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The Second Department Overturns a Jury Award of Stigma Damages in Oil Spill Case

In a recent oil spill case under the Navigation Law, an intermediate state appeals court, the Appellate Division of the State Supreme Court, Second Department overturned a $225,000 jury award of "stigma" damages (plus $61,600 fees award) to a private homeowner for devaluation of his property values - not for clean-up costs - due to contamination that leaked onto this Nassau County property from the neighboring property. Fusco v. State Farm Fire & Cas. Co., 57 A.D.3d 939 (2d Dep't 2008).

The concept of "stigma" damages arose in a celebrated case from New York's highest appeals court, Criscuola v. Power Authority of State of New York, 602 N.Y.2d 649 (N.Y. 1993). In that case, which involved alleged stigma due to the homeowners' proximity to overhead electro magnetic wires, and the "cancerphobia" experienced by plaintiffs, the high court ruled that a finder of fact must consider "evidence that the market value of the property across which power lines have been built has been negatively affected in relation to comparable properties across which no power lines have been built." Id., at 590.

But our own experience is that parties are rarely able to prove a concrete impact on valuation of properties once the actual contamination is remediated. In a depressed real estate market, it may be that any blemish on a property reduces its value.

In the Fusco case, the court found that the plaintiff's appraiser did not provide evidence of sales of properties that had oil leaks compared to those that did not, rendering her opinion of diminution of value due to stigma highly speculative and conclusory.

The moral of the story: it is still difficult to recover damages for stigma in New York State.

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