On June 23, 2026, the Supreme Court decided Pung v. Isabella County, No. 25-95, and rejected a full-market-value damages theory for tax-sale takings claims. The Pung family owed $2,241.93 in real-property taxes, the Michigan home was assessed at $194,400, and Isabella County sold it at public auction for $76,008. The Court held that the Takings Clause baseline is the auction sale price, at least when the tax sale is fairly conducted, and that the Eighth Amendment does not require more than surplus proceeds.
That is a narrower rule than many public entities feared after Tyler v. Hennepin County, the 2023 decision requiring governments to return surplus proceeds after tax foreclosure sales. Pung does not let a county keep surplus proceeds. It says the federal just-compensation measure is not the property’s hypothetical open-market value when a fair tax sale produced a lower price. The Court vacated and remanded so the Sixth Circuit can address any preserved arguments about whether Isabella County’s process was unfair.
Who it affects
This affects counties, cities, school districts, treasurers, land banks, tax collectors, public universities, and public-entity pools or joint powers authorities that retained or inherited tax-foreclosure litigation after Tyler. It is most relevant where a public entity general liability IBNR review grouped tax-sale takings claims with broader civil-rights, inverse-condemnation, or due-process files. A pool with members in different states should not book one blanket reduction, because member practices differ on notice, redemption periods, auction procedures, and surplus-return mechanics.
The reserve mechanism
The reserve lever is severity first, then tail factor. For a clean tax-sale case reserved on a full-property-value theory, Pung can reduce the indemnity range materially. In the case itself, the federal takings measure moved away from the $194,400 assessed value and toward the $73,766.07 surplus proceeds figure, the $76,008 sale price less the $2,241.93 tax debt.
That does not make the claim category disappear. Claims handlers should separate four components in each file: surplus proceeds, notice defects, alleged sale-procedure defects, and attorney-fee or defense-cost exposure. The first bucket may now be easier to value. The other buckets can keep files open, especially where the taxpayer argues that the auction was not fairly conducted or that state law supplies a different remedy.
The diagnostic is claim-level coding, not a global tail-factor release. From tracking public-entity reserve reviews after Tyler, the recurring mistake is treating every tax-foreclosure file as a full-property-value exposure before isolating surplus proceeds and process defects. That creates the same distortion described in case reserve strengthening: the reported loss triangle reads a legal-theory cleanup as a development signal unless the TPA recodes the files. Use the leading indicators of adverse reserve development mindset here: open inventory, attorney involvement, motion posture, and claim coding will show the change before aggregate paid losses do.
What this means for your next review
Put a tax-sale claim schedule on the next reserve-study agenda. Identify open claims reserved using assessed value, appraised fair market value, or resale value rather than auction surplus. Ask the actuary to show the carried reserve by damage theory, then run one view for clean sale records and a second view for disputed notice or auction procedures. For public pools, require a member-by-member exposure review before adjusting the public entity liability tail, because one county’s clean process does not validate another member’s file.
Sources
- Pung v. Isabella County, No. 25-95, U.S. Supreme Court slip opinion, June 23, 2026: https://www.supremecourt.gov/opinions/25pdf/25-95_dc8e.pdf
- Supreme Court docket, No. 25-95: https://www.supremecourt.gov/docket/docketfiles/html/public/25-95.html
- Supreme Court question-presented report, No. 25-95: https://www.supremecourt.gov/qp/25-00095qp.pdf
- Appendix containing the Sixth Circuit decision below, No. 25-95: https://www.supremecourt.gov/DocketPDF/25/25-95/365731/20250722101251035_250715a%20Appendix%20for%20efiling.pdf
- Tyler v. Hennepin County, No. 22-166, U.S. Supreme Court slip opinion, May 25, 2023: https://www.supremecourt.gov/opinions/22pdf/22-166_8n59.pdf