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Court of Appeals Upholds Trial Decision in Bloomington Utilities Case

In City of Bloomington Utilities Department v. Walter, the Indiana Court of Appeals affirmed a trial court ruling that the City of Bloomington Utilities Department (the “City”) is not immune from liability in an incident where property was damaged after it was flooded with 300 gallons of sewage.

In November 2005, Walter and Day, tenants of an apartment owned by the Cadavids, noticed that their apartment was flooded with sewage because of a blockage in a sewer line near the apartment. The Cadavids contacted their insurance carrier about their loss caused by the sewage; however, the insurance company denied their claim because the blockage occurred within the City's portion of the system. Specifically, the blockage occurred in an eight-inch sewer line and the City is responsible for the maintenance and operation of public sewer lines that are eight inches or more in diameter.

The Cadavids, Walter, and Day (together, “Homeowners”) sent a Notice of Tort Claim to the City, in compliance with the Indiana Tort Claims Act (“ITCA”). The City denied the claim and the Homeowners filed a complaint under the ITCA. The City filed an answer and a motion for summary judgment claiming: (1) the City’s creation of a schedule for inspecting sewer pipes was a discretionary function for which it was immune under Indiana Code § 34-13-3-3(7); and (2) even if the City was not immune, it did not have notice of the problem and an opportunity to repair the condition prior to the flooding incident. The trial court denied the City’s motion for summary judgment “finding that: (1) the City was not engaging in a discretionary function that warranted immunity; and (2) there was a genuine issue of material fact regarding sufficient notice.” The City brought this appeal.

The Indiana Court of Appeals denied the City’s appeal because “it was not convinced that [the City’s] actions involved the formulation of policy that would entitle it to immunity under Indiana Code section 34-13-3-3-(7).” In Indiana, “the essential inquiry is whether the challenged act is the type of function that the legislature intended to protect with immunity.” Moreover, “discretionary immunity is provided to governmental units for undertaking a policy-oriented decision-making process.” Here, the Homeowners alleged that the City negligently planned, designed, installed, operated, maintained, and controlled the sewer lines serving their property. Once the allegation was made, the City “bore the burden to show that a policy decision, consciously balancing risks and benefits, took place . . .” The City argued that its Capacity, Management, Operations and Maintenance Program ("CMOM"), a program setting forth guidelines for the City to inspect, clean, and repair the city's sewer system, should be entitled to discretionary immunity.

The court acknowledged that the CMOM Program reflected both policy decisions and guidelines for sewer operation. Indiana law, however, allows courts to distinguish between decisions involving the formulation of basic policy, entitled to immunity, and decisions regarding only the execution or implementation of that policy, not entitled to immunity. Because the City actions in question involve only the implementation of its policy, the court decided that “the actions may be evaluated under traditional tort standards of reasonableness” and summary judgment is inappropriate.

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