Cities across the country face a budding catastrophe. In staggering numbers, houses are rapidly falling into ruin and homes are in foreclosure. Empty dwellings that once were neighborhood homes and a part of the tax base, are largely inhabited now by criminals.
To combat the rising crime rates and to solidify the home-ownership goals of their citizens, many cities are considering eminent domain. Their consideration involves a twist from what might be thought of as traditional uses of eminent domain, however. This case provides a good example of such traditional uses of eminent domain, in which the cities' powers of eminent domain could be exercised in condemning the property, throwing out the homeowners in the process, paying off the investors holding any mortgages and other liens, and hoping to resell the property. This is always a losing economic proposition for the cities, it seems.
Enter the consideration of exercising powers of eminent domain, with a twist from the traditional use of those powers. Cities are currently considering whether to exercise powers of eminent domain to first negotiate with mortgagees and, if the negotiations are not successful, then condemning the mortgages and paying the same price as the cities offer in the negotiations except that now they are offering the same price in an eminent domain proceeding. This creative use of eminent domain would terminate the mortgagees' rights over the properties in the process -- and thereby also terminate the mortgagees' rights over the homeowners. The homeowners, neighbors all and taxpayers too, would not have to leave their homes or their neighborhoods.
Not willing to stand for this invasion of their asserted rights to foreclose, and voicing no objections to traditional uses of foreclosures and of eminent domain during the course of both of which homeowners are evicted, "Wall Street and real estate interests" have filed lawsuits against cities which have exercised powers of eminent domain in this way, and they have threatened lawsuits against cities which have the audacity even to consider using eminent domain in this way. See Shaila Dewan, "More Cities Consider Using Eminent Domain to Halt Foreclosures" p. B4, col. 1 (New York Times Nat'l ed., Saturday, November 16, 2013).
Public Entities and Officials Liability Insurance Policies may provide some protection to many of these cities and municipal officials who are sued by the litigious "Wall Street and real estate interests". Public Entities Insurance provides very similar coverage as Directors and Officers Liability Insurance Coverage provides to the private sector -- ironically, very similar coverage as the D&O Coverage passionately invoked by many of the same "Wall Street and real estate interests" who have been sued since they helped to cause the Great Recession in the first place.
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