April showers bring … flood and sewage back-up claims. Flooding and sewage back-up can result in significant damage for municipal ratepayers, so ratepayers place a high value on municipal water and sewer services. And when there’s a problem, they quickly look to the municipality to make good any damage or loss.

The best way for a municipality to minimize liability exposure for flood and sewer claims is to understand the most significant risks it faces – and the key defences available to it. Here are the three most common claims and three most common defences.

CLAIMS

A home or business owner who experiences damage related to water or sewer, or her insurer, sometimes sues the municipality. The three most common types of claims are:

Negligence. Negligence claims by homeowners and businesses against municipalities for sewer backup and overland flooding are the most common. Court decisions demonstrate that proper maintenance is important for municipalities to avoid liability, particularly in cases of a known or foreseeable risk.

For example, in one case a business flooded during a heavy rainfall and the owner sued the municipality. The court decided the municipality failed to both remove debris from a nearby catch basins and pipes and to install a curb to prevent water from flowing across a piece of land and onto the owner’s property.  The court concluded the municipality was negligent.

Environmental Legislation. Environmental legislation (for example, the NS Environment Act) typically:

• prohibits a person (including a municipality) from releasing a substance (which includes sewage or wastewater) that may cause an “adverse effect” on the environment; and
• imposes a corresponding duty to report and remediate the release of such substances.

A conviction under the legislation can lead to civil liability: in a civil claim for resulting damages, proof of conviction can be used as evidence that the municipality was negligent. Legislation might give a municipality a statutory defence against claims for damages arising from failure in its inspection system – but the municipality may still be liable for the potentially significant costs of remediation measures.

Negligent Approvals. Municipalities are also exposed to liability for negligently issuing approvals.

For example in one case a municipality knew a piece of land was only marginally stable, but still issued a development permit. The land owner breached certain conditions in the permit, including that he refrain from installing a certain type of irrigation system. Part of his yard collapsed into an abutting ravine, and his house was damaged. He sued the municipality. The court decided the municipality owed a special duty to ensure the owner was aware of the risks of using the prohibited irrigation system – and was 35% liable for the damage.

DEFENCES

When a municipality is sued, it has some unique defences available to it because it’s a public body. The three most common are:

Policy Decision. A municipality is immune from liability if it made a policy – as opposed to an operational – decision:

• Policy decisions are those dictated by financial, economic, social, or political constraints and are usually made by a municipal council. A municipality is not liable for policy decisions.
• Operational decisions are those based on administrative direction, expert/professional opinion, or technical standards. A municipality does owe a duty of care for operational decisions – and therefore may face liability for them.

In one case snowmelt couldn’t drain into the municipality’s catch basin because of ice and snow. Instead, it ran into a person’s driveway – and basement. The person sued the municipality. The municipality argued that it would be too costly to keep every catch basin in the municipality fully operational at all times, and it had followed its policy for inspections. The court decided this was a policy decision, and the municipality could not be held liable.

Statutory Authority. A municipality might also avoid liability by relying on the defence of statutory authority. This defence requires that a statute not only authorize the municipality to do something but also authorize the way it is to be done.However, if a statute authorizes the municipality to do something – but not how to do it – then it can be liable for damages if it could have done the authorized thing in a way that avoided damage to others.

Statutory Immunity. Partly as a reaction to court decisions that tended to increase municipal liability, several Provinces have amended municipal statutes to provide immunity from certain claims, other than negligence. The result is a municipality simply can’t be sued for these claims. For example, the NS Municipal Government Act includes statutory immunities for liability:

• arising from a system of inspections unless performed negligently
• arising from the breakage of a pipe, conduit, pole, wire, cable or party of a utility or service
• for failure to provide a service or the manner of providing a service, unless the municipality failed to meet a certain standard determined by financial , economic and other consideration
• for failure to maintain a public place unless it has notice of a state of disrepair
• for failure to enforce a bylaw unless the decision is made in bad faith
• for sewer and water overflow as a consequence of snow, ice, or rain
• for damages caused by wastewater facilities, storm water systems, supply water systems, or from the discharge of sewage from a municipal sewer unless it was caused by poor construction or neglect in maintenance

Courts do tend to construe these defences narrowly. For example, in one case, there was statutory immunity against damages for a sewer system’s breakdown or malfunction. Gravel built up in a sewer causing it to back-up and flood. A homeowner successfully sued the municipality: the court decided there was neither a “breakdown” nor a “malfunction” of the sewer system, but rather a failure to maintain it.

KEEPING THE PIPES CLEAN

Municipalities will likely continue to face liability exposure from flooding and sewage backup claims given the importance of water and sewer service to municipal ratepayers, the significant damage that can occur, and the perception that municipalities have deep pockets. Minimizing this exposure is challenging. The best starting point is:

• understanding the primary sources of liability and defences;
• encouraging municipal councils to make decisions to take advantage of the a policy defence; and
• taking care when issuing approvals.

Knowledgeable legal counsel can help municipalities take these steps and minimize exposure.

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Please contact your McInnes Cooper lawyer or any member of our McInnes Cooper Insurance Defence Team to discuss this topic or any other legal issue.

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McInnes Cooper has prepared this document for information only; it is not intended to be legal advice.  You should consult McInnes Cooper about your unique circumstances before acting on this information. McInnes Cooper excludes all liability for anything contained in this document and any use you make of it.

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