When Hurricane Harvey headed for Houston, Texans braced
for an expected large amount of rain and heavy winds. What they did not expect
was the catastrophic flooding that took place in the city.
Houston is a city developed with water in mind. It is about
45 miles from the coast and has a number of bayous, marshes, creeks, and other
bodies of water to control. And it had flood control measures in place. This is
especially true because in 2001, Houston was heavily flooded during Tropical
Storm Alison. While the city has also endured other flooding events, its flood
control measures were generally expected to work. But as the Texas Tribune recently reported, Houston’s past and current efforts do not go far
enough to address the issue.
Many Houstonians affected by Harvey did not have flood
insurance because their homes or businesses were not located in designated
“flood zones.” As the insurance industry is learning, flood maps are
increasingly irrelevant and do not accurately reflect the flood risk faced by Houstonians.
The susceptibility of the Houston area to flooding is due to a number of
factors, including infrastructure issues, development in 500-year floodplains, and
paving over ground that previously worked to absorb rainwater (thereby
increasing runoff and overwhelming reservoirs). According to data concerning
500-year flood plains, there is supposed to be only a 0.2% chance for flooding
each year. But a CoreLogic report issued in 2017 noted that 52 percent of residential and commercial
properties in the Houston metro are at “High” or “Moderate” risk of flooding,
but are not in a Special Flood Hazard Area (SFHA) as identified by the Federal
Emergency Management Agency (FEMA). Because these homes were not in floodplain
zones, they did not carry flood insurance when Harvey hit.
To address the floodplain issues, Houston’s city council
recently passed a measure to try to minimize future damage to homes and
businesses – namely, any new construction or renovations expanding homes by 35%
or more will have to be elevated two feet above the floodplain. This affects
properties in both the 100-year and 500-year flood plains. But this response is
arguably a band-aid. It does not address the grandfathered properties that are
not required to be raised, or the issue of greater flooding risk in areas
previously considered “safe” from flooding.
There has also been discussion of building a third
reservoir to help to address the increased runoff caused by development on flood-absorbent
grasslands. The two current reservoirs – Addicks and Barker – are about
70-years old and may be at risk of failure. The shortcomings of the current
reservoir system were exposed during Harvey when officials were unable to
sufficiently contain the amount of water that had built up during the storm. In
response, the officials released water, which in turn flooded neighborhoods
previously considered protected from flood conditions.
In the insurance context, if floodplain maps are not a
good measure of risk, how can insurers and insureds effectively evaluate the
risk of flood loss? The ability to assess accurately the actual risk of flood –
particularly in areas that were previously identified as 500-year or even
1,000-year floodplains - is critical to the underwriting process, including insurers’
determination of appropriate limitations of liability and deductibles. Without
an accurate tool to assess risk, an insurer may inadvertently face a loss it
never anticipated or expected to cover.
Fortunately, there are many tools in addition to
floodplain maps that may provide relevant information and assist in assessing
risk. The most obvious one, of course, is prior flood losses. Insurers can look
to prior losses in the area, including the number and extent of losses to
evaluate risk. Also, underwriters can analyze the area’s flood protection
measures. This includes evaluating the effectiveness of water run-off measures
and local reservoirs. And the condition of the reservoirs themselves should be
considered.
Ultimately, under Texas law, flood is flood whether the
property is located in a floodplain or not. More particularly, Texas courts
recognize that surface water, i.e.
water runoff, is considered to be “flood,” which is typically excluded or
limited under most homeowners’ policies. Specifically, Texas courts define “surface
water” and “floodwaters” as:
Surface water is generally defined as that which is derived from falling rain . . . and is diffused over the surface of the ground . . . Floodwaters are those which, generally speaking, have overflowed a river, stream or natural water course and have formed a continuous body with the water flowing in the ordinary channel . . . Such waters are not divested of their character as surface waters by reason of their flowing from the land on which they first make their appearance onto lower land in obedience to the law of gravity.
Valley Forge Ins.
Co. v. Hicks Thomas & Lilienstern, L.L.P., 174 S.W.3d 254, 258 (Tex.
App.—Houston [1st Dist.] 2004, pet. denied). Texas courts recognize that the
primary characteristic of surface water is that it does not follow a defined
course or channel and does not gather into or form a natural body of water. Texas Woman’s Univ. v. The Methodist Hosp.,
221 S.W.3d 267, 278 (Tex. App.—Houston [1st Dist.] 2006, no pet.).
Because surface water is “water which is diffused over the
ground from falling rains or melting snows, and it continues to be such until
it reaches some bed or channel in which water is accustomed to flow,” Dietrich v. Goodman, 123 S.W.3d 413, 417
(Tex.App.-Houston [14th Dist.] 2003, no pet.), significant rainfalls that occur
in areas with issues related to water run-off create greater risks for flood
damage.
As noted, courts have distinguished “surface water” from
“flood water,” which has been recognized as “those [waters] which, generally
speaking, have overflowed a river, stream or natural water course and have
formed a continuous body with the water flowing in the ordinary channel.” Valley Forge, 174 S.W.3d at 258; see also Raburn v. KJI Bluechip Investments,
50 S.W.3d 699, 704 (Tex. App. 2001) (“Flood waters are waters above the regular
flow of a stream”); Dalon v. City of DeSoto,
852 S.W.2d 530, 538 (Tex. App. 1992), writ denied (Apr. 21, 1993) (“If the
floodwater forms a continuous body with the water flowing in the ordinary
channel, or if it temporarily overflows presently to return, as by recession of
the waters, it is to be regarded as still a part of the stream.”) (quoting 78
Am.Jur.2d Water § 225 at 670 (1975)). But most policies define “flood” to
include surface water. Therefore, whether property is damaged by water from an
overflowing body of water, such as a creek, river, lake, or ocean, or whether it
is damaged by surface water, flood exclusions or limitations will typically
apply.
Because floodplain maps have recently been demonstrated
to be somewhat unreliable, insurers should not rely exclusively upon these
designations in underwriting risks. Instead, insurers should reassess the risk
for flooding in areas known to have heavy rainfall records, heavy development,
aged infrastructure systems, and unexpected flood losses. Moreover,
governmental efforts to address flooding risks, such as Houston’s new
requirement to raise homes, will affect the replacement cost value of
properties, including, potentially, code upgrade coverage. Regardless, there
should be an expectation that flooding will happen again in Houston.
Posted by Shannon O'Malley