Flood Insurance

Are You Insured For A Flood?

….probably not. How about mudflow or a landslide? Flood insurance may cover mudflow depending on the circumstances. Even a homeowner’s insurance policy could cover mudflow if the proximate cause was determined to be wildfire-a covered peril. A landslide is not covered under homeowner’s or flood insurance policies-for that peril you need DIC insurance (Difference In Circumstances). Here is flood insurance information gathered from several online sources.

BY SAM DEAN STAFF WRITER LA TIMES

FEB. 5, 2024 12:40 PM PT

“This week’s rain is turning streets into creeks and hillsides into mudslides. Homeowners across Southern California are facing major damage to their homes as a result — and in most cases, they won’t get any help cleaning up the mess from their insurance companies.

The standard homeowners’ policy does not cover losses from flood damage. Mudslides, mud flows and debris flows aren’t covered by typical homeowners’ insurance, either — though in particular circumstances, a homeowner’s policy might cover some of the damage from these events. Damage from falling trees or other wind-related impacts should be covered by homeowners’ policies, however, and the comprehensive coverage in an auto insurance policy should cover any damage to Californians’ cars.

Flood insurance has been underwritten by the federal government since 1968, as part of the National Flood Insurance Program. Homeowners have to purchase this coverage separately from the NFIP, which is administered by the Federal Emergency Management Agency, if they want their house to be protected from flood damage.

But Californians, by and large, haven’t ponied up for flood insurance. Out of the over 4.6 million flood policies in the country, 190,000 — just over 4% — are for California homes and businesses, according to data from the NFIP. In the eight Southern California counties under a state of emergency from the current storm, only 52,820 homes and businesses are covered.

Los Angeles County, home to nearly 10 million people, has just 14,580 flood insurance policies on the books.

The good news for policy-holders is that flood insurance covers most of the ways that dirt, water and debris can damage a home, as long as a major flood event is in progress.

Essentially, as long as mud or debris that damages the home is being carried by water, then flood insurance kicks in, said Janet Ruiz, director of strategic communication at the Insurance Information Institute, an industry group. The technical terms for these sources of destruction are mudflows and debris flows.

If a wildfire is involved in creating the mud or debris which then flows into a house, the fire coverage section of a typical homeowners’ policy can cover that damage. This kicked in during the deadly 2018 floods and mudflows in Montecito, which claimed 21 lives and led homeowners to file $388 million in insurance claims. Since the floods came on the heels of the massive Thomas fire in late 2017, that incident was deemed the “proximate cause” of the damage. But this specific set of circumstances is not common, and after a relatively sedate 2023 fire season, is unlikely to help many homeowners dealing with damage this week.

But mudslides — which have a technical definition distinct from the colloquial use of the word — are not covered by flood insurance, and are rarely covered by any kind of insurance policy at all. If water is picking up mud and debris and moving it into a home, that’s a mudflow in insurers’ books. But if the wet ground that a home is on slides away, shifting the house off its foundations (or causing it to fall off the side of a hill), then that’s a mudslide, and few policies will help the homeowner out.

“That’s ground movement, so that’s homes sliding off their foundation,” Ruiz said. “That’s not covered under a homeowners’ or flood insurance policy.”

The same goes for landslides, like the one that caused a cluster of houses in Rolling Hills Estates to pitch into a ravine in 2023.

But in a very specific scenario, a normal homeowners’ policy will cover some damage related to a mudslide or other earth movement: “If your neighbor’s house slides into yours, then their homeowners’ insurance would be liable to pay for your house,” Ruiz said.

Private insurers do offer flood coverage, and Ruiz said that it’s becoming more popular among the wealthy. The federal policy caps out at covering $250,000 in damage to a residential property and $100,000 for its contents. Even though flood losses are typically partial — Ruiz points out that California floods rarely affect the second stories of homes — some homeowners turn to the private market for more coverage.

Then there’s the basement issue. The NFIP does not cover most damage to basements, which pushes some homeowners to buy specific policies for their underground lairs. “There’s some pretty cool basements out there,” Ruiz said; ‘some people really trick them out.’”

Coverage for Flood, Mudflow, Mudslide, Debris Flow, Landslide, or Other Similar Event After a Wildfire

Fact Sheet

Homeowner Policies

In general, homeowner’s insurance policies (HO) issued in California, while worded slightly differently by various insurers, provide coverage for accidental physical loss to property as described in the policy subject to exclusions and limitations. Standard exclusions include: flood, earth movement, earthquake, landslide or mudflow, settling, cracking, shrinking, subsidence or sinkhole, erosion, sinking, rising, shifting, expanding or contracting of earth. However, most homeowner’s policies will cover an ensuing fire or explosion resulting from earth movement.

Frequently Asked Questions

Does my HO policy cover damages from flood, mudflow, mudslide, debris flow, landslide, or other similar events?

HO policies generally exclude damages caused by mudflow, mudslide, debris flow, landslide, or other similar events. However, it is important to read your particular policy to understand what is covered and what is excluded. (Note: See below, regarding “efficient proximate cause”. There may be possible coverage depending on the facts and cause of the loss.)

My home suffered a mudflow/mudslide/landslide/sinkhole loss in the areas near the recent wildfires. Is this covered under my HO policy?

There exists the concept of “efficient proximate cause”. It is possible that if the facts show that the wildfire (a covered peril) was the efficient proximate cause of the subsequent mudflow, mudslide, debris flow, landslide, or other similar events, then there may be coverage under the HO policy. You should first file a claim with your HO carrier. Should the claim be denied, the insurer must explain the reason for the denial and provide specific language on which the decision was based. If you wish to have the claim decision reviewed, you should file a Request for Assistance with this Department.

I don’t have a copy of my HO policy. What should I do?

Ask your insurance company or agent for a copy of the policy and all endorsements. The law requires your insurance company to provide this to you free of charge within 30 days of your request.

I have my HO policy but I don’t understand it. What should I do?

CDI can help you to understand your policy and coverages, if you have those documents available (in an in-person meeting). Otherwise, you should first contact your insurance company, agent or broker to get assistance understanding your coverages. If you are still unsure about your coverages or disagree with how the insurer is describing your coverages, you should file a Request for Assistance with CDI and one of our officers will assist you in understanding your coverages.

If I suffered damages from a mudflow/mudslide/landslide/sinkhole and my HO policy does not cover these damages, what should I do?

If the Local Assistance Center (LAC) is open in the area for your event, you should speak with local and state government officials to find out if there are any special financial assistance programs you may be eligible for. If the President declares a state of emergency, there may be financial help available from the Federal Emergency Management Agency (FEMA) or low interest loans from the Small Business Administration (SBA). Also, you may check with your lender or other financial lending institutions to explore the possibility of special programs that may be available.

I don’t think the mudflow, mudslide, debris flow, landslide, or other similar event was a result of natural causes. I believe my house should not have been built at this location as the earth is not stable. What can I do?

If you believe that the mudflow, mudslide, debris flow, landslide, or other similar event was caused as result of actions or negligence on the part of others, you should contact an attorney and discuss the possibility of legal recourse.

National Flood Insurance Program

The California Department of Insurance does not have jurisdiction over claim disputes under the National Flood Insurance Program. Flood insurance is a Federal program administered by the Federal Emergency Management Agency (FEMA). Consumers who have purchased an NFIP policy and have a loss, should report the loss immediately to the insurance agent or the insurance company administering the NFIP flood insurance to report the claim. Consumers requiring assistance can reach NFIP at 1-800-621-3362.

Under the National Flood Insurance Program (NFIP), coverage is provided for direct physical loss by or from a flood which is defined as “A general and temporary condition of partial or complete inundation of two or more acres (one of which is your property) of normally dry land area or of two or more properties from overflow of inland or tidal waters; unusual and rapid accumulation of runoff of surface waters from any source; mudflow, collapse or subsidence of land along the shore of a lake or similar body of water as a result of erosion or undermining caused by waves or currents of waters that result in a flood.”

Pertinent NFIP policy exclusions are:

• Earth movement - even if the earth movement is caused by flood.
• Earthquakes
• Landslide
• Land subsidence
• Sinkholes
• Destabilization or movement of land that results from accumulation of water in subsurface area, or gradual erosion. However, the policy will cover losses from mudflow and subsidence resulting from erosion caused by flood unless the cause of loss is caused by a flood, as defined in the policy, damages resulting from landslides and sinkholes are not covered under the NFIP.

Consumers whose claims have been denied by NFIP can contact FEMA to explore the appeal process.

Source: “California Department of Insurance Website.”

Difference in Conditions Insurance

Click here to see the California Department of Insurance List https://www.insurance.ca.gov/01-consumers/105-type/5-residential/carriersDICpolicies.cfm

At Aegis General, we provide the only true stand-alone

DIC insurance program in the market. This means you

don’t have to meet the typical underwriting criteria of a

full homeowner’s program. Our program was designed

from the ground-up to support DIC (Difference in

Conditions) policies. As a companion to a FAIR Plan or

equivalent policy, we support all occupancies and dwelling

values of up to $3,000,000. The coverage in an Aegis DIC

policy complements the fire and other perils provided by

a California FAIR Plan or equivalent policy. And, just like

all of our programs, the Aegis DIC program is available via

our real-time online quoting and policy issuance platform.

The Aegis DIC policy helps fill the coverage gaps that

exist between a FAIR Plan or similar policy and a typical

DP3, HO3, HO4, MHO or HO6 policy (yes, we support DIC

coverage for renters and condo owners as well!). What’s

more, the Aegis DIC program provides all the convenience

you expect from a standard homeowner’s program:

• Burglar alarm and other discounts;
• Customer loyalty credits at qualifying renewals;
• Equipment breakdown coverage; and
• Even a coverage unique to Aegis that reimburses for a mandatory wildfire evacuation if the FAIR Plan or equivalent policy provides no Loss of Use coverage.

Highlights

• The only true stand-alone DIC insurance program, designed from the ground-up as a new Difference in Conditions policy. The Aegis DIC program is available via our real-time online quoting and policy issuance platform.
• All occupancies supported
• Dwelling limits up to $3 million available
• Personal liability limits up to $1,000,000
• Complements the coverage provided by your client’s California FAIR Plan or equivalent policy
• Evacuation Reimbursement coverage included for all primary homes
• Equipment Breakdown coverage available
• Numerous discounts and coverage options available

Individual product coverage, limitations and exclusions may vary by state. Not all products available in all states.

Term Insurance Agency is P&C licensed in California only. We do not write homeowner’s or DIC insurance coverage. However, click here to see Neptune online flood insurance services we offer in California only.