A CITY IN CRISIS : Adjusters Fan Out as Insurers Brace for $1 Billion in Claims : Coverage: Fears arise that firms will not write policies in the worst-hit areas, making it harder than ever to do business.

Damage assessment was barely under way on Saturday as insurance companies began to dispatch adjusters across the greater Los Angeles area to gauge the extent of riot losses.

However, there were indications that insured losses in the rioting that started on Wednesday could approach $1 billion.

Among the major concerns are whether insurance companies will shun the worst-hit areas of the city, making it harder than ever to do business there.

At the very least, some parts of the city will see delays in obtaining coverage or in adding to existing coverage. Several large companies have notified their agents to stop writing policies until inspectors can be sure that the property being insured has not already been damaged.

There are also fears that many of the small businesses that suffered riot-related losses lack adequate coverage to rebuild.

“Under-coverage will be a major issue,” said Bill Rake, president of the Greenspan Co., a public adjusting company in Los Angeles that represents policyholders with insurance claims.

Insurance adjusters have been unable to do their jobs in many parts of the city because of continuing violence. Therefore, industry officials say it will take several more days before an estimate of the total damage is available.

Still, early signs indicate that the destruction of the past few days may rival that caused by the Watts riots of 1965 and may even be comparable to the damage from last fall’s Oakland hills fire.

One company alone, Los Angeles-based Farmers Insurance Group, estimated that its “several hundred expected claims” could reach or exceed $70 million.

Aim Insurance of Anaheim and Crusader Insurance of Woodland Hills, smaller firms that write many policies for video stores and grocery stores in the inner city, also were expected to rack up big losses, as was Philadelphia-based Reliance Insurance Co., which covers hundreds of Los Angeles liquor stores.

California Fair Plan, an industry pool covering homes and businesses that cannot find insurance elsewhere, had $2.2 billion worth of policies at risk in South Los Angeles, Compton and Inglewood. With the Fair Plan’s offices closed on Friday, the 20 or so claims that arrived before then were probably only the start of the deluge, spokesman Mike Harris said.

Fair Plan, an insurer of last resort established after the Watts riots, offers only “bare-bones” fire coverage for homes and businesses, Harris said. Customers insured exclusively by Fair Plan may find themselves unable to recover losses from looting, bodily injury liability or business interruption.

After last fall’s Oakland fire, which caused more than $1 billion worth of destruction, state Insurance Commissioner John Garamendi criticized the industry’s response as inadequate and slow.

“His treatment made everybody really aware,” said Carol Willis, a vice president at Aim Insurance Co. “The industry is determined to do the best conceivable job this time.”

Norman Maltz, a Northridge insurance broker who writes policies for liquor stores all over the Los Angeles area, said some poorly capitalized insurance companies based in the Caribbean and other offshore locations might be unable to cover losses from the rioting.

However, Elena Stern, spokeswoman for the state Department of Insurance, said state investigators have not encountered any widespread problems with such carriers in commercial coverage.

Harris, Fair Plan spokesman and a member of an anti-arson task force, said that arson by inner-city store owners would be particularly hard to detect in the wake of the rioting.

“Given the chaos, it would be very hard to prove,” he said.

Insurance Coverage

Policyholders, agents and the insurance industry are in a state of confusion as a result of the unrest in Los Angeles. Here is an update on the general situation facing insurance coverage in the greater Los Angeles area based on interviews with insurance industry sources:

Homeowners and businesses in parts of the city will face delays in obtaining new coverage or adding to existing coverage. In some instances, companies have told their agents to stop writing new policies until the properties to be covered are inspected. However, in other areas of the city--as well as the rest of Southern California--insurance activity was expected to continue uninterrupted.

Basic automobile insurance may not cover fire or other damage caused by rioters. However, comprehensive auto policies cover such damage.

Customers of the California Fair Plan may not be covered for losses from looting, business interruption or bodily injury liability unless they have additional policies on top of the Fair Plan’s fire coverage.

Basic homeowners’ insurance covers damage resulting from fire, smoke, explosion, vandalism or malicious mischief, riot, and civil commotion. Most homeowners’ policies also cover theft and bodily injury liability.

Renters’ insurance covers personal property losses due to fire, theft and riot, but a building owner’s policy does not normally cover such losses suffered by tenants.

Similarly, businesses that lease space are covered by their own tenants’ insurance policies, but not by their landlords’ policies.

HELP LINES

* Call your insurance agent or a toll-free hot line established by the state Department of Insurance: (800) 927-HELP. The hot line is staffed from 8 a.m. to 5 p.m. weekdays.

* Los Angeles City Hall also has established a toll-free telephone number for those who have suffered riot damage: (800) 870-1929.