Insurance companies refused to pay a dime to Fiona's victims in N.L., but there's a solution on the horizon

Peggy Savery plays cards with her husband Lloyd at her new table in a sun-drenched kitchen. The family is still settling into their new home in Port aux Basques, bought and furnished by a hodgepodge of donations and disaster relief funding.

Their old house, the one destroyed by a storm surge during post-tropical storm Fiona, was covered, she says, estimating the family paid their insurance company about $60,000 to protect their most valuable asset.

But when disaster struck last September, all of the Saverys' claims were denied; damage from seawater wasn't included in their premiums.

"They didn't give us a dime," she said. 

The Saverys are among 102 households in Port aux Basques and surrounding communities that were destroyed by Fiona whose insurance companies refused to pay out for damages from the storm.

Most were left homeless, with nowhere to turn and forced to depend on government aid to rebuild their homes or buy again. The Newfoundland and Labrador government paid out $41 million to Fiona's victims after a lengthy application and assessment process to fill the void left by insurers.

Denise Pike Anderson was forced to downsize and move to nearby Cape Ray.

Had her insurance paid out, she would've been able to rebuild, she said. Instead, her company told her she needed special surge protection — something almost no insurers currently offer.

"The insurance [companies] should be grateful to the government," she said. "I really believe that we need stricter laws."

About 1.5 million Canadians live in a flood plain or low-lying coastal community, according to the Insurance Bureau of Canada.

With increasing risk from climate change, a collection of insurance companies and the federal government are hammering out a deal to offer flood insurance to homeowners in those areas, says Craig Stewart, a vice-president with the bureau.

"Insurance is designed for accidents, and when people live in flood plains or in low-lying coastal communities … we know they're going to flood at some point, and it's no longer an accident," Stewart told CBC News. "That's why insurance isn't a good fit, and why we've been pursuing another solution for those people."

The federal government will underwrite that insurance, with capped premiums available for people in at-risk areas, Stewart said.

"Right now we essentially have two solutions: we have government-backed disaster assistance, which is essentially free insurance paid for by the taxpayer, and then you've got an insurance market which won't cover those at high risk," he said. "Neither is optimal."