Claims Stemming from Government Regulated Flooding After Hurricane Harvey

by Zelle LLP
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[author: Bennett Moss]

In August, Hurricane Harvey directly hit the city of Houston, leaving substantial wind and flood damage in its wake. Many home and business owners who avoided flood damage breathed a sigh of relief on August 28 when the immediate threat of flooding seemed to have passed. But for those Houstonians along the Buffalo Bayou, the worst of the damage was yet to come. In order to avoid flooding downtown Houston, the U.S. Army Corps of Engineers ordered “controlled releases” of both the Addicks and Barker Dams, thereby alternatively flooding thousands of homes and businesses that would have otherwise been spared. Now the owners of those homes and businesses are looking for a way to recoup their damages.

U.S. Army Corps of Engineers Release the Dams

On August 28, 2017, the U.S. Army Corps of Engineers faced a difficult decision. Hurricane Harvey brought a torrential downpour of rain, and the Addicks and Barker dams were dangerously swollen with water. The Corps had two choices: (1) essentially do nothing and leave the dams alone, risking potential dam failure which could result in thousands of deaths and billions of dollars in damage or (2) order a “controlled release” of the dams, knowingly flooding thousands of properties that would have otherwise stayed dry.[1] The Corps ultimately choose the latter, and thousands of properties were damaged as a direct consequence of the Corps actions.

Property owners were understandably upset by the Corps’ decision, no matter how utilitarian. Thousands of home and business owners found themselves knee-deep in water after the bulk of the storm had already passed. And unless the properties were protected by some form of flood insurance, that damage was likely uninsured because Texas law defines flood to include water released from dams and reservoirs. In fact, many flooded homes in the area were not located in a known floodplain, meaning the homeowners were not required by lenders to carry flood insurance.[2]

In the aftermath of the flooding, property owners are now looking for ways to recoup their damages. While some homeowners have already joined class action suits against the responsible government actors, insurers would be wise to begin considering their options on subrogating the claims of flood insurance policyholders.

Property Owners Bring Proposed Class Actions Against Government Authorities

For those owners whose properties were not located within any floodplains (and therefore did not have flood insurance), the best recourse available for their damages will likely be lawsuits against the government agencies responsible for the releases. As of today, at least two proposed class actions have been filed against government agencies responsible for intentionally flooding the dams.[3] In one of the class action complaints, plaintiffs state that “[w]hile much of Harris County was flooding, Plaintiffs and members of the Classes had property that was not flooding as of August 27, 2017.”[4] The complaint also alleges that it was “[t]he decision to release water [from the dams that] flood[ed] not only the homes and businesses around the reservoirs but many homes and businesses downstream.”[5]

The plaintiffs in the class have a long, difficult road ahead of them if they hope to recover. The bulk of the class action case rests on a claim for constitutional taking in violation of Section 17 of Article I of the Texas Constitution, which states that “no person’s property shall be taken, damaged, or destroyed for or applied to public use without adequate compensation being made, unless by consent of such person.”[6] In its response, the city of Houston asserts that the court lacks jurisdiction over the issue as it retains governmental immunity from the suit.[7]

These class actions will be interesting to follow, as they have been pled in Texas courts based on the Texas Constitution’s takings clause, as opposed to the U.S. Constitution’s takings clause. As insurers begin subrogating their policyholders’ claims, they may find that they will be more likely to succeed on claims based on the Fifth Amendment of the U.S. Constitution in Federal courts.

Insurers Should Look to the Fifth Amendment for Reimbursement of Claims Paid Out

For those property owners who carried flood insurance, coverage may be afforded for claims stemming from the dam-controlled releases. Of course, whether the claims stemming from this flooding are actually covered by flood insurance will depend on the unique language of each individual policy. Insurers who do cover these losses may choose to seek reimbursement for the claims they are paying out through subrogation.

If insurers want bring subrogation suits against the government for its role in the flooding resulting from the controlled releases, insurance carriers should look to the Fifth Amendment of the U.S. Constitution for relief. The Fifth Amendment, in relevant part, states “nor shall private property be taken for public use, without just compensation.”[8] This language — known as the takings clause — has been the basis for legal action against government induced flooding before. In Ark. Game & Fish, the Supreme Court of the United States analyzed whether the controlled release of a dam, authorized by the U.S. Army Corps of Engineers, which negatively impacted nearby private property, could be found to be a taking thereby requiring just compensation.[9] The Court held that government-induced flooding temporary in duration was not exempt from the takings clause inspection, and could be found to require just compensation.[10] In order for a government-induced flood to be a compensable taking, there are a litany of factors that the Court articulated in order to determine the nature of the invasion.[11] These factors include the amount of time the flood invaded the property, the degree of the foreseeability of the result of the government-authorized action, and the character of the land at issue with the owner’s reasonable investment-backed expectations regarding the land’s use.[12]

Looking to Ark. Game & Fish gives insurers hope that their subrogated claims may yield results. The case states that action by the Corps of Engineers can certainly constitute a government taking, as was done in Houston when the Corps releases the dams. The flooding that resulted from the releases was known by the Corps, making the issue of foreseeability potentially easy to prove. Of course, the Government will have a litany of defenses on its side, including the public necessity defense. The necessity defense gives a governmental entity immunity from a Fifth Amendment takings claim where there is both an actual emergency and an imminent danger met by a response that is actually necessary.[13] Here, the government will likely argue that the controlled release of the dams was necessary to avoid the imminent danger of the dam collapsing.[14] However, if insurers can prove that the dam was not in any real danger of collapsing, insurers may be able to recoup their paid out claims to the victims of these controlled releases.


[1] Kiah Collier, Can flooded-out Houstonians win lawsuits against Army Corps?, The Texas Tribune (Sept. 28, 2017, 8:00 PM), https://www.texastribune.org/2017/09/28/will-flooded-out-houstonians-prevail-lawsuits-against-army-corps/.

[2] Id.

[3] Aldred et al. v. Harris County Flood Control District et al., No. 2017-57831, Complaint (80th Dist. Ct., Harris County, Tex. Sept. 5, 2017); Ross et al. v. San Jacinto River Authority et al., No. 2017-58385, Complaint (80th Dist. Ct., Harris County, Tex. Sept. 6, 2017). 

[4] Aldred et al. v. Harris County Flood Control District et al., No. 2017-57831, Complaint (80th Dist. Ct., Harris County, Tex. Sept. 5, 2017).

[5] Id.

[6] Tex. Const. art. I, § 17.

[7] Aldred et al. v. Harris County Flood Control District et al., No. 2017-57831, Defendant City of Houston’s Original Answer (80th Dist. Ct., Harris County, Tex. Oct. 6, 2017).

[8] U.S. Const. amend. V.

[9] Arkansas Game & Fish Comm'n v. United States, 568 U.S. 23, 26 (2012).

[10] Id.

[11] Id.

[12] Id.

[13] Trin-Co Inv. Co. v. United States, 130 Fed. Cl. 592, 599 (2017). 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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