Closing Watch
The house was insured. The ground wasn't.
A 2024 city survey found that none of the surveyed residents in the affected landslide area had insurance that covered landslide damage. The city is now seeking support for a separate insurance program modeled after the California Earthquake Authority or FAIR Plan. That program does not exist yet.
The coverage problem comes from the cause of the damage. Standard California homeowners policies generally exclude earth movement, including landslide, subsidence, erosion, and shifting soil. Flood insurance also generally excludes landslide damage.
That distinction matters during a transaction. A buyer may secure homeowners insurance, satisfy the lender, and close escrow without having coverage for a known land movement exposure. The policy is active. The house is insured. The landslide risk may still sit outside the contract.
For hillside and coastal properties, an insurance review and geotechnical due diligence answer different questions. Before contingencies are removed, the buyer and lender may need to review seller disclosures, geological reports, repair history, visible movement, utility interruptions, and any prior insurance claims. Insurance should not be treated as a substitute for that work.
There can be exceptions when a covered event, such as a fire, is determined to be the predominant cause of the land movement. The facts and policy language matter. But the larger lesson is simple: confirming that a policy can be issued does not confirm that every major risk affecting the property is covered.
A property can have an active insurance policy while still carrying a major uninsured exposure.
Deal Context
The age of a leak can change the claim.
In a recent published California appellate case, the court revived a homeowner's water damage claim because the insurer had not established how long the pipe had leaked before applying a continuous leakage exclusion. The damage matters, but so does evidence showing when it began.
Partner Language
Two sentences you can use
The house was insured. The ground wasn't.
A property can have an active insurance policy while still carrying a major uninsured exposure.
About the author
Jessie Navarro
Jessie Navarro is the agency principal at J. Navarro Insurance Agency Inc. in Redondo Beach, California. He works with property owners, real estate professionals, lenders, investors, and businesses on insurance questions that can affect transactions and long-term ownership.
About Jessie and the agency