In October 2024, the Indiana Supreme Court held that property owners cannot recover damages for traffic flow reduction to their property caused by roadway projects if the project leaves the property’s access points unchanged because no taking of a property right would occur.[1]
As part of new I-69 construction, the state in 2019 sought to purchase a narrow strip of land from an undeveloped parcel belonging to Franciscan where another nearby property owner, SCP, owned a drainage easement for its CVS storefront.[2] The new interstate would also remove the nearest intersection, which would soon place plaintiffs’ properties at the dead-end of a road and abutting the new interstate.[3] Unsuccessful in negotiations, the state filed for eminent domain, and plaintiffs asserted damages including a reduction in their properties’ commercial value.[4] The state, in turn, argued that damages stemming from traffic reduction are barred as a matter of law.[5] The trial court disagreed, leading to a jury verdict over two million dollars.[6] The Court of Appeals reversed the jury determination of damages for error, and the Supreme Court granted transfer.[7]
When an Indiana government entity uses eminent domain to take property, it owes compensation to the property owner including “‘fair market value’” and “damages ‘to the residue of the property’ that the owner retains.”[8] But a compensable taking requires taking a property right.[9] While condemning the narrow strip of property at hand indisputably created a taking, the traffic issues arising from removing the nearby intersection required a separate analysis.[10]
Indiana common law on damages from loss of property access shows two salient legal principles. First, “a landowner cannot recover damages for changes in traffic flow past their property[.]”[11] Second, “a landowner can recover damages when ingress and egress to their property is actually or constructively eliminated.”[12] And as further refined in State v. Kimco of Evansville, Inc., loss-of-access damages do not include road improvements that prevent expansion of public access.[13]
The court distilled previous law into an analytical framework:
When a property’s ingress and egress points remain unchanged, the landowner cannot recover damages based only on increased circuity of travel between the property and a public roadway because those damages do not result from the taking of a property right. . . . But when a property actually or constructively loses ingress and egress points between the property and a public roadway, the landowner can recover damages because they result from the taking of a property right.[14]
Accordingly, the court abrogated any case before Kimco that fails to tie a property interest taking to eminent domain damages.[15]
Applying this framework, the court held that the Franciscan plaintiffs failed to show a property right taking.[16] While “[t]akings cases are fact-sensitive,” plaintiffs’ concerns solely involved traffic flow, and no ingress-egress points were affected by removing the nearby intersection.[17] Thus, the court remanded the remaining valuation decision to the trial court with restrictions to appropriated land value alone.[18]
Moving forward, property owners affected by roadway construction should take care to frame their property interests through access instead of traffic concerns. Even a constructive access issue, like the bridge weight limits in Tolliver,[19] creates a compensable taking. Otherwise, unfortunately, legislative change may be required to ensure compensation for traffic-related damage to business and commercial value.
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[1] State v. Franciscan All., Inc., No. 24S-PL-118, 2024 Ind. LEXIS 660, at *2–3 (Ind. Oct. 31, 2024).
[2] Id. at *3–5.
[3] Id.
[4] Id. at *5–6.
[5] Id. at *4–5.
[6] Id. at *6–7.
[7] Id. at *7–8.
[8] Id. at *8 (quoting Ind. Code § 32-24-1-9).
[9] Id. at *8–10 (citing State v. Ensley, 164 N.E.2d 342, 348 (Ind. 1960)).
[10] Id.
[11] Id. at *11–12 (citing Ensley, 164 N.E.2d at 348, 350).
[12] Id. at *11–13 (citing Ensley 164 N.E.2d at 348; State v. Tolliver, 205 N.E.2d 672, 677–78 (Ind. 1965) (holding that constructive taking existed where traffic change required access to industrial business over bridge without weight capacity for business’s trucks)).
[13] 902 N.E.2d 206, 208, 214 (Ind. 2009); Franciscan, 2024 Ind. LEXIS 660, at *13–14 (also discussing lack of consideration for whether damages are “special and peculiar” and inapplicability of a change to “a property’s ‘highest and best use’”).
[14] Id. at *14–15 (cleaned up).
[15] Id. at *15.
[16] Id. at *16–17.
[17] Id. at *17–18.
[18] Id. at *19. Trial court-appointed appraisers disagreed on Franciscan’s land valuation, but a previous settlement precluded SCP’s easement valuation. See id. at *7.
[19] See supra note 12.
Authors:
Erin Borissov and Andy Eddington
Erin Borissov is a partner in the law firm of Parr Richey Frandsen Patterson Kruse with offices in Indianapolis and Lebanon, Indiana. She advises utilities and business clients in the areas of utility regulatory law, electric cooperative law, easement and right-of-way law, commercial transactions, corporate governance, and corporate compliance.
The statements contained herein are matters of opinion and general information only and are not to be considered legal advice and should not be construed to form an attorney-client relationship. If you have any questions regarding this article, please contact an attorney.