Storm surges cause coastal inundation due to setup of the water surface resulting from atmospheric pressure, surface winds and breaking waves. Here we show that during Typhoon Haiyan, the setup generated by breaking waves near the fringing-reef-protected town of Hernani, the Philippines, oscillated with the incidence of large and small wave groups, and steepened into a tsunami-like wave that caused extensive damage and casualties. Though fringing reefs usually protect coastal communities from moderate storms, they can exacerbate flooding during strong events with energetic waves. Typical for reef-type bathymetries, a very short wave-breaking zone over the steep reef face facilitates the freeing of infragravity-period fluctuations (surf beat) with little energy loss. Since coastal flood planning relies on phase-averaged wave modelling, infragravity surges are not being accounted for. This highlights the necessity for a policy change and the adoption of phase-resolving wave models for hazard assessment in regions with fringing reefs.