The Subrogation Strategist

Inverse condemnation is a legal theory that is not common in the subrogation industry. However, when dealing with a loss where property damage is the result of action by a public entity, it is a claim that may be available. While there are distinct considerations with raising an inverse condemnation claim, pleading it can also have advantages over common negligence causes of action. Understanding when inverse condemnation is an available claim is the first step in such an analysis.

Although it is not a subrogation case, the Court of Appeal of California (Court of Appeal) recently examined the basis for inverse condemnation claims, in general, in Shehyn vs. Ventura County Public Works Agency, 108 Cal.App.5^th 1254. In Shehyn, the plaintiff brought an action against the defendants, Ventura County Public Works Agency and Ventura County Waterworks District No. 1 (collectively, the District). The Court of Appeal reviewed an appeal after the trial court sustained the District’s demurrer without leave to amend the cause of action for inverse condemnation. The Court of Appeal reversed the judgment, remanding the case with the instruction to enter a new order overruling the demurrer.

This case arises from permanent property damage allegedly sustained by Steve Shehyn (Shehyn). Specifically, the damage was to irrigation pipes and an avocado tree orchard owned by Shehyn. The District provides water to property owners in Ventura County, including Shehyn. The subject orchard is located at the end of one of the District’s branch lines. Shehyn claimed that sediment in the water on his property was “vastly and grossly disproportionate” to other properties the District served, and the excessive sediment led to the subject property damage.

According to eminent domain law, although public use can involve the taking of or damage to private property, the owner of such property must be justly compensated. A plaintiff looking to enforce this principle through an inverse condemnation claim must allege that a public entity has taken or damaged their property for a public use. The damage must be substantially caused “by an inherent risk presented by the deliberate design, construction, or maintenance of a public improvement.”

The trial court here sustained the demurrer on the basis that Shehyn “invited” the District onto his property by using the county water. The Court of Appeal disagreed, holding that a property owner does not invite a municipal entity onto its property simply by using the only source of water available to him. Because Shehyn alleged the sediment in his water was “vastly and grossly disproportionate” to the rest of the District’s customers, the plaintiff sufficiently pled a claim for inverse condemnation and the trial court should have overruled the demurrer.

This holding is important because it demonstrates how plaintiffs can apply inverse condemnation in certain circumstances. If a public entity is causing property damage through improvements for public use and the damage is not sustained by the greater public, a plaintiff may plead inverse condemnation. This is true for subrogation claims just as it is with property owners directly.

The main benefit of an inverse condemnation cause of action is that the plaintiff does not have to prove fault. Thus, even where a negligence claim falls short, the plaintiff may still have grounds for the pursuit of subrogation. Additionally, depending on specific state laws, inverse condemnation may help avoid certain immunities and allow for the recovery of costs on a successful claim. It is not every day that inverse condemnation will come up for subrogation professionals, but it is an overlooked tool they should employ when appropriate.