Key Takeaways:
Seven Beach Street homes in Dana Point's Capistrano Beach neighborhood were red-tagged and two more yellow-tagged after Hurricane Marie's surf destroyed decks and sea walls, city officials said, leaving owners to discover that the damage may fall outside their homeowners policies.
"Your homeowner's policy is not gonna cover anything related to a flood, rising tides, rising water — you have to have specialized insurance for that," Brian Kabateck, an attorney whose firm handles insurance bad-faith cases, said in a broadcast interview. "The first mistake people are gonna make is they're gonna think that their insurance policy is gonna cover this, and it probably doesn't."
The first Beach Street home was tagged on August 28 after a residential deck was destroyed, according to a city news release. Interim work on Tuesday included installing a boulder revetment behind the homes. Shalesh Gupta, one of the affected owners, said his sea wall began failing the previous Thursday, his patio "fell into the ocean" on Saturday, and the living room and bedrooms followed; he has been granted an emergency permit to demolish what remains. Orange County Supervisor Katrina Foley said the area needs roughly 1 million cubic yards of sand, against about 100,000 cubic yards deposited at Capo Beach over the past three years. Malibu placed more than 30 homes under evacuation orders and Long Beach evacuated almost two dozen more on Monday night.
The coverage arithmetic is the problem. Flood insurance in the U.S. is sold mainly through the National Flood Insurance Program administered by FEMA, and standard NFIP policies cap at $250,000 for the structure — a figure Kabateck called "nowhere near enough for these people to rebuild their homes," particularly on oceanfront lots. Lenders typically require flood coverage only when a property sits in a designated flood zone, so owners outside those boundaries may hold policies that never contemplated tidal water. Excess flood coverage above the federal cap is available from private carriers, but agents are not held to the same disclosure standard as attorneys, Kabateck said: "If you don't ask them the specific question, they don't have to tell you."
Owners hoping to recover from a public entity face a narrow path. Kabateck said suits against a city, county, state or flood district are unlikely to succeed unless the government did something that worsened the damage — failing to clear a flood channel meant to move water away from homes, or reshaping the shoreline with tractors, berms and sea walls in ways that altered natural sand flow. "It's a big question, it's a big if," he said. "I'd get an engineer as quickly as possible to try to get answers to that."
The stakes extend past the tagged properties. Insurers are expected to scrutinize whether damage came from wind and storm surge or from rising water, since the two are treated differently under most policies — a causation fight that can take months and often ends in litigation. California owners already carry a documented underinsurance problem that surfaced in the state's recent wildfire rounds, and coastal premiums for excess flood coverage are likely to rise as carriers reprice tidal risk. Beach Street owners are working with a coastal consultant and engineering firm on emergency measures, and the next high-tide cycle will test whether the boulder revetment holds.
This article is for informational purposes only and does not constitute investment advice.
