Third-Party Claim Coverage
In contrast to a first-party claim, however, when Mr. Downhill sues Mr. Uphill for negligence, claiming that he failed to take reasonable steps to avoid the failure of the land supporting his swimming pool, there may be third-party negligence liability coverage available to Mr. Uphill to pay for his legal defense and, to the extent Mr. Downhill proves negligence, the damage caused to Mr. Downhill’s property. Although Mr. Uphill’s insurance carrier may not cover his own losses, it might cover him for claims of negligence regarding his maintenance of the property.
In an interesting twist, if Mr. Uphill cross-complains against Mr. Downhill, asserting that his negligent actions in failing to maintain properly the downhill retaining walls caused the landslide, Mr. Downhill’s insurance carrier may be obligated to defend and indemnify him against those allegations.
There may be numerous liable parties for geological failures. Given the variety of those failures, it would be impossible to address all of the potential types of liability in this article. But, in general, the potential liable parties could be property developers and their agents; neighboring property owners; city, county, or other governmental agencies; or prior owners of property.
Property Developers and Their Agents
The property developers, their architects, designers, engineers (of all types), contractors, geologists, and even, in some limited cases, lenders may be liable for the damage. Liability may be based on negligence, breach of warranty, fraud, or even strict liability, depending on the circumstances of the failure and the kind of developer.
In one case, a property developer affirmatively misrepresented that the property was on a “cut” site, not a “fill” site. (A cut site is one in which the lot is cut into the hillside, while a fill site is built up using compacted fill, usually removed from a cut site.) At the first rains, the property slid, and it was conclusively demonstrated that the site was a “fill” site, not a “cut” site. In that case, the buyer was entitled to rescission of the real estate transaction based on the fraudulent misrepresentation.
Neighboring Property Owners
Neighbors may owe a duty to protect against these kinds of failures between their properties. For example, both Mr. Uphill and Mr. Downhill may well have valid arguments that the other was negligent in some respect. Other kinds of liability may be based on the failure of lateral support (for example, in excavation or retaining wall failures), nuisance, or even the concentration and discharge of surface water across the neighbor’s land.
County, City, or Other Governmental Agencies
Hillside failures may be caused by the negligent cutting of roads without appropriate retaining structures in place, by inappropriate placement of drainage, or even roads that, because of their slope, gather and discharge water across the land of a downhill landowner in a way that causes damage. In dealing with these kinds of claims, it is imperative to follow any number of governmental claims statutes, which may significantly shorten the claims periods and may require that claims be presented in a specific manner before a lawsuit may be brought.
Prior Owners of Property
If a prior owner of property knew of a condition of the land that would suggest its geological instability and failed to disclose that condition upon sale of the property, the prior owner may be liable for fraud or negligent misrepresentation. In one example, a property seller knew that there was a noticeable gap growing at the intersection of sidewalk and lawn. Before selling, the seller filled the gap and placed additional sod to cover the scar. But the gap was evidence of land movement that might have put a buyer on notice of the need to investigate the stability of the hillside. The slope failed, and the buyer sued.
If indeed the prior owner misrepresented a material condition of the property, and the buyer relied on that misrepresentation, the buyer may be entitled to rescission of the sale—essentially transferring the severely damaged property (and possibly even any potential liability associated with the landslide) back to the seller, in exchange for a full recovery of all money spent in acquiring the property.
When the earth moves due to earthquake, heavy rains, poor construction, change in drainage, or loss of vegetation, the damage can be enormous. What may have seemed a simple and innocuous thing to do, such as adding landscaping to a hillside, may have catastrophic results. When that happens, it is important to stabilize the moving earth quickly and effectively to prevent further damage. It is also important to identify the potentially liable parties and put them on notice of a possible claim for damages.