It sounded like artillery, an infiltration of a quiet suburban community in the dead of night, as Kevin Pelley stood in the dark in what was left of his yard on a bank of the Puyallup River. A combat Army veteran who served in Kuwait and Iraq, Kevin watched the storm for hours. An atmospheric river was filling the actual river, causing a flow of over 16,000 cubic feet per second, or 50 times the prior month’s average. Water washed away much of his backyard. When a large piece of soil cleaved off into the river, it fell with the force and noise of gunfire. By the time day broke in his town 35 miles south of Seattle, the foundation of the Pelley home was teetering over the bank of a newly formed cliff. The river that used to be about 100 feet behind their house was now under it. A code enforcement officer from Pierce County placed a yellow “Restricted Use” tag: the property was no longer safe to enter, except for analysis by engineers.

“We had a fire pit out basically where the river is now,” Pelley says, surveying the land where his house used to stand. “So many things I can picture in my mind that should be here, that aren’t anymore. That willow tree was my…that was the hardest loss,” he says.

This story is part of Bloomberg Green’s investigation into how climate change is making parts of the planet uninsurable, leaving millions of people without a safety net. Governments and companies aren’t prepared.

The Pelley family — Kevin, Shauna, two cats, two dogs, eight ducks — had only lived in the house for about five weeks when the flood struck in November 2022. Their real-estate transaction, like hundreds of thousands completed in the US each year, was designed to redistribute the risk of owning a valuable, highly leveraged asset subject to the whims of fires, floods and other destructive events. The mortgage lender took no issue with the home’s proximity to the water. Closing the deal required a method for moving that weather danger away from the family and its lender. And that meant an insurer. USAA wrote the Pelley’s home insurance plan. The family had even bought flood insurance via the federal government’s program, despite not being in a flood zone. The family did not receive payment from either one. The flood policy didn’t become active until after the river rose. Regardless of when the policy took effect, “USAA would have denied and FEMA upheld the denial because water didn’t enter the property or damage the foundation,” Kevin says.

After sign-offs from the underwriter, appraiser, loan officer, insurance agent, engineer and realtor, the Pelleys found themselves saddled with a property that was now unlivable and a mortgage that was due. Even if the family was able to get a settlement from the flood policy, it would have been less than half of what they owed their lender, leaving them with a devastating loss Kevin and Shauna Pelley on the foundation of their dream home in Graham, Washington, in February. The family was impacted by a 2022 flood and then another in 2023. Video: Grant Hindsley for Bloomberg Green In December 2023, Kevin says an official from Pierce County called: another flood was coming. After a century of minimal flooding, this was the river’s second severe episode in just over a year. County officials said that if the house wasn’t razed, they’d be responsible for any damages and pollution that came from the structure falling in the water; that bill, the family recalls, could rise to seven figures. “Pierce County worked with the property owners to discuss options to remove the home,” Christina Rohila, a public information specialist with the county’s planning and public works department, says in a statement. The family agreed, and the house was demolished. The Pelleys say
their mortgage company later determined they behaved responsibly.

What was their home is now a cement slab, with bits of granite and linoleum flooring sticking out. The county sent a $38,000 bill, which incurs interest monthly. The Pelleys owed more than half a million dollars for a home that no longer existed on land that was unbuildable. Insurance, the Pelleys say, still refused to pay. Water didn’t come into the house into this second event, either, as it had been erased.

“We shed a lot of tears over this,” Shauna Pelley says. “Absolute climate change. And bad luck. Ithink it’s a little bit of both.” Source: Shauna Pelley

A spokesperson for USAA said the company was unable to comment specifically about the Pelleys’ case, citing a privacy policy. “In general terms, in order to have a flood policy active, you have to have it for at least 30 days,” the spokesperson said. “A flood policy is required to be in effect for 30 days prior to being active.” FEMA, which administers the National Flood Insurance Program, declined to comment on the matter, citing privacy concerns. In an appeal denial seen by Bloomberg Green, FEMA found that “while there may have been a flood in the area and the river was above flood stage, the policyholder has not presented any evidence to prove the building was damaged due to a direct physical loss by or from flood.”

Most mortgages in the U.S. are backed by the federal  government, including this loan, which was backed by the Department of Veteran Affairs. In a statement speaking generally about its lending program , a spokesperson for the department says the agency encourages “servicers of guaranteed loans in disaster areas to extend forbearance to borrowers in distress.” The agency says it has started collecting and analyzing data to understand the impact of climate risk on its home loan program, but that the analysis is still ongoing and the results are not yet available to the public. The agency’s loan technicians aim to help borrowers who are working with banks and insurers, but the agency “does not have the authority to force specific actions to be taken by either entity,” it says…