State May Consider Mudslide Insurance for Homeowners

As damage mounted Friday in what a federal geologist warned may become the worst mudslide season in California history, the state insurance commissioner suggested that the state might have to provide mudslide insurance to hillside homeowners, as it does for earthquakes.

Ever since the devastating Portuguese Bend landslide on the Palos Verdes Peninsula in the mid-1950s, the insurance industry has almost unanimously refused to cover landslides and mudslides because of the high risk and catastrophic losses, industry leaders said.

But a spokeswoman for California Insurance Commissioner Chuck Quackenbush said Friday that he is considering filling the gap with a state-sponsored program, similar to the California Earthquake Authority established in 1996 after insurance companies backed out of the quake coverage business.

“The commissioner is looking into the situation,” said Dana Spurrier, deputy commissioner and press secretary to Quackenbush. “It appears we may have another situation that is unique to California, and we may have to apply the right type of policy for California consumers.

“Do we need to take care of another problem [like earthquake coverage]? It appears the answer is yes, and [Quackenbush] is looking into the options,” Spurrier said in an interview from her hotel in Washington, where she is on business.

In the meantime, a federal geology researcher predicted Friday that California will be hit by the most devastating earthslides of the century as a result of the rainstorms now lashing the state.

David Howell of the U.S. Geological Survey in Menlo Park said slide victims will soon learn that insurance policies do not cover slide damage, which he predicts will top $1 billion, not including flooding.

“On average, we have about $100 million a year in earth movement damage. We don’t hear much about it because it is paid out through litigation because there is no insurance,” Howell said.

“But this is not an average year. This is a year of extraordinary conditions . . . and the trajectory calls for it to be the wettest rainy season in this century. Therefore the magnification of the damage will be tremendous.”

He said landslide insurance had disappeared even before the devastation of the El Nino storms in 1983.

Portuguese Bend, a mile-long stretch of coast along Palos Verdes Drive in Rancho Palos Verdes, is one of Southern California’s most scenic areas, but also one of the most unstable geologically. Earth slippage, at a rate of an inch a day, destroyed about 100 homes there in the 1950s and led to new soil standards for construction sites.

“What has happened is that the only recourse for somebody who suffers earth-moving damage is to sue,” Howell said.

“A whole new cottage industry has sprung up of earth-movement-chasing lawyers. Everybody is liable: builders, neighbors, consultants, the government. This is not the way that society should operate. There should be a safety net.”

A spokeswoman for a regional association of casualty insurers said the cost of mudslides is so extensive that providing insurance is prohibitive.

“Landslides tend to be catastrophic losses, so the risk is very high,” said Candysse Miller, regional director of the Western Insurance Information Service. She said the main factor in the industry’s refusal to offer such coverage is that only the owners of homes atop or below potential landslide areas would purchase the insurance, unlike other homeowner policies, which draw a broad base of buyers to share the risk and expense.

Miller also said that landslide insurance would “encourage people to rebuild in areas where it is not safe to build.”

She recommended that home buyers “take a good, hard look at an area before they purchase. Who wouldn’t want to wake up with a gorgeous view, but is it worth the risk?”

Ty Cordova, public affairs specialist for the State Farm Insurance regional office in Westlake Village, said: “Mudslides are only covered if driven by flooding and the mud rises up from a creek or riverbed into a home.”

Flood insurance does not cover damage beyond the home, such as to fences or retaining walls, he said.

An exception to the rule is Lloyds of London, which on Jan. 1 began offering landslide insurance, Miller said. The company charges a $1,200 annual premium for a $300,000 policy, she said.