Loss of Easement Use Deemed Property Damage Under Insurance Policy

Published on: September 15, 2011

In an important insurance-related decision for condominiums and unit owners, the Massachusetts Appeals Court recently ruled that easements constitute “tangible property” and thus claims for damages based upon the loss of use of an easement will likely trigger an insurance company’s duty to defend under the standard form condominium unit owner’s homeowner’s policy.

The underlying dispute in the case of Citation Insurance Company v. Newman involved two adjacent unit owners at a small condominium in Cambridge in 2007.  The bone of contention was one unit owner’s (Hanratty) through the wall air conditioner which projected into a yard area to which the other unit owner (Newman) held an exclusive easement pursuant to the condominium master deed.  Newman continually complained to Hanratty about the air conditioner to no avail.  Eventually Newman resorted to self-help by sealing the air conditioner with duct tape rendering it unusable.  Hanratty filed suit against Newton seeking to restrain her from interfering with the air conditioner and requiring her to stay 10 yards away from him.  Newman filed counterclaims alleging nuisance and trespass as a result of the air conditioner protruding into the exclusive easement.  Newman also alleged the use of the air conditioner “creates a substantial and unreasonable interference with [the] use and enjoyment of her property.”

 Hanratty forwarded the counterclaims to his insurer (Citation) pursuant to his standard form condominium unit owner’s policy and demanded Citation defend him against the lawsuit and indemnify him for any damages awarded to Newman.  Citation filed a declaratory judgment action seeking a decision from the Court as to whether it owed a duty to defend and indemnify Hanratty against Newman’s claims.  Citation claimed it owed no duty to defend Hanratty on the grounds that Newman’s counterclaims do not allege property damage and that any physical damage or loss of use alleged affected only an easement.  Citation argued the easement does not constitute “tangible property” as defined under the property damage provision of the policy.

 The Appeals Court rejected Citation’s argument and instead held that an easement constitutes tangible property sufficient to trigger an insurer’s duty to defend under an insurance policy.  The Appeals Court determined that “for the purposes of deciding whether there has been injury to or loss of use of tangible property, it makes no meaningful difference which abstract legal concept has given rise to the claimant’s rights in real property.  Whether the claimant owns, rents, or holds an easement to it, the real property in question remains tangible property.  Indeed, the absence of any meaningful distinction is especially evident in this case, where the easement is exclusive and, for functional purposes, essentially indistinguishable from a fee.  Because, no less than an estate, Newman’s easement confers rights in property that physically exist, her allegations of injury to or loss of use of the yard are allegations of injury to or loss of use of tangible property as required by the definition of property damage contained in Citation’s policy.” 

 In sum, the Appeals Court held that an easement is a tangible property right and any injury to or loss of use of the easement constitutes property damage under the terms of the standard form condominium unit owner’s insurance policy.  Assuming no other coverage issues exist, an insurer will be required to defend a unit owner against claims for injury to or interference with another’s use and enjoyment of property conferred by easement.  In light of the Appeals Court’s decision, any claims or lawsuits brought against a unit owner or an association for interference with or injury to an easement should be immediately reported to your insurance agent for review and submission to the insurer as the defense of the claim (and possibly indemnification for the alleged injury) may be covered under the applicable insurance policy.

 For more information regarding this article please contact Andrew Brooslin at abrooslin@meeb.com or at 781-843-5000 (x141).

For a copy of the Decision please click here.