Wildfires

Dust storms

Floods

Crop damage

Summary

Introduction

A drought is considered a deficiency in precipitation over an extended period of time, usually a season or more, which results in water shortages for some activity, group, or environmental sector. However this can be much more far-reaching than it sounds: the Dust Bowl of the 1930s covered 100,000,000 acres and while it was centered on the panhandles of Texas and Oklahoma, it touched adjacent sections of New Mexico, Colorado, and Kansas; dust blizzards went as far as the east coast. Part of the issue in the 30s was not only the lack of precipitation but the plowing of virgin soil that displaced natural grasses that normally trapped soil and moisture, even in dry conditions. This unanchored soil turned to dust and formed huge storms known as black blizzards or black rollers. Roughly 3.5 million people moved out of the Plains states between 1930 and 1940 due to this natural disaster.

Another huge drought occurred between 1950-1956 through the Great Plains and Southwest. By the time the drought ended in 1957, 244 of Texas's 254 counties were declared federal disaster areas. In 1988, due to drought, 793,880 acres of Yellowstone National Park burned, causing the first complete closing of the park in its history. The drought that occurred between 1987 and 1989 was the costliest drought in American history, costing roughly $39 million. There have been other droughts sporadically and in various sizes from the 1960s through today. Droughts from 1980 to 2019 have cost the country $236 billion dollars. The impact of droughts is severe in the Southern and Plain states where billions of dollars of livestock and crops are at risk. A national Drought Monitor is available at http://droughtmonitor.unl.edu/ that provides a graphic as to what states nationwide are experiencing what level of drought and other information.

Current Conditions

Currently, 44% of the country and 51% of the lower forty-eight states are in drought conditions. This means that 218 million acres of crops and 116.3 million people in the country are experiencing drought conditions. Forty states are in a condition of moderate drought or worse. These conditions lead states to restrict water usage, by restricting or prohibiting watering of lawns and nonessential use of water. California has restricted the watering of lawns to two days a week and has requested homeowners to cut back on water usage by 30%. Watering periods may not be longer than ten minutes. Residents in the City of Malibu have been offered a cash rebate if they remove their lawns and replace them with something more efficient. The rebate is $5 per square foot up to $25,000. Commercial, industrial and institutional properties may not water nonfunctional turf. Colorado, Utah and Nevada are among other states that have created programs encouraging residents to remove lawns and replace them with drought-tolerant plants that require less water to grow, and some states offer payment as well.

With water restrictions, the filling of swimming pools, especially for swim clubs, could become problematic. If clubs are not permitted to fill their pools and lose business income, would coverage exist? Drought itself is not listed as an exclusion, however there must be direct physical loss or damage to property at the premises to trigger coverage. What is the physical loss or damage at the swim club? They've lost their access to water, but that is not physical damage per se. It could fall under the utility services exclusion—failure of any utility service includes lack of sufficient capacity or reduction in supply. There is an endorsement to cover utility interruption—CP 15 45. The utility interruption must be caused by a covered cause of loss, and we're back to the beginning.

Wildfires

Traditionally wildfire season begins June 1, but the past several years have seen wildfires become more of a year-round hazard. As of July 18, nearly ninety large fires have burned three million acres in twelve states. Year to date there have been 37,070 fires that have burned 5,357,050 acres. The National Interagency Fire Center tracks fires throughout the country. https://www.nifc.gov/fire-information/nfn

California, Colorado, Oregon and Washington are particularly prone to wildfires. A homeowner's risk of wildfire is expected to double over the next 30 years. Some states, including New Jersey, Massachusetts, Louisiana, Alabama, and Arkansas will likely see their fire risks grow more than 200% in the next 30 years. Coverage is straightforward, as fire is pretty much a universally covered peril with little if any exceptions or exclusions other than arson. However, more people are moving into the Wildland Urban Interface(WUI). The WUI is the transition between unoccupied land and human development, such as dwellings, stores and offices. It's where human development mingles with undeveloped wildland or vegetative fuels.

There are 46 million residences in the Wildland Urban Interface; The Interface grows by 2 million acres a year, because people like to live near nature and see the woods and animals. Unfortunately, similarly to those who live on the coast, they're setting themselves up for disaster by being at risk for severe losses and risk losing coverage as carriers will increase rates and remove coverage from the most at risk areas. From 2015 to 2019, carriers nonrenewed nearly 350,000 policies in areas at high risk for wildfires.

One way to help prevent fires is by establishing defensible space. According to CAL FIRE,  defensible space is broken down into two zones to create 100 feet of space. The first zone extends thirty feet from the building, structures, and decks. All dead plants, grass, weeds, vegetation, leaves, and pine needles should be removed from not only the yard but the roof, rain gutters, and from around and under decks. Trees should be trimmed to at least ten feet away from the chimney, branches that overhang the roof should be removed, and trees should be trimmed to keep a minimum of ten feet from each other. A separation should be maintained between items that can catch fire such as patio furniture, wood piles, swing sets, trees, and shrubs. Wood piles should be moved into zone two. Flammable plants or shrubs near windows should be trimmed or ideally removed.

Zone two extends seventy feet from zone one, giving a total of 100 feet of defensible space; remember however that certain towns or counties may have even stricter requirements. In zone two, grass must be kept mowed to no more than four inches high, horizontal spacing should be kept between shrubs and trees, vertical spacing needs to be maintained between grass, shrubs, and trees, and leaves, needles, twigs, bark, cones, and small branches must be removed, although they are allowed to a depth of three inches. Horizontal spacing is the clear space between trees and shrubs; there should be ten feet of clearance between trees on level ground, and twice the width of shrubs on level ground. For example, if a shrub is two feet wide, then there should be four feet of space between it and the next shrub.

On sloped ground, the distances double, and on severe slopes, the distances triple. Vertical spacing requires six feet of spacing from the ground to the first branches of the tree. If a shrub is under a tree, then the space required between the top of the shrub and the bottom branches of the tree is at least three times the height of the shrub. If the shrub is two feet high, then six feet of space is required from the top of the shrub to the bottom of the first tree branch.

The Insurance Institute for Business and Home Safety (IBHS) recently developed a program to help property owners take actions that will reduce a property's exposure to wildfire risk. The program is called Wildfire Prepared Home, and it focuses on the most effective ways to build resilience in the face of wildfires. Homeowners who take these steps will be able to show that their property is more resistant to wildfires than unmitigated or partially mitigated properties. Currently, the program is available only in California, but the measures would protect homes in any area. Details may be found here: Wildfire Prepared Home Designation.

Dust Storms

The dry ground makes dust storms and haboobs a very real hazard. "Haboob" is an Arabic name for dust storm and is often the result of a collapsing thunderstorm pushing air over dry areas and picking up dust and carrying it aloft. This is not a light amount of dust. Visibility is blocked, aircraft are grounded, and driving is impacted. Haboobs tend to be larger and more serious than regular dust storms. They can generate winds up to seventy miles per hour and last for three hours. During a haboob, visibility can drop to zero in less than a minute, seriously impacting traffic and causing accidents, some of which may be a chain reaction and involve numerous motorists. Haboobs also generate friction among the dust particles, which can lead to the buildup of electrical charges that can create lightning or discharge along power lines and transformers, causing loss of power and fires.

Storms originating in Mexico have been known to travel as far as the Great Plains and southern Canada. Storms often occur in Arizona, New Mexico, and Texas. Storms can be as large as fifty miles wide and 10,000 feet high. Damages include typical damage from wind and sand. Wind damage is straightforward enough, however sand damage is another matter.

The standard homeowners form provides coverage under debris removal for the removal of ash, dust, or particles from a volcanic eruption that causes direct loss to a building or property in a building; nothing is said about damage from dust or sand not caused by a volcano. Sand blowing at sixty miles per hour can certainly cause damage to siding and other property and contaminate any water in pools or hot tubs. While damage to personal property includes damage caused by windstorm or hail, damage to property inside a building caused by sand or dust is not covered unless the direct force of wind causes an opening in a roof or wall and the dust or sand enters through that opening. Since these storms can arise out of the blue, it is possible for the insured to leave his windows open and come home to a house full of dust and damaged property and have no coverage for any of it.

Another homeowners issue is that of matching; depending on how the winds blow, only part of the dwelling's siding could be damaged, bringing up the issue as to whether all the siding must be replaced to restore the insured to his pre-loss conditions or if only the damaged siding must be replaced, even if it does not quite match. It is a difficult issue as courts fall on both sides; however, if the insured had matching siding before, logic dictates that he should end up with matching siding again after a loss. See Matching Statutes by State for details on statutes and cases.

The Salton Sea, the largest lake in California, is drying out and it could become catastrophic. The material from a dried lake bed is lighter and flies farther than ordinary soil, creating the potential for dust to be blown to Los Angeles, creating health problems for 650,000 people. Aside from aggravating asthma and other common breathing problems, Valley fever is a risk as well. Valley fever is a fungal infection with flu-like symptoms caused by organisms found in the soil that can be stirred into the air by anything that disturbs the soil, such as dust storms. It can cause more serious effects and death in small numbers of people. Between 1998 and 2011, cases went from 2,000 to over 24,000, in large part due to the growing drought.

Current estimates are that the 350 square mile lake will shrink to 100 square miles by 2030, the salinity will triple over fifteen years, and the fish will disappear in seven years. A ten-year management program has been developed in order to counter the declining water level and mitigate air quality issues.

This raises the potential for workers compensation claims for anyone who works outside, such as landscapers, road crews, construction workers, and amusement park staff. The Mayo Clinic recommends the wearing of masks, which employers should provide in order to avoid infections among outside workers and possible claims.

Floods

While it may seem bizarre to talk about floods in an article about droughts, it is entirely possible. With the ground parched, water is apt to run off and flood instead of soaking into the ground. A normal thunderstorm or amount of rain can lead to severe flooding on top of a drought. It is even worse when a large amount of rain falls leading to severe flooding. Flood is never covered by standard property policies, and flood policies are needed. Mudslides and other earth movement is possible too and likewise is not covered.

Water damage to vehicles is another issue. A parked vehicle that is submerged by rising water is an other than collision claim, while the people who drive into standing or flowing water is a collision claim. It is a matter of the insured driving into, or colliding with the water, versus the water rising up around the vehicle, similar to the difference between driving into a tree and having a tree limb fall on the vehicle.

Crop Damage

Crops are some of the hardest hit areas where drought is concerned. The 2014 drought in California cost $1.5 billion, $1 billion of which was revenue loss alone. Five percent, or 428,000 acres, of irrigated cropland was out of production. Rain helps when it comes, but with crops, the damage is not immediately reversible as crops are growing plants, and rain can be too little too late in order for the crop to rebound. Crop insurance is its own specialty and insured through a federal program working with various carriers. See Federal Crop Insurance,  and USDA.

Summary

When insurance catastrophes are discussed, most people think first of hurricanes, floods, and tornadoes. Drought does not often make the list, although there are numerous insurance issues. From losses of potable water to wildfires, dust storms, floods, and crop damage, droughts have serious implications for many areas of insurance.

Related articles you may find interesting:

Droughts and Wildfires

IBHS Wildfire Prepared Home Designation Overview

The Aftermath of Wildfires

The Truth about 100-Year Floods