Eminent Domain Insurance

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Eminent Domain Insurance
by Robert Franco | 2008/03/24 |

I read an article today about a company that is offering an insurance property to protect property owners against losses incurred as a result of the state's power of eminent domain. I had to check my calendar to see if it was April Fool's Day. I think this is probably the most useless type of insurance I have ever seen... and its not cheap! (see Underwriter Launches Policy to Protect Against Eminent Domain).

For less than $300 per year, the policy provides up to $200,000 loss of market value when the home is sold, plus up to $50,000 to relieve the expense of moving as a result of eminent domain...

The company claims that this was developed in response to the U.S. Supreme Court decision in Kelo v. New London. In that case, the Supreme Court held that a state could use its eminent domain power to take property from a homeowner and give it to a private developer for economic redevelopment. The decision was so alarming that state legislators across the country began working on legislation that would protect their constituents from such takings. Some have been more successful than others, but the backlash from the Kelo decision likely means that this type of taking will be more difficult in the future.

What exactly does this insurance cover? When the state exercises its eminent domain power, they are required by the constitution to compensate the homeowner. That usually means they must pay fair market value. The policy provides up to $200,000 for loss of market value, but how is that measured? Presumably, the loss of market value would have to be attributable to the eminent domain action which will result in a payment of fair market value to the homeowner. Plus the policy will pay up to $50,000 for moving expenses.

The odds of losing your home to eminent domain seem very slight and the payout on such a policy will likely be very limited. Yet, the premium seems fairly expensive at about $300 per year. Of course, the company offering the coverage has exactly the opposite opinion.

[The Ward Group LLC] said the policy offers more than real protection, it provides “peace of mind.”

“When you consider the value and limits of coverage provide and the relatively low premium amount, we are confident a high percentage of homeowners will elect to purchase the coverage,” said Ward.

My advice would be to buy a lottery ticket - your odds of winning the lottery are probably better than having your home seized by eminent domain and it will only cost you $1.00.

Robert A. Franco
SOURCE OF TITLE
rfranco@sourceoftitle.com

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575 words | 10175 views | 2 comments | log in or register to post a comment

	I know people that lost their homes...
	I know people that lost their homes in the Kelo matter. The issue is...what constitutes fair market value to be paid for the taking of the property. Due process would require notice of the proposed taking and an opportunity for the property owner to be heard at a minimum. In eminent domain proceedings the value of the property would most likely be established by an appraisal of the property in a manner similar to foreclosures. The proponant ( State or Municipality) is going to try to get the lowest appraisal possible. In response the home owner is going to try to get the highest appraisal possible. I have run into this in foreclosure cases. When the court is confronted with conflicting appraisals it usually values the property by averaging the two conflicting appraisals. Whether this constitutes fair market value remains to be seen. In which case the home owner may receive less than the true fair market value of his property.
	by Kevin W. Ahern \| 2008/03/24 \| log in or register to post a reply

	Kevin: I agree. There is the poss...
	Kevin: I agree. There is the possibility of the home being undervalued. But, I wonder which appraisal the insurer would use to determine any payout under the policy? It would seem that they have the same incentive to use the lower appraisal that the state has in the eminent domain action. In any regard, I don't think the difference would be great enough to warrant paying $300/year for the insurance. Especially when you consider that the odds of ever having a claim are slight to begin with. Many people feel that the odds of having a title claim are too remote to justify the cost of title insurance, and that is a one time premium. At $300/year, the cost for eminent domain insurance would likely be much greater than title insurance. I'd have a hard time recommending this to any homebuyer. I think it will be a very tough sell.
	by Robert Franco \| 2008/03/24 \| log in or register to post a reply

Source of Title Blog

Robert A. Franco The focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco
SOURCE OF TITLE

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