Waterfront views come with high stake risks

Images of a house slipping into a river near Victoria, B.C. earlier this week raise concerns surrounding extreme weather and its effects on some of Canada’s most enviable waterfront properties including whether or not your insurance company has your back.

Heavy rains eroded the riverbanks near an Esquimalt home, dragging the deck and retaining wall into the Gorge Waterway and leaving the house precariously perched on the edge.

Unfortunately for the homeowners and the segment of Canadians enjoying cliff, lake or riverside views from their couch, they aren’t likely protected by their insurance.

“It’s a standard exclusion, covered if caused by an earthquake but otherwise not covered and not available for purchase anywhere we can see,” explains Adam Mitchell, president and broker at Mitchell and Whale Insurance.

But it’s an issue on both insurance and government policy makers radar, says the broker.

“It’d be a pretty small sector of the population that could fall victim. You either need to be on cliff edge or bottom of a hill. But one of the things that is a high topic is the (spike) in overland water or flood damage,” says Mitchell.

He points to Alberta where flooding of the Bow and Elbow River in 2013 and the damages it wrought cost insurance companies $1.7 billion. Severe weather in other parts of Canada pushed that figure up nationally to more than $3 billion that year.

“It became a growing issue right after the flood in Alberta with many of those private residences having claims denied,” says Mitchell. “There was political pressure applied where companies came around and eventually started doing it but they realized there was no product to cover these larger and more frequent storms.”

Several major insurance providers like Aviva and Co-operators started offering flood coverage last year but it’s still not enough, according to Simon Fraser University’s Adaptation to Climate Change Team.

“The fact that Canada is the only G8 country without a national flood program is of concern,” says Pete Karageorgos, director of consumer and industry relations at industry association the Insurance Bureau of Canada. He points out that the U.S. has a hybrid industry-government program where the insurance industry sells a product, adjust the claims and the government pays them back for it.

“Now we’re seeing insurance companies starting to offer flood insurance for overland flooding in some cases and sewer backup coverage,” he says.

But waterfront property owners shouldn’t hold their breath.

“I think the concern is that, like any risk, homeowners go forward blindly. If you have a home with that kind of a view on a river or on a lake or at the edge of some nice precipice that you can see forever, you recognize there are some risks inherent of being located there,” he says. “So why should someone who is inland who has less of a risk of their property being flooded pay the same insurance rates of someone whose property backs onto a lake?”

Not to say that there’s no recourse. It’s possible to question the liability of the municipalities who approved the development in the first place along an area deemed a floodplain. But the success of that has yet to be tested.

“We have the conservation authorities and they know for the most part where the floodplains are,” says Karageorgos. “But that’s a longer conservation.”

He says the question about access to coverage and protection for all those beautiful waterfront properties comes down to demand.

“The market is competitive and the standard policies typically exclude these types of things,” says Karageorgos. “You may be able to find an insurer who will offer you that coverage but recognize that in the likelihood you do find it, because of the limited market size the cost will be greater.”