcy Court entered final judgment in the adversary proceeding on May 29, 2013. (No. 10-04050, Dkt. # 118). On June 11, 2013, Margulies filed a notice of appeal from the May 29, 2013 judgment; Hough’s cross-appeal followed on June 13, 2013. (No. 10-04050, Dkt. #119, 121).
D. The Instant Action
The parties’ respective notices of appeal were docketed by this Court on August 27, 2013. (Dkt. # 1, 2). Pursuant to a briefing schedule set forth by the Court on September 4, 2013 (Dkt. # 6), and amended on September 6, 2013 (Dkt. # 7), Mar-gulies’s appellate brief was filed on September 30, 2013 (Dkt. # 13), and Hough’s appellate brief was filed on October 23, 2013 (Dkt. # 14). By letter dated October 24, 2013, Margulies requested the opportunity to file an amended appellate brief, explaining that his previous brief was an “entirely incomplete version” of his proposed amended brief. (Dkt. # 15). On November 6, 2013, the Court granted Mar-gulies’s request, and extended the responsive deadlines accordingly. (Dkt. # 19). USAA’s opposition brief was filed on November 22, 2013 (Dkt. # 20), and Hough’s reply brief was filed on December 13, 2013 (Dkt. # 25).
By letter dated February 20, 2014, Hough requested that the Court set a supplemental briefing schedule to address the New York Court of Appeals’ recent decision in K2 Inv. Grp., LLC v. Am. Guar. & Liab. Ins. Co.,
A. The Standard of Review
Under 28 U.S.C. § 158(a), district courts have jurisdiction to hear appeals from “final judgments, orders, and decrees” of bankruptcy courts. A district court may “affirm, modify, or reverse a bankruptcy judge’s judgment, order, or decree or remand with instructions for further proceedings.” Fed. R. Bankr.P. 8013.
In general, a district court reviews a “Bankruptcy Court’s findings of fact for clear error [and] its conclusions of law de novo.” In re Bayshore Wire Products Corp.,
B. Analysis
1. The Dischargeability Claim
a. Applicable Law
The Bankruptcy Code precludes discharge for any debt that is the result of a “willful and malicious injury by the debt- or to another.” 11 U.S.C. § 523(a)(6). “As used in that section, the word ‘willful’ indicates ‘a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury.’” Ball v. A.O. Smith Corp.,
Hough bears the burden of demonstrating non-dischargeability by a preponderance of the evidence. Grogan v. Garner,
Finally, the determination of whether a particular debt should be excepted from discharge under § 523(a)(6) is a legal conclusion that falls within the exclusive jurisdiction of the bankruptcy courts. See 11 U.S.C. § 523(c). Accord
b. Willfulness
Margulies contends principally that the Bankruptcy Court improperly applied an objective standard in determining that his actions were willful and not subject to discharge. (Margulies Br. 12-16). He is correct.
The Supreme Court has instructed that [t]he word “willful” in [§ 523(a)(6) ] modifies the word “injury,” indicating that nondischargeability takes a deliberate or intentional injury, not merely a deliberate or intentional act that leads to injury. Had Congress meant to exempt debts resulting from unintentionally inflicted injuries, it might have described instead “willful acts that cause injury.”
Geiger,
The section of the Restatement cited favorably in Geiger provides further that intent is found when “the actor desires to cause consequences of his act, or that he believes that the consequences are substantially certain to result from it.” Restatement § 8A, cmt. a. Comment b continues,
If the actor knows that the consequences are certain, or substantially certain, to result from his act, and still goes ahead, he is treated by the law as if he had in fact desired to produce the result. As the probability that the consequences will follow decreases, and becomes less than substantial certainty, the actor’s conduct loses the character of intent, and becomes mere recklessness.... As the probability decreases further, and amounts only to a risk that the result will follow, it becomes ordinary negligence .... All three have their important place in the law of torts, but the liability attached to them will differ.
Id., cmt. b. Although Geiger did not specifically incorporate the Restatement’s “substantial certainty” test, courts that have considered this issue post-Geiger have relied upon Geiger’s favorable reference to that section of the Restatement in defining intent — for the purposes of § 523(a)(6) — as either a deliberate intent to cause the injury, or a substantial certainty that the injury will occur.
There remains, however, a long-standing split among the Circuits as to whether that substantial certainly must be judged subjectively or objectively. Compare In re Markowitz,
In a recent Seventh Circuit opinion, Judge Posner recognized the divergence among Circuit courts on this issue, observing ultimately that
whatever the semantic confusion, we imagine that all courts would agree that a willful and malicious injury, precluding discharge in bankruptcy of the debt created by the injury, is one that the injurer inflicted knowing he had no legal justification and either desiring to inflict the injury or knowing it was highly likely to result from his act.
Jendusa-Nicolai v. Larsen,
This Court joins in endorsing the subjective standard. It accords better with the Supreme Court’s directive in Geiger, see
The Bankruptcy Court erred by collapsing the distinction between the objective and subjective standards of intent, and thereby applying a quasi-objective standard. Specifically, the Bankruptcy Court cited decisions from, among others, both the Fifth and the Ninth Circuits, in holding that a plaintiff must prove “that the debtor actually intended to injure the victim, or engaged in conduct that was substantially certain to cause injury.”
While Margulies’s testimony at trial indicated that he did not anticipate hitting Hough (see Tr. 256-57 (“I’m not defending that I continued to move the car, but I was very certain that he would move out of the way”), 238 (Margulies “really didn’t” anticipate hitting Hough), 139 (Margulies did not expect that he would hit Hough when Margulies’s car began “rolling” forward)), the Bankruptcy Court made no specific factual findings as to whether Margulies himself was substantially certain that his actions would injure Hough. Accordingly, the matter is remanded for further factual development on this issue and application of a subjective standard.
c. Malice
While the Supreme Court did not address the meaning of “malicious” in Geiger, the Second Circuit has defined the term in the context of the Bankruptcy Code to mean “wrongful and without just cause or excuse, even in the absence of personal hatred, spite, or ill-will.” In re Stelluti,
Malice is properly found where “the debtor’s conduct giving rise to liability has no potential for economic gain or other benefit to the debtor, from which one could only conclude that the debtor’s motivation must have been to inflict harm upon the creditor.” Novartis Corp. v. Luppino (In re Luppino),
The Bankruptcy Court found that Mar-gulies’s actions were malicious because Margulies offered no excuse for injuring Hough, and held that Margulies’s decision to drive towards Hough in order to force him out of the way was in derogation of “commonly accepted duties in the ordinary relationships among people.”
In this regard, Margulies argues that his actions were motivated by economic benefit — that is, arriving punctually at an important business meeting — and cannot therefore be deemed malicious. (Margu-lies Br. 25-26). To be sure, in cases where a debtor seeks profit or some other benefit, “ ‘the underlying conduct, however deplorable, would not give rise to liability under § 523(a)(6) in the absence of some additional, aggravating conduct on the part of the debtor of sufficient gravity to warrant an inference of actual malice under the Second Circuit decision in [Stelluti], ’ ” In re Rouette, No. 13-20250(ASD),
.2. The § 3420 Claim
a. Applicable Law
The Court turns next to Hough’s cross-appeal from the Bankruptcy Court’s determination that Margulies’s actions were intentional — and thus not covered by, and indeed affirmatively excluded by, the Policies.
Hough bears the initial burden of proving that the damage was the result of an accident or occurrence in order to establish coverage where it would not otherwise exist; the burden then shifts to USAA to prove that an exclusion applies to defeat coverage. Consol. Edison Co. of N.Y. v. Allstate Ins. Co.,
An insurer’s duty to disclaim arises from Insurance Law § 3420(d), and it is satisfied when “the insurer provides a notice of disclaimer ‘as soon as is reasonably possible after it first learns of the accident or of grounds for disclaimer of liability.’” Adams v. Perry’s Place,
The parties do not dispute that USAA failed to serve Hough with a notice of disclaimer pursuant to § 3420(d)(2). In re Margulies,
b. Whether the Incident Was Intentional
The Policies provided coverage for “occurrences” not excluded by the Policies; occurrences are defined as “accidents,” but the term “accidents” is undefined. Margulies III,
have determined that liability coverage depends upon whether the alleged injury was intentionally caused or was an unintended, although foreseeable, result of the alleged intentional conduct. The distinction is drawn between damages which flow directly and immediately from an intended act, thereby precluding coverage, and damages which acci-dently arise out of a chain of unintended though expected or foreseeable events that occurred after an intentional act. Ordinary negligence does not constitute an intention to cause damage; neither does a calculated risk amount to an expectation of damage. To deny coverage, then, the fact finder must find that the insured intended to cause damage.
Brooklyn Law Sch. v. Aetna Cas. & Sur. Co.,
The Bankruptcy Court found that while Margulies did not have the subjective intent to injure Hough, his actions were “substantially likely” to cause injury to Hough and were thus intentional. In reaching this determination, the Bankruptcy Court relied upon its finding in the Dischargeability Section, which, as noted, was improperly premised on an objective standard. More importantly, the standards applicable to the Dischargeability Claim and the § 3420 Claim differ in a small, but meaningful, respect: “Willfulness” for the purposes of the Bankruptcy Code asks whether Margulies was “substantially certain” his actions would result in injury to Hough, whereas “intent” for the purposes of the New York Insurance Law, as discussed below, targets Margu-lies’s knowledge and intention as to whether his acts would “directly and immediately” cause Hough injury, as well as whether the “whole situation” constituted an “accident.” Thus, a debtor could fail to be “substantially certain” that his conduct during a particular incident would result in injury (for the purposes of dischargeability), while the circumstances of that incident, considered in their totality, could nonetheless render the incident not accidental (for the purposes of insurance coverage).
More fundamentally, the Bankruptcy Court’s definition of intent was improper because it relied upon the Policies’ “intentional act” exclusion to define “intentional” when determining whether coverage existed in the first instance. Margulies III,
To be sure, Margulies’s intent is at issue in both the coverage and the exclusion provisions in the Policies — an illustration of just how “problematic” it can be to distinguish “coverage by reason of exclusion as opposed to lack of inclusion.” NGM Ins. Co.,
USAA argues that Margulies’s actions were “inherently intentional” and could never be deemed accidental, notwithstanding Margulies’s lack of subjective intent to harm Hough. (USAA Opp. 13-18). It is well-established that “[w]hen the alleged harm is an inherent result of the act ... intent to injure will be inferred as a matter of law from the intentional character of the conduct.” Dodge v. Legion Ins. Co.,
USAA relies on a different type of case in which the inherent intent doctrine was applied, Progressive N. Ins. Co. v. Rafferty,
c. Whether the Incident Was Fortuitous
To demonstrate that the Policies cover the Incident, Hough must also show that the Incident was “fortuitous,” in that it was not expected or intended by Mar-gulies. This requirement is drawn from New York Insurance Law § 1101(a)(1), which defines an “insurance contract” as “any agreement whereby one party, the ‘insurer,’ is obligated to confer benefit of pecuniary value upon another party, the ‘insured,’ dependent upon the happening of a fortuitous event.” A “fortuitous event” is defined as “any occurrence or failure to occur which is, or is assumed by the parties to be, to a substantial extent beyond the control of either party.” Id. § 1101(a)(2); see also Consol. Edison Co. of N.Y., Inc.,
d. Whether USAA Is Barred by the Doctrine of Res Judicata
Lastly, Hough argues that the doctrine of res judicata bars USAA from relitigating Margulies’s intent.
A district court retains the ability to consider an issue not raised below to the extent it is necessary to prevent manifest injustice. Generally, however, no manifest injustice results from an appellate court’s refusal to hear a claim raised for the first time on appeal where a party clearly had the opportunity to raise the claim below. See Mellon Bank, N.A. v. United Bank Corp. of N.Y.,
Hough’s res judicata argument fails on the merits as well. The doctrine of res judicata holds that “a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.” Allen v. McCurry,
As to the first two elements of Hough’s claimed res judicata argument, the Judgment was a final adjudication on the merits, and the Court assumes arguen-do that USAA and Margulies are in privity, though USAA was not a party to the state court action. See Hinchey v. Sellers,
Hough contends that USAA could have defended Margulies subject to a reservation of rights. (Hough Reply 3-5). Doing so, however, would not actually have litigated the issue of Margulies’s intent. It is precisely for this reason that insurers are advised to initiate declaratory judgment proceedings as to coverage, separate and apart from the underlying action. See K2-II,
CONCLUSION
For the reasons set forth in the Opinion, the May 16, 2013 judgment of the Bankruptcy Court is VACATED, and the action is REMANDED for proceedings and further factual findings consistent with this decision.
Specifically, as to the Dischargeability Claim, the Bankruptcy Court should consider on remand (i) whether Margulies was substantially certain that Hough’s injuries would occur, and if he was not, (ii) whether that finding impacts the Bankruptcy Court’s determination that Margulies’s actions were malicious; as well as (iii) whether Margulies’s actions were undertaken for the purpose of economic benefit.
As to the § 3420 Claim, the Bankruptcy Court should consider on remand (i) whether Margulies’s intent and knowledge establish that Hough’s injuries were the sort that would flow “directly and immediately” from Margulies’s actions; and (ii) whether the Incident was accidental, that is, “unusual, unforeseen, or unexpected” from Margulies’s perspective.
The Clerk of Court is directed to mark the case as closed.
SO ORDERED.
Notes
. The facts set forth herein are taken from the record on appeal as designated by each appellant. In addition, included within the record is the transcript from the December 14, 2012 trial before the Bankruptcy Court, which is cited as "Tr.” For convenience, the parties' memoranda of law will be referenced as follows: Mar-gulies's appellate brief as "Margulies Br.”; Hough’s appellate brief as "Hough Br.”; USAA’s opposition brief as "USAA Opp.”; and Hough's and Margulies’s reply briefs as "Hough Reply” and "Margulies Reply.”
. Margulies testified that immediately prior to impact, he "felt that [he] could” maneuver his car around Hough, but when he looked he saw that he would have been hit by other traffic. (Tr. 258). Nonetheless, Margulies testified that if he could have moved out of the way to avoid hitting Hough, he would have done so. (Id.).
. Margulies also testified that he “really didn't” anticipate that he would hit Hough with his car (Tr. 238), and that he did not expect that he would hit Hough when Margu-lies began moving forward (id. at 139).
. A person is guilty of misdemeanor assault in the third degree when he "recklessly causes physical injury to another person.” N.Y. Penal Law § 120.00(2). Under New York Penal Law § 15.05(3), a person acts recklessly with respect to a result or to a circumstance described by a statute defining an offense when he is aware of and consciously disregards a substantial and unjustifiable risk that such result will occur or that such circumstance exists. The risk must be of such nature and degree that disregard thereof constitutes a gross deviation from the standard of conduct that a reasonable person would observe in the situation. Margulies III,
.Margulies was the named insured under a $300,000 automobile liability policy, and a $1,000,000 Personal Umbrella Policy, both of
. At that time, the matter was assigned to United States Bankruptcy Judge Arthur J. Gonzalez, who retired shortly after rendering this decision. The matter was subsequently reassigned to United States Bankruptcy Judge Stuart M. Bernstein.
. Margulies takes issue with the application of the "without just cause or excuse” standard applied widely within this Circuit, as being impermissibly vague. (Margulies Br. 24-26). Unquestionably, this is the prevailing law in the Circuit. At its core, however, Margulies’s dispute is with what he perceives to be the Bankruptcy Court’s disregard of his subjective intentions and assumptions. (Id.). Those are relevant to the application of the willfulness standard, and the Court’s decision herein addresses his concerns in that respect.
. New York Insurance Law § 3420 permits Hough to stand in Margulies’s shoes in pursuing this indemnification action, and he has no greater rights than would Margulies. D’Arata v. N.Y. Cent. Mut. Fire Ins. Co.,
. Insurers who breach their duty to defend are similarly precluded from relying on a policy’s exclusions to deny coverage. See Auto. Ins. Co. of Hartford v. Cook,
. USAA cites a number of cases in which the insured’s actions were deemed to be intentional, and thus not covered, in arguing that the Bankruptcy Court's decision should be affirmed. (See USAA Br. 13-18). See, e.g., State Farm Fire & Cas. Co. v. Whiting,
. Relatedly, USAA points to Messersmith v. Am. Fid. Co.,
. The Court finds USAA's and Hough’s arguments regarding judicial estoppel to be equally unavailing. (USAA Br. 25-27; Hough Reply 6-8). Hough and USAA have each attempted to use the Judgment as both a sword and a shield when it suited them in this litigation. The Court recognizes, however, that this is more an outgrowth of Hough’s alternative claims for relief than any indication of bad faith.
. USAA contends that the Rooker-Feldman doctrine precludes this Court from revisiting the state court decision finding that USAA was not collaterally estopped from asserting Margulies’s intent as a defense. (USAA Br. 27-28). First, the state court rendered its decision based upon the doctrine of collateral estoppel; Hough raises an argument based upon the distinct, though related, doctrine of res judicata. Hough v. USAA Cas. Ins. Co.,