Eminent Domain Report

California’s infrastructure is aging. There have been numerous reports of water line breaks and gas line leaks, and public agencies have been moving quickly to upgrade their utilities to minimize these risks and satisfy increasing demands. When incidents do occur, when do agencies face potential liability in inverse condemnation? A recent California Court of Appeal decision, Kelly v. Contra Costa Water District (Feb. 10, 2015) 2015 Cal.App.Unpub.LEXIS 924, while unpublished, provides some guidance.

In Kelly, the owners of a self-storage facility in Pittsburg, California, discovered water accumulating on their property. After a number of tests, it was determined that the water was coming from a cement water main running under the property. The local water district made numerous unsuccessful attempts to find the location and cause of the leak. Several years later, the water district’s engineer conducted a video inspection of the pipe’s interior and found an indentation in the pipe. The water district determined that the leak was small and intermittent and the repair did not need to be performed on an emergency basis. The repair was not completed until 2008.

Eventually, the water main leak caused cracks in the concrete slab running under some of the owner’s storage buildings. The property owner filed a lawsuit against the water district, which included causes of action for inverse condemnation, maintaining a dangerous condition of property, nuisance and trespass.

The Trial Court

The tort claims were tried to a jury and the inverse condemnation was tried to the court. The court sided in favor of the water district on the inverse condemnation claim, but the jury found the water district liable for trespass and awarded damages based on the repair costs. (The jury also found that the property owner was negligent at the time the property was constructed and assessed the owner’s percentage of fault at 20 percent, thereby lowering the award).

The Court of Appeal

The property owner appealed the trial court’s ruling regarding the inverse condemnation claim, but the Court of Appeal upheld the trial court’s ruling finding no liability. Since the water district unquestionably damaged the owner’s property, the question is why was there no liability?

The Court explained that a property owner may recover just compensation from a public entity under the theory of inverse condemnation for:

any actual physical injury to real property proximately caused by [a public] improvement as deliberately designed and constructed . . . whether foreseeable or not. This requirement is satisfied by a public improvement that as designed and constructed presents inherent risks of damage to private property, and the inherent risks materialize and cause damage.

The Court further explained that a claim for inverse condemnation requires a taking or damaging for public use that is based upon a policy decision by the public agency, and not simply the negligent act of a public employee. For example, in a case of alleged careless maintenance, as in this case, the plan of maintenance must be unreasonable to establish a taking – poor execution of a maintenance plan does not result in a taking.

Because the damage to the owner’s property was caused by negligent maintenance of the water main by the water district’s employees who failed to promptly locate and repair the leak (rather than by the design or construction of the pipe or the overall water delivery system), there was no liability in inverse condemnation.

Conclusion

Kelly supports the conclusion that as long as a public agency is undertaking reasonable efforts to maintain its infrastructure, there will be no inverse condemnation liability for damages caused by leaking or faulty pipes. However, where an agency understands that its pipes need to be replaced, but simply waits until the pipe breaks before fixing it, such a maintenance program will be viewed as inadequate, and lead to potential exposure in inverse condemnation.

Limiting exposure to inverse condemnation claims is important, as attorneys’ fees attach to the finding of liability. Nevertheless, agencies can still be found liable for other tort claims, such as trespass or negligence, when infrastructure is not properly maintained.