Residents have begun returning to their Laguna Beach, Calif. homes, but those whose homes were destroyed or damaged by a landslide Wednesday will have to face rebuilding without collecting on their homeowners insurance.
The landslide struck the Bluebird Canyon area of Laguna Beach, destroying or badly damaging 18 homes. Almost all of those homes, according to Lehman Bros. analyst Jay Gelb, were valued at $1.5 million or more, but will not be paid for by insurers.
"These losses are devastating for the individuals involved but should result in immaterial insured damage because landslides are excluded from most homeowner's policies," Mr. Gelb said in a note to investors, classifying the landslides as a "neutral" event for insurers.
Landslide coverage must be purchased separately from a homeowners' policy, with Lloyd's being the main carrier of the coverage. However, landslide coverage is "extremely expensive," according to Mr. Gelb, and is generally only purchased by large corporations. "As a result, most homeowners go uninsured for this peril," he said.
In addition, many insurers have stopped writing coverage in the Laguna Beach area, which was also hit by a similar devastating landslide in 1978. Most residents were allowed to return to their homes Friday, although 48 homes remain off limits or accessible during only daytime hours.
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