In recent years, homeowners took measures to avoid paying the costly flood-insurance rates under the Biggert-Waters Flood Insurance Reform Act of 2012, like applying for Letters of Map Amendments (LOMAs), which exempt properties within a high-risk zone from mandatory flood insurance. Last month's legislation will bring relief to residents located in high-risk areas, where flood insurance is required by law, by repealing the termination of grandfather policies and reinstating caps on premium increase rates. Despite these changes, many homeowners still have their heads under water.
"The new laws have not been formally implemented yet," said insurance broker Carlos Guerra of Allied Brokers in Palo Alto. He recounted stories of policy owners being forced to pay, once again, the ever-soaring rates as outlined in Biggert-Waters while waiting for the new legislation's moment in the sun. Residents who wonder when that may be will find no solace in Guerra's answer: "At the leisure of Congress," he said.
Although all of Palo Alto is technically in a flood zone, only particular areas, including areas alongside San Francisquito Creek, are considered higher-risk Special Flood Hazard Areas (SFHA), according to the city of Palo Alto's website. Most of the city lies within the X zone, where homeowners are not legally required to take out flood-insurance policies.
For residents living in higher-risk areas, mandatory insurance can cost several-thousand dollars per year. Under Biggert-Waters, all homes, regardless of their construction date, require an elevation certificate, which can range in price from $500 to $2,000 from a licensed surveyor, according to Allied Brokers. Delayed acquisition of an elevation certificate could cause insurance rates to go from $1,500 to $6,000. Furthermore, rental properties and homes with severe claims began to receive 25 percent rate increases with policy renewals, a stipulation that went into effect January 2013.
Because federal regulations require that property loans for homes in SFHAs be covered by flood insurance, there are few options for avoiding legally mandated flood insurance, other than owning the property outright.
However, some Palo Alto residents have skirted these rising premiums by applying for LOMAs, which state that a specific property is situated in a way that would minimize its flood risk in comparison to surrounding properties. For example, a home with a slightly higher elevation than its neighbors would create its own little island in the event of a flood. The City of Palo Alto's website outlines an application process that includes submitting data to the Federal Emergency Management Agency (FEMA), which proves a property's protection. A property that receives a LOMA has the added benefit of optional lower-priced premiums and fewer construction requirements.
"Most people don't realize that this option is available," Guerra said of the LOMA application process. He counsels his clients to hire surveyors to confirm whether they are in a flood zone and, whenever possible, to apply for LOMAs to amend their zone status.
"There's been some success stories for several of our clients that are in East Menlo Park and East Palo Alto," he said.
Tides are shifting, however, with the implementation of 2014's Homeowner Flood Insurance Affordability Act, passed by Congress and signed by the President March 14. The new law allows most properties to retain their subsidized premiums instead of being subject to dramatic increases when the property changes hands or a current owner lets the policy lapse. Under the new law, annual rate increases are also limited to 18 percent per year.
The new law also reinstates grandfathering by repealing the provision in Biggert-Waters that stated older homes built in compliance with flood maps at the time would not be able to keep the old, lower rates if newer flood maps were issued. Under the old law, which had yet to take effect, the termination of grandfathering meant property owners mapped into high risk areas would face higher rates phased in over five years unless they could elevate their structures.
In addition, the new law requires FEMA to refund policy holders who overpaid for premiums under the old law. In accordance with the new legislation's affordability goals, FEMA is also required to minimize the number of policies with annual premiums that exceed 1 percent of the total coverage provided by the policy, Allied Brokers said.
Any Palo Altan who remembers the El Niño storms of 1998 knows the importance of flood insurance, even in this year's drought. Jagjit Singh, a Los Altos resident who lived in north Palo Alto on Louisa Court during the '98 flood, recalled the disaster.
"We lived with friends for about four to five months," he said.
Although Singh's home at the time was insured against flooding, his policy still "had some really archaic rules."
"For example, in the kitchen, (the policy) only covered the lower cabinets, not the upper ones," he said. "And windows were excluded."
Under both old and new laws, a standard flood-insurance policy pays only for physical damage to a property caused by rising water. Any coverage for a home's contents and personal belongings must be purchased separately, according to Allied Brokers.
Despite the loopholes in his policy, Singh expressed more grief with the city of Palo Alto than with his insurance company.
"After the flood, there were lots of people who were very upset about the lack of preparation," he said. "There were lots of meetings where people voiced their frustrations, including me."
After the1998 floods, Singh participated in a lawsuit against Palo Alto, with the intention of putting pressure on the city to remedy the problem of water direction in the event of future floods. This problem continues today: For the past year, the San Francisquito Creek Joint Powers Authority (JPA) has negotiated with the Regional Water Quality Control Board regarding major flood-protection plans. In late February, the Regional Board denied the JPA the necessary permits to begin their project. The JPA is now working with the water board to address its concerns and overturn the decision.
Edie Lohmann, a flood-insurance specialist, will present information on the National Flood Insurance Program, flood-insurance rates, elevation certificates and related topics at a meeting sponsored by the San Francisquito Creek Joint Powers Authority (JPA) on Wednesday, April 23, at 7:30 p.m. in the Palo Alto City Hall Council Chambers, 250 Hamilton Ave. The meeting will also be cablecast on Channel 26.