In 2011, Pasadena was hit by a powerful storm carrying hurricane force winds that injured more than 5,000 City-owned trees, 2,000 of which were uprooted. During the course of the storm, an approximately 110 foot tall Canary Island pine tree located on City property fell on a private residence, causing severe property damage.

The homeowners’ insurer paid more than $700,000 in insurance benefits. As subrogee under the homeowners’ insurance policy, the insurer sued the City for inverse condemnation, under the California Constitution, on the theory that the City owned the tree and maintained and cared for it as part of the City’s tree protection regulations. The trial court agreed and found the City liable in inverse condemnation on the grounds that the tree that fell was a public improvement maintained for a public purpose, the damage to the residence was proximately caused by the improvements, and the City is strictly liable for the property damage. The court awarded the insurer approximately $800,000 in damages and $330,000 in costs.

On August 24, 2017, in Mercury Casualty Company v. City of Pasadena, __ Cal.App.5th __ (Case No. B266959 & B268452), the Court of Appeal for the Second Appellate District reversed the trial court judgment and cost order.

The Court first considered Article 1, section 19 of the California Constitution, which allows a property owner to recover “just compensation” from a public entity for private property that is “taken or damaged for a public use.” Under that provision, when there is incidental damage to private property caused by governmental action, but the governmental entity has not reimbursed the owner, a suit in inverse condemnation may be brought to recover monetary damages for any “special injury” not shared in common by the general public.

The Court then examined the only three published decisions that have addressed inverse condemnation claims arising out of a public entity’s ownership of trees, none of which held the entity liable in inverse condemnation: Regency Outdoor Advertising, Inc. v. City of Los Angeles, 39 Cal.4th 507 (2006); City of Pasadena v. Superior Court, 228 Cal.App.4th 1228 (2014); Boxer v. City of Beverly Hills, 246 Cal.App.4th 1212 (2016) (we wrote about the Boxer decision here).

Only Regency and City of Pasadena addressed whether city-owned trees qualify as a public improvement for purposes of inverse condemnation. In particular, Regency rejected a billboard company’s theory of inverse condemnation liability, holding that a property owner’s interest in having its property viewed by the public, by itself, does not constitute a sufficient property right to give rise to an inverse condemnation claim. City of Pasadena involved another inverse condemnation lawsuit filed as a result of residential damage caused by a different city-owned tree that fell during the 2011 storm in which the court noted that a public improvement is a project or use that involves (1) a deliberate action by a public entity (2) taken in furtherance of public purposes.

Based on Regency and City of Pasadena, the Court held that a tree constitutes a work of public improvement for purposes of inverse condemnation liability only if the tree is deliberately planted by or at the direction of the government entity as part of a planned project or design serving a public purpose or use, such as to enhance the appearance of a public road. In other words, the complained-of damage in an inverse condemnation claim must be caused by an improvement that was “deliberately designed and constructed.”

In rejecting the insurer’s inverse condemnation claim, the Court was persuaded, in part, by the fact that there was no evidence of who planted the tree, much less that the City planted it as part of a construction project serving a public purpose. The Court also rejected the argument that the City’s adoption of its tree protection regulations converted the fallen tree into a work of public improvement because the regulations were adopted decades after the tree was planted and could not have had any bearing on how or why the tree was planted.

Mercury Casualty establishes a bright line test for when a tree can be considered a work of public improvement that can subject a public entity to liability in inverse condemnation. Even where there is no evidence a tree was planted as part of a planned project or design serving a public purpose or use, however, an entity may still face liability for other claims, including dangerous condition of public property.