Citation:

National Casualty Company v. Newtown Township and James A. Nolen,III, 2000 WL 1052142 (E.D.Pa.) July 24, 2000

Summary:
Public Official Liability Coverage May Available to Defend Claims Against a Township Arising Out of a Land Use Moratorium and Alledged Inverse Condemnation
Case Details:

The township placed a moratorium on all further land subdivision and development for a period of 18 months during which time the municipality was revising its Comprehensive Plan and Subdivision and Land Development ordinances. A landowner who wanted to develop his property during the moratorium brought action in state court alleging that the supervisors exceeded their powers and that the ordinance achieved a “reverse condemnation” of the property. The landowner petitioned for a Board of View to award damages for this alleged taking.

The township’s insurer refused to provide a defense or indemnification to the township with respect to the lawsuits citing an exclusion in the policy for coverage relating to damages arising out of the principles of eminent domain. The township sought declaratory judgment from the federal district court as to the duty to provide a defense.

The court held that the policy excluded public official liability coverage for injury or damage arising from any claim related to the principles of eminent domain. However, since the policy also provided that the insurer will defend the municipality for lawsuits seeking damages, then insurer is liable to provide a defense to an eminent domain action up to the point of the determination whether an alleged inverse condemnation occurred as a result of a moratorium being placed on land use development. The insurer was not liable to defend litigation to determine the amount of damages in the event of a ruling that there had been a compensable taking.

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