Legal Brief

Does Recent Flooding Raise Inverse Condemnation Concerns for Public Agencies?

By Brad Kuhn, chair of Nossaman’s Eminent Domain & Valuation Group, and Jillian Friess Leivas, an associate of Nossaman’s Eminent Domain & Valuation Group

The recent storm events in California led to excessive quantities of rainfall and, by extension, flooding. This flooding raises the question of whether or not public agencies could face inverse condemnation liability from any flooding related damages. In California, the basic elements of an inverse condemnation claim include the substantial participation in a public project that results in the taking or damaging of real property. The burden of establishing these elements is on the plaintiff in an inverse condemnation action. The causation element is the source of much of the controversy when it comes to inverse condemnation liability for public agencies and is often the element most difficult for a plaintiff to prove.

General Inverse Condemnation Liability

Traditionally, California inverse condemnation law imposed a strict liability standard for damage proximately caused by a public improvement as deliberately designed and constructed. This resulted in the imposition of inverse condemnation liability even when the direct cause may be an unprecedented event such as flooding or wildfires. However, in 2019, this strict liability standard was modified by the California Supreme Court. Now, in order for a claim of inverse condemnation to succeed, the property owner must show more than just a causal link between the existence of a public improvement and damage to private property – it must demonstrate that “the property damage was the probable result or necessary effect of an inherent risk associated with the design, construction, or maintenance of the relevant public improvement.” (City of Oroville v. Superior Court (2019) 7 Cal.5th 1091.) This California Supreme Court recognized the burden that would be placed on public agencies if strict liability was the ongoing standard, so instead it raised the bar by undertaking a more rigorous analysis focused on the reasonableness of the public agency’s actions and the potential responsibility of the private property owner as a result of its acts or omissions that may have played a role in the damages.

In Oroville, the property owners failed to install a backwater valve that was legally required under the municipal code, and which could have prevented or substantially diminished the property damage. As such, the Court considered the reasonableness of both the public agency’s actions and the potential responsibility of the property owner. Therefore, if a property owner’s actions, or lack of action, also play a role in the damages, that may impact a finding of inverse condemnation liability.

Inverse Condemnation Liability for Flooding

Inverse condemnation liability in flooding cases has historically been held to a different standard. The general rule of strict liability had been previously modified in favor of a rule of reasonableness in cases involving flood control projects. (Belair v. Riverside County Flood Control Dist. (1988) 47 Cal.3d 440.) To determine reasonableness in this context, courts look to (1) the overall public purpose being served by the improvement project, (2) the degree to which the plaintiff’s loss is offset by reciprocal benefits, (3) the availability to the public entity of feasible alternatives with lower risks, (4) the severity of the plaintiff’s damage in relation to risk-bearing capabilities, (5) the extent to which damage of the kind the plaintiff sustained is generally considered as a normal risk of land ownership, and (6) the degree to which similar damage is distributed at large over other beneficiaries of the project or is peculiar only to plaintiffs. (Locklin v. City of Lafayette (1994) 7 Cal.4th 327, 368-369.) This rule of reasonableness only applied in cases where flood improvements fail and the damaged property is one that had been historically subject to flooding, not cases where improvements functioned as intended and designed and property was not historically subject to flooding. Therefore, the standard of reasonableness has not been universally applied to all flooding cases.

Oroville provided an affirmation of the reasonableness standard and broadened it to include flooding cases which were previously excluded. Thus, property owners face an uphill battle if they seek to hold public agencies liable based on a theory of inverse condemnation, in flooding situations and other contexts. First, plaintiffs have the burden of establishing all of the elements of an inverse condemnation claim. Second, on the causation element, the rule of reasonableness prevails over strict liability. Courts will look more carefully at the reasonableness of a public agency’s actions and at the behavior of property owners. For example, there may be various legal requirements that property owners are required to undertake in the development or maintenance of their property, such as specific capacity requirements for drainage, maintenance requirements for pipes, setbacks from water conveyance systems, building standards or materials that limit water intrusion, and so forth. If properly implemented, such requirements may have a role in limiting damage caused by water intrusion. But, in California, known for its droughts and limited rainfall, such requirements may not have been strictly followed. Now, in periods of excessive rainfall and flooding, the actions of property owners (or the absence of action) may create a situation where a property owner contributed to the property damage. For public agencies, they may point to such evidence and argue that the court should consider the reasonableness of the actions of both the public agency and property owners. This standard could also serve to encourage property owners to ensure they are in compliance with all property requirements to help prevent or mitigate future damage.

Therefore, while recent flooding could result in an increase in inverse condemnation cases against public agencies, the reasonableness standard applied to flooding cases, affirmed and expanded in the Oroville case, is likely to provide some insulation for public agencies against the finding of inverse condemnation liability. Nonetheless, public agencies need to act reasonably and consider the risks of flood impacts, especially now that California is facing more systematic flood events.