Flood Insurance Becomes More Attractive

After a preview this month of the havoc winter rains may cause on fire-ravaged hillsides, insurance offices in the city say they have been inundated with requests for flood insurance information.

Moreover, insurance agents say homeowners increasingly are buying the long-ignored insurance, which is offered only by the federal government and not by commercial insurance companies.

While there were predictions of flooding immediately after the firestorm, it took the intense downpour of Nov. 11, releasing a destructive torrent of mud and water, to alert the city’s residents to the danger.

“I had 39 phone calls between 9 a.m. and noon the day after the flood, and I have written almost 20 (flood insurance) policies so far,” said Patrick Freeman, an Allstate agent in Laguna Beach.

Previously, insurance agents say, Laguna Beach homeowners had shown little interest in flood insurance, even though there are two federally designated flood hazard areas in the city: much of Bluebird Canyon and all of Laguna Canyon, including the downtown shopping and business district.

Tom Murphine, an agent at John Campbell Insurance in Laguna Beach, estimated that less than 10% of the business and homeowners in those areas have flood insurance. He said most who do have that coverage bought it at the demand of mortgage lenders.

But disaster experts warn that the recent fire has exposed new areas of the city to danger.

“What we are facing now is significant burn-over in the watershed that aggravates the potential of increased flooding from any rainstorm. Anything downstream of those watersheds will be subject to floods,” said Jack Eldridge, chief of flood insurance programs for the Federal Emergency Management Agency in the region including Southern California.

“To compound that,” he added, “all the partly burned brush gets picked up by the runoff as part of the debris load and blocks up normal drainage channels so (water) runs where it would not normally go.”

Eldrige, who was in Laguna Beach this week to tout flood insurance on a local cable television station, advises homeowners to consult with city building officials to determine if their homes are in a federally mapped flood zone or downstream of a burned watershed.

Laguna Beach Fire Chief Rich Dewberry said the city has asked a consultant to study the watersheds that have been burned to predict the amount of runoff that would be produced by varying amounts of rainfall. He said people with homes within the watersheds may then be told the extent to which they are at risk.

Eldridge said flood insurance can be purchased any time and becomes effective five days after the application and first-year premium payment are received.

He suggested that owners of homes endangered by burned watersheds buy flood insurance only until vegetation is regenerated on the hillsides.

“You can buy a one-year policy and renew it annually,” he said.

Murphine agreed that “once the landscaping is in place and the property built back up, the perils will be relieved for most of us.” He said he sent warnings of potential flooding to two clients on Skyline Drive whose homes survived the firestorm, and they promptly bought flood insurance.

He said the sale of flood insurance “seems to be gaining momentum. As the word spreads about hazards and ways to cover it, we are getting more and more interest.”

Freeman said the owner of a home outside a federal flood zone can buy flood insurance for $150 a year covering up to $100,000 on the home and $60,000 on its contents. The maximum coverage of $185,000 for the house and $60,000 for contents costs $395 a year. This is supplemental insurance only and does not replace the homeowners’ normal policy.

Flood insurance in federally designated high-risk flood areas is more costly. In those areas, Eldridge said, insurance on a $100,000 home, excluding contents, costs $252 a year if the home meets current building codes.

But flood insurance for homes that don’t meet those standards can be $412 a year.

Eldridge said that statewide, only about 24% of buildings in high-risk flood areas have flood insurance, a showing that he attributes in large part to consumer ignorance.

“Homeowners’ insurance and most business insurance does not cover damage for flooding, but survey after survey has indicated that a large percentage of people still think their homeowners insurance covers them for flooding,” he said.

But Diane Venstrom, an account representative for State Farm in north Laguna Beach, said some of her clients are discouraged from purchasing flood insurance when they learn that it would not protect them in the event of landslides caused by water-saturated earth. “They are concerned about the mountain coming down,” she said.

Neither the private insurance industry nor the federal government will insure for landslides, Eldridge conceded. Sometimes, he said, it is difficult to distinguish between a mudflow, which flood insurance will cover, or an earthslide, which it won’t.

But Murphine said he advises clients in the path of potential flooding to buy the insurance, despite its limitations.

“They already endured trauma from the fire and the first rain, and you just try to find ways to protect them.”

He said clients on Browncroft Way had five to six feet of mud and water in their home from the last rainstorm.

“They had recently purchased insurance that ironically went into effect at 12:01 a.m. that morning, just three hours before the storm hit.”