Insurers, adjusters and agents with clients in the tiny village of Oso, Wash. have been busy fielding calls, making site visits and offering condolences to the 100-plus residents who lost homes, businesses and even family members when a huge landslide smashed through the valley community Saturday. One thing they have not been doing, however, is preparing to make payouts.
That’s all down to a tragic lack of appropriate coverage, says NW Council President Karl Newman.
“Landslides aren’t covered under standard home and business owner policies. The only policy we are aware of that covers landslide damage is difference in conditions (DIC) coverage, and most people don’t have it,” Newman told Insurance Business
. “Right now, what most insurers are doing is making themselves available and ready to talk to their insureds, but they are in a position where they can’t provide coverage. It’s such an absolutely heartbreaking circumstance for everyone.”
A DIC policy would cover for damages resulting from Saturday’s slide, as well as mudflow, earthquake and flood. However, despite a historic incidence of landslides in the Pacific Northwest, just 4,700 home and business owners in Washington state have a DIC policy in place.
“That means far less than 1% have a policy like this,” Newman said, adding that no evidence has emerged that any of the victims of the Oso landslide had a DIC policy covering their home at the time of the damage.
Newman puts that down to the extra cost—about $1,000 a year for a $300,000 home—as well as the mistaken belief that FEMA will provide disaster aid to cover the cost of the home or business. In reality, FEMA typically offers a handful of grants, but more often, low-interest loans with payments due in addition to mortgage on a home that no longer exists.
Further complicating the problem is the fact that a majority of home and business owners—and even their agents—are unaware that DIC coverage exists.
“Typically, even many insurance agents are not aware that this policy exists, or they don't take it seriously. We would encourage agents and brokers, in light of the tragedy, to take that extra step in really encouraging a home or business owner to consider difference in conditions coverage,” Newman said. “Even if you don’t write it, at least refer them to an agent or broker who does.”
The Insurance Marketplace offers a comprehensive overview of agents
who sell DIC coverage and other surplus lines in all 50 states. Agents advising clients who own a home or business near an incline would do well to consult the database if they themselves do not work with carriers offering the coverage.
Newman said it is “far too early” to estimate damages of the landslide, but any payouts will likely come from several of the major carriers. Currently, at least 26 people are dead and 176 more are missing. That number may grow in coming weeks, Snohomish County, Wash. officials said.
You may also enjoy: "Preventative efforts save town from flood damage"
"The vital renters insurance policy change you're not making"
"The top 5 states for auto, homeowners hikes in 2013"