New flood-insurance laws hang premiums out to dry

Rapidly rising costs drive homeowners to seek exemptions

Changes in flood-insurance laws may help assuage some anxieties faced by Palo Alto homeowners, as the federal Homeowner Flood Insurance Affordability Act of 2014 amends policies that forced many homeowners to pay skyrocketing premiums.

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.


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Posted by Hulkamania
a resident of Duveneck/St. Francis
on Apr 19, 2014 at 9:44 am

We refinanced our home in the mid '90s. We eventually went with BofA. Among all the paperwork was BofA's statement that we didn't need flood insurance. Surprise, surprise! We just got a nice chunk of change.

When the '98 flood hit we stood in the front yard and watched the river flow down St. Francis. Our home became a refugee center for neighbors at the lower end of the street. The worst thing we experienced was a lot of strange plant popping up in the front yard from all the seeds carried in the water. I got poison oak from wading in to help neighbors muck out their homes.

The proposed hold on flood insurance rates will only be temporary. From what I've read rates have the potential to climb to as much as $40,000 a year.

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Posted by Wayne Martin
a resident of Fairmeadow
on Apr 19, 2014 at 9:57 am

The FEMA Flood Insurance payouts are dependent on each year’s disasters—which seem to happen more on the East Coast and Gulf Coast than anywhere else. FEMA provides some decent statistics about the payouts, and policies in force, on its WEB-site—

FEMA Flood Insurance WEB-site:
Web Link

FEMA Payouts/1978-Present, by State/County:
Web Link

FEMA Policy Information/Policy Statistics:
Web Link

Policy Information by State
Policies In Force - Policies in force on the "as of" date of the report.
Insurance In Force - The coverage amount for policies in force.
Written Premium In Force - The premium paid for policies in force.

What’s missing from this data is the state-by-state cross-subsidy of flood payouts that come from homeowners’ premiums. The payouts to states like New Jersey, New York, and Florida are quite high, compared to most of the other states. It stands to reason that people paying into the FEMA pool are ultimately paying the payouts for those people in high-risk states, who year-after-year make claims to the government for hurricane/storm induced flooding.

The money for these payouts has to come from somewhere. The whole idea of insurance pools is that low-risk people ultimately pay for high-risk people, who can not afford to pay for the damages they sustain because of their behavior, or just bad luck that befalls them.

It would be an interesting exercise to determine the total dollars paid out by Palo Alto homeowners into the FEMA pool since the requirement for this insurance was imposed, and then look at the payouts that have resulted since 1978. The difference in these two amounts becomes the cross-subsidy.

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Posted by resident 1
a resident of Adobe-Meadow
on Apr 19, 2014 at 12:39 pm

There is an article today in SJM about Searsville Lake - "Conservation group calls creek endangered". The dam is at the head of the Searsville Lake / San Francisquito Creek which is in part the reason that we are in a flood control area. Many groups have been working to clean up the creek but are thwarted by Stanford Universities refusal to remove the dam which is 120 years old and filled with silt. This is confounding the total creek management from top to bottom which could help alleviate flood damage.

It is projected that we are going to have an El Nino winter which will put additional strain on the aging dam at the top and possibly cause earth sliding down, as well as extraneous, unplanned water flooding.

SU's refusal to alleviate this problem and participate in the creek clean-up and flood control measures is causing both Stanford Employees and Palo Alto / Menlo Park / East Palo Alto homeowners to absorb the added cost of the flood insurance.

SU is now the perpetrator in the continuing problem and listing of the creek in the "America's Most Endangered Rivers 2014".

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Posted by Gus L.
a resident of Barron Park
on Apr 19, 2014 at 2:25 pm

How does this effect Commercial property in the flood zone or along the Creek?

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Posted by Norman Beamer
a resident of Crescent Park
on Apr 19, 2014 at 3:38 pm

To Resident 1, regarding Searsville Dam:
You are misinformed. The Searsville dam has no effect whatsoever on the flooding problem. Moreover, it is way overdesigned, consisting of giant oversize concrete blocks stacked on top of each other, and so is in no danger of collapse form flooding, or even earthquakes. If the dam were to be removed, it would significantly increase flooding danger, and also cause huge sediment and silting problems downstream. And to remove the dam, the silt behind it would have to be carted away, which whould require a steady convoy of trucks, 24 hours a day, every day of the week, for months. One thing that is true: Stanford has thus far refused to cooperate on the idea of upstream retention basins, which are part of any flood solution. The Searsville dam could be part of such a solution, but much more capacity than that would be needed.

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Posted by Never Trust B of A
a resident of Old Palo Alto
on Apr 19, 2014 at 3:59 pm

We originally financed our home through B of A. in addition to telling us we did not need flood insurance, they also ripped us off to the tune of $1200/year in interest. We refinanced as soon as we could, and sure enough, that refi depended on us taking out flood insurance. Thankfully, that was in early 1997, and thankfully also most of the houses down the street from us were flooded in Feb 1998. We were on slightly higher ground.

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Posted by resident 1
a resident of Adobe-Meadow
on Apr 19, 2014 at 6:28 pm

The calculations on the removal of silt look overstated. It can be done in a gradual process and re-distributed. The silt is not a dead product - it can be dried and packaged as top soil. It has a lot of nutrients in it.

The dam can remain and allow water to collect, that was the original purpose of the dam.

That doesn't solve the fish problem. The goal on all waterways is to provide a natural path for the fish to come up and reproduce. Clear the silt, add a fish ladder, add some holding pools.
Also the creek needs to be cleared of excess vegetation so the water can flow down instead of backing up.
A problem due to lack of water flow is the build up of silt at the bottom of the creek - there is nothing washing it out - only a high tide pushing it up.

You can sell original Stanford University top class top soil - big seller.

I live near Adobe Creek - before it was updated the water came to the top and the tide pushed it back up the drains so that the water came up through the drains and flooded in the street. Adobe Creek has been updated and is now in very good condition. SCVWD comes in and scoops up the vegetation so it does not build up and become congested. Silt removal on a yearly basis for Adobe Creek.

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Posted by resident 1
a resident of Adobe-Meadow
on Apr 20, 2014 at 9:35 am

Gus l - get out your AAA map. San Francisquito Creek is the major element in flood control that is causing the increase in your flood insurance. It is the border between San Mateo and Santa Clara Counties. It empties into the bay at the end of Embarcadero Road.

Management of a major listed flood control creek starts from the top down. The top in this case is Searsville Lake which is not emptying on a natural basis because of the dam. Every dam in the state / US is suppose to be managed for top efficiency as both a holder of water and a natural outflow to the bay / ocean. In this case it is not happening which is causing the upflow of salt water and sludge from the bay.

Lack of water flow is providing a home for transients who are leaving trash in the creek. The bottom of Embarcadero below 101 is adversely affected by the build up of sludge caused by the bay pushing it upward at high tide. There is not a counter action which pushes the sludge back into the bay on a continual, natural manner.

The fix is not that hard, especially since the silt in the lake is not conflicted by boat oils and other toxic issues due to marine traffic. It is really a good, viable nutrient rich product.

SU has produced a top level soil enhancer - now farm it and sell it. You can look like a number 1 star in the world of Conservation. You can get a write-up in the Nature Conservancy organization who are trying to solve similar type problems all over the world.

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Posted by Jim
a resident of Midtown
on Apr 20, 2014 at 10:09 am

We bought our house in 1985. We did not have to pay flood insurance then. Once we refinanced, flood insurance kicked in. We now pay over $1,800 a year on flood insurance. We live near Greer Park, but our house is elevated. We are 9 inches from being exempt from having to pay flood insurance. The houses across the street are considerably lower than ours, but we all probably have to pay the same, which of course, is not fair. The Colorado Park Apartments always get flooded due to the complex being lower than the houses in the area. Yet, we're lumped in with them despite being much higher. If water ever got to our front door, the first floor apartments behind us would be halfway underwater and Highway 101 would be flooded. We've taken photos of our house and submitted them to FEMA, yet they always have a reason to deny us a change in policy. We are now seeking another surveyor (we had out house surveyed in 1998) because the previous elevation certificate is outdated, even though nothing has changed in regards to the elevation of our house. Bottom line, we are always paying for someone else's flood. Our house will never flood, yet we're out tens of thousands of dollars. The City of Palo Alto needs to look into this and help its residents that are getting ripped off by FEMA.

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Posted by Richard Clark
a resident of Duveneck/St. Francis
on Apr 20, 2014 at 3:58 pm

Anytime you are forced to buy goods or services you can be sure that you are going to pay top dollar.

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Posted by Paul
a resident of Crescent Park
on Apr 21, 2014 at 12:04 pm

Can I just say... All the lame puns in this story are really irritating.

1 person likes this
Posted by Carla Talbott
a resident of another community
on Apr 21, 2014 at 12:32 pm

Resident 1970-2008, Duveneck/St.Francis We were flooded out of our house in 98. The lack of any help in even evacuating us from the flooded area in the middle of a cold night was gob-smacking. We had to find our own way out to Greer and Oregon through ice cold filthy water up to our waists. Then we were met with no blankets, nothing. There was obviously no plan, the fire truck sat around waiting to be told what to do, was sent to another site where we sat around, all the time freezing to death. I bought that house in 1974 and no one was informed in those days if a property was in a flood zone. We learned that when we refinanced in 1988 to remodel and add onto the house. From then on we paid flood insurance as a requirement of the mortgage. We had 2 ft. of water in the house, 3 ft in the garage. Worse and more lasting than the water was all the silt as the flood had "ponded" in the Sierra Court area, dropping everything. The insurance does cover only the property, no contents (unless you purchase extra coverage). Your homeowner insurance won't cover damage from rising water but the auto insurance replaced our 2 vehicles. The flood insurance does not cover anything outside the house's footprint so loss of fencing, a garden shed, outdoor furniture, stone paths, etc. was not covered. I went to many meetings, all for nothing. Just living in a flood zone after such a traumatic event was very stressful and one time San Francisquito came within 3-4 inches of flooding again and we were frantically putting everything we could up off the floor. The peace of living in a non-flood zone, in OR, has been wonderful and I don't have to fret every time there is a lot of rain. I hated leaving my house in P.A. but didn't hate leaving a flood zone. Stanford is rolling in money, plenty for everything but doing their part as far as flood prevention.

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Posted by resident 1
a resident of Adobe-Meadow
on Apr 21, 2014 at 12:38 pm

Paul - what lame puns are you referring to? This is one of the more factual topics out there. Since you live in Crescent Park you are more effected by flooding from the creek. I believe that Crescent Park had the highest concerns on the bridges which cross the creek - that has been a major topic for the Crescent Park part of town. That is the creek we are talking about. If you look at the City of Palo Alto pages you will note that there is a grid of what the high water marks are at the bridges concerning flood control.

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Posted by muttiallen
a resident of Adobe-Meadow
on Apr 21, 2014 at 8:21 pm

muttiallen is a registered user.

We bought our house in 1975 and flood insurance was $88. When it went up over $300 a few years later we had it surveyed, got the LOMA and haven't paid a penny since. Our main floor is 11.5 feet above sea level. In the 1998 flood we saw our street flooded clear across, but not a drop in the raised-up house. I'm sorry for all those paying so much more now. Blame it on east coast hurricanes.

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Posted by resident 1
a resident of Adobe-Meadow
on Apr 21, 2014 at 10:06 pm

Muttiallen - we are very fortunate that Adobe Creek was rebuilt and the SCVWD comes in once a year to clear the vegetation and dirt that has accumulated. I was here prior to the rebuild and the water was coming up out of the street drains - a function of high tide pushing back against the volumes of water coming down off the mountains. I know that a number of commercial buildings in East Meadow Circle were flooded. Given some the equipment being built there that was a very high price flood.
Clean creeks from top to bottom with good access to the bay to empty out is the best way to go.

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