Insurance Holes Leave Hillside Residents Sunk

Despite months of exhortations to prepare for stormy weather, large numbers of hillside residents in Southern California were caught by last month’s damaging deluge without flood insurance protection, thinking they were safe in their homes high above conventional flood zones.

Federal and state officials were joined by the insurance industry last summer and autumn to press the message that homeowners should buy coverage through the federally operated National Flood Insurance Program, and convinced more than 100,000 flood-prone homeowners, a 39% increase statewide.

But the weather disaster that followed proved to be unpredictable, confounding the best efforts to prepare and finding many residents of coveted hillside homes paying little attention to warnings.

In hard-hit Laguna Beach, a city of nearly 13,000 dwellings, only 521 property owners had federal flood insurance policies as of Feb. 27, according to the Federal Emergency Management Agency. In Malibu, where damage was considerable, only 190 flood policies were in effect, said FEMA spokesman Mark Stevens.

Similarly in Ventura County, communities were low on flood protection. Only 78 property owners in Port Hueneme and 202 in Ojai had policies.

By comparison, communities where residents are in or near mapped flood zones have much greater participation in flood insurance coverage: 17,000 in Huntington Beach, 11,000 in Fountain Valley and 15,000 in Santa Ana. Some, but not all, of the newer residents in those areas are required by mortgage regulations to maintain flood insurance.

“I live up on a hill in Laguna Beach and I don’t have flood insurance and don’t intend to get it,” said Kenneth C. Frank, Laguna Beach’s city manager. “Other than this winter, I can’t remember any other time when we had this type of flooding.”

Laguna Beach resident Deneece Gabbard has taken several weeks away from her firm, Pacific Coast Productions, to sweep, mop and run electric fans to dry out her South Laguna house. It suffered between $50,000 and $100,000 in damage when rising water backed up from a street to her yard and through a sliding glass door, filling the lower portion of the house with nearly 4 feet of muddy water and dirt.

“We had insurance for just about everything--except flooding,” Gabbard said.

Last year, FEMA-produced radio and television spots urging people to buy flood insurance at a cost of about $500 a year were broadcast, well in advance of the onset of the El Nino ocean conditions that fueled the devastating winter storms. The insurance industry added its voice, running ads and sending letters to homeowner policy customers urging them to buy the additional protection.

“We hit it hard,” said Kenneth Adams of the Western Insurance Information Service in Los Angeles, an industry research firm.

But the message missed many of those who were the most vulnerable this year.

“Ninety-nine percent of people who own property have fire insurance,” said John Campbell, a longtime Laguna Beach insurance broker and civic leader. “But who would think you would ever have a flood or mud flow on the top of a hill?”

FEMA officials said they didn’t expect heavy participation from hilly areas, even though it may have been wise in retrospect for those property owners to buy flood insurance.

“In a place like Malibu, other than the homes right on the beach, it really doesn’t have the flood hazard,” said FEMA’s Alex Newton in Sacramento. “It’s the same with Laguna Beach.”

The National Flood Insurance Program (NIFP) is the nation’s primary insurance program for residential flooding. Separate from conventional homeowners insurance, it is a self-supporting federal program, although policies may be sold through private agents. Federal flood insurance covers more than 368,000 California property owners, providing more than $52 billion in coverage.

But even those who have national flood insurance are not assured of payouts from damage resulting from mud. The policies do not cover landslides, and, in some cases, geologists or even court rulings will have to decide whether damage resulted from a river-like flow of mud or from a landslide.

“Mudslides, or mud flows, must be the result of rainfall,” said FEMA’s Stevens. “It’s a mud flow if it behaves as a fluid, a river of mud. But if it involves relatively dry [earth] or boulders tumbling down the mountainside, then it’s not covered.”

An NIFP manual defines a mudslide as result of “the unusual and rapid accumulation or runoff of surface waters” that are “akin to a river of liquid and flowing mud on the surfaces of normally dry land areas . . . as when earth is carried by a current of water and deposited along the path of the current.”

Stevens said that when homeowners and adjusters disagree, technical experts may be called in to determine what caused the damage.

Much is at stake, depending on how the issue is decided for some property owners.

The Boys & Girls Club of Laguna Beach, a nonprofit youth center that is also used by adults, has closed its gym indefinitely because of nearly $40,000 in storm damage. Rain and mud seeped through a corner where the base of the wall hits the foundation, said Kim Maxwell, executive director. It filled a third of the gym, which is still drying out.

“It’s the first time that we’ve had any damage,” she said.

Even though the club has paid $500 a year to the National Flood Insurance Program for the last four years, officials said they don’t know whether they will be reimbursed.

The uncertainty has been stressful for Joel and Sandy Bush, who live in Laguna Canyon and operate a dog kennel and are awaiting storm-related payments from damage they sustained first in December, then again in February.

They are hoping to receive $30,000 for damage they suffered in December. Between their home and business, they already have spent $40,000 of their own money for preliminary repairs, clothing and a few items of necessary furniture.

“Four feet of water--that pretty much takes care of everything you own,” said Joel Bush of December’s damage.

They have seen the system work before, receiving a $38,000 insurance settlement in 1995 for flood-related damage. But the repeat experience has eroded their will to battle.

“Every minute certain things aren’t fixed, they degrade more,” Sandy Bush said. “Everything is moldy, musty. It really does make you sick.”

Times staff writers Scott Reckard, Roberto Manzano and Karima Haynes and correspondents Liz Seymour, Leslie Earnest and Dawn Hobbs contributed to this report.