By Samuel López | USA Herald

LONG BEACH, Calif. — The huge surf and coastal flooding hammering Southern California Friday is producing dramatic images.

For homeowners, the next wave may come in the mail.

Insurance denials.

USA Herald reported September 30 that the unusual Pacific Kelvin-wave event moving toward California could raise coastal water levels and expose a largely overlooked insurance gap.

That concern is no longer theoretical.

Powerful surf has damaged beachfront property along the Southern California coastline, while floodwater has moved into residential streets and commercial areas. Protective sand berms designed to hold back the ocean have been overwhelmed in some locations.

But the insurance question is considerably more complicated than the images suggest.

A homeowner can look at a partially damaged house and reasonably think, I have homeowners insurance. This is why I pay premiums.

The policy may tell a different story.

The California Department of Insurance specifically lists flood and tidal wave among the perils generally not covered by standard homeowners insurance. Flood insurance ordinarily must be purchased separately.

That distinction could become financially devastating for homeowners who assumed a high-value homeowners policy protected the structure against almost any catastrophe.

It does not necessarily do so.

A $3 million beachfront house can carry extensive homeowners coverage and still have a major hole in protection if the homeowner never purchased separate flood insurance.

The California Department of Insurance warns that homeowners and commercial policies typically exclude flood and similar water-related catastrophes. It also says the California FAIR Plan does not provide ordinary flood protection and that supplemental coverage may be necessary.

That means the first question after these coastal losses should not simply be, How badly was the house damaged?

It should be, What physically caused each part of the damage?

That distinction matters enormously.

Consider a beachfront house struck during today's conditions.

A powerful swell could first damage an exterior wall. Wind could tear roofing material loose. Ocean water could then enter through the compromised structure. Waves could undermine soil beneath a deck or foundation. Floodwater could destroy flooring, appliances and furniture.

Those are not necessarily one insurance loss.

They may become several competing causation arguments inside the same claim.

California law has an important doctrine for precisely this kind of dispute.

Under the state's efficient proximate cause rule, courts examining first-party property claims involving multiple causes look to the predominant or most important cause of the loss.

The California Supreme Court explained in Garvey v. State Farm Fire & Casualty Co. that when covered and excluded perils combine, the coverage analysis turns on the efficient proximate cause rather than simply identifying every condition somewhere in the causal chain.

The court later reaffirmed in Julian v. Hartford Underwriters that insurers cannot use policy language to eliminate California's efficient proximate cause rule where doing so conflicts with state law.

That could become extremely important following this week's coastal damage.

If the predominant cause of a particular loss is an excluded flood or tidal-water event, a standard homeowners carrier may have a strong basis for denying that portion of the claim.

But if a covered peril predominates — depending on the facts and the language of the individual policy — coverage analysis can become more complicated.

That is why homeowners should be careful about casually describing the entire loss as “flood damage” when reporting a claim.

They should describe what happened.

What hit the house first?

Did wind damage the roof?

Did a wave physically strike the structure before widespread inundation occurred?

Did a wall collapse from wave impact?

Was the foundation undermined?

Did water rise gradually from the street, or did surf directly strike the building?

Which damage occurred before the interior flooded?

Those facts may matter.

The California Department of Insurance itself draws distinctions between different kinds of water loss. Homeowners policies generally exclude flooding, but other water damage may be covered when it results from a covered peril. The department gives the example of rain entering through an opening created by strong winds.

For coastal homeowners, photographs and video taken immediately after the event could therefore become evidence rather than simply documentation.

Video showing a wave striking a wall before floodwater accumulates could matter.

Photographs showing wind damage before inundation could matter.

Security-camera footage could matter.

Engineering reports could matter.

Even the timing of structural movement could matter.

Then there is flood insurance.

The National Flood Insurance Program defines flooding broadly enough to include the overflow of tidal waters and unusual rapid accumulation of surface water affecting the required area or number of properties.

The federal program also recognizes certain forms of shoreline collapse or subsidence caused by erosion or undermining from waves or currents exceeding anticipated cyclical levels as potentially falling within the flood definition when policy requirements are met.

But that does not mean every form of coastal erosion is automatically covered.

California's Department of Insurance notes that flood insurance generally excludes earth movement such as landslide, land subsidence and gradual erosion.

That creates another difficult insurance line.

A house filled with seawater presents one issue.

A house whose foundation drops because the ground underneath it has progressively eroded presents another.

Anyone suffering damage from the current event should document the property before cleanup where safely possible, preserve photographs and video from before and during the event, retain damaged materials when practical, keep mitigation receipts and report the loss promptly.

Homeowners should also obtain complete copies of every applicable policy — not simply the declarations page.

Most importantly, homeowners should not assume an initial claim denial necessarily answers every coverage question where multiple causes contributed to the destruction.

California insurance law makes causation important.

After watching sand berms disappear and ocean water move through Southern California communities this week, that may prove to be one of the most consequential facts for homeowners long after the water retreats.

Read USA Herald's September 30 report — California ‘Kelvin Wave’ Phenomena Could Supercharge King Tides and Expose a Major Insurance Gap

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