RIOT AFTERMATH: GETTING BACK TO BUSINESS : Strife Termed Costliest in U.S. History : Insurance: Industry officials say damage claims could reach as high as $1 billion.
Insurance officials said the Los Angeles riots will be the costliest civil disturbances in U.S. history in terms of insurance losses, which some said may approach $1 billion.
Adjusters were on the streets in riot-torn areas on Monday, in some cases writing checks on the spot to business owners. Adjusters were still having problems contacting customers on Monday; as a result, most insurers said it will be several days more before they knew the extent of their losses.
Representatives of Allstate, Farmer’s Insurance Group, Firemen’s Fund and State Farm, among the largest insurers serving the area, all vowed that there would be no pullback in coverage from riot-affected areas.
As to prospects for higher insurance rates, a spokeswoman for the state Department of Insurance said: “We don’t expect an onslaught of rate increase requests. There will be some insurance companies looking to jack up their rates in the aftermath of this catastrophe, and Commissioner (John) Garamendi will scrutinize such requests very, very carefully.”
Until now, the costliest civil disturbances on record were the Watts riots of 1965, with insured damage of $182.6 million in inflation-adjusted dollars, according to the Western Insurance Information Service.
“We passed that point Wednesday night about midnight,” said Leonard Gelfand, vice president of Farmers Insurance Group. He said a final figure of $1 billion is “not out of the question.” Uninsured losses would add to that damage total.
Gelfand criticized Mayor Tom Bradley for what he said was misinformed speculation that insurers would be “bogged down” by the volume of claims.
“We’re equipped to handle this,” Gelfand said. “This is what we do.”
At 1 p.m. Monday, a team of adjusters from Farmers, in bright yellow “Emergency Response Team” jackets, was walking the perimeter of a burned-out commercial building at Vermont and Leighton, a block from the Coliseum.
The rubble was ringed by a strip of yellow police tape, to which an entrepreneur had thoughtfully attached a flyer advertising his services in “emergency board-up” and rubbish removal.
The building, owned by Houshang Eshagian, had housed stores selling discount clothing and women’s handbags. Neighbors said it was looted before it was burned to the ground. The heat had been such that thick steel I-beams were twisted like licorice in the rubble.
A Farmers’ spokesman said the building was insured for $600,000, plus another $90,000 for its contents and $120,000 for business interruption. It will be months before the stores can be reopened.
When Eshagian arrived half an hour after the adjusters, he was given a check for $75,000, an advance against his business interruption claim.
Such scenes were repeated Monday across South Los Angeles.
As of Monday morning, Farmers had received about 200 claims, a spokesman said, adding that the final number was expected to be between 800 and 1,000 claims. Farmers, the largest California-based writer of commercial insurance, was sticking by an earlier estimate that its losses “conservatively” would reach $70 million.
At Allstate, which writes a relatively small amount of commercial coverage, 86 riot-related claims--46 for commercial buildings--had been lodged as of late Monday afternoon, said Dick Donegan, regional underwriting manager.
The claims added up to about $10.5 million, Donegan said, adding that that figure was much lower than what the final total will be, since it includes only structural damage and not such additional factors as business interruption losses and damage to contents.
Donegan said the best news he heard Monday was that Mayor Bradley would empower the task force headed by Peter V. Ueberroth to cut through bureaucratic red tape during the rebuilding process.
Since last fall’s huge Oakland fire, Donegan said, “we haven’t rebuilt many houses--not because the money isn’t there but because we can’t get permits. If the mayor is serious about this, we’re delighted.”
The rioting was not the only damage some insurers felt. The stocks of some insurance firms fell Monday, even as the markets staged a broad rally. For instance, the stock of Woodland Hills-based Unico American Corp. slumped $1.125, to $3.50 a share in over-the-counter trading.
Unico said it expects “very material” losses from a “substantial number” of riot-related claims at its Crusader Insurance Co. subsidiary. Unico said it was unable to gauge the extent of losses but expected many more claims. Crusader Insurance covers many small inner-city businesses, such as liquor, grocery and video stores.
Customers of the California Fair Plan, an industry-sponsored pool that offers insurance in high-risk areas, will be covered for losses caused by looting, a spokesman said Monday. He corrected his earlier statement that such losses were not included in the Fair Plan’s commercial packages.
Insured Losses From Civil Disorders No official estimate of insured losses is available yet for the recent civil disorders in Los Angeles. But it is expected to top the 1965 Watts riots in the city, the most costly previous U.S. civil disorder as measured by inflation-adjusted dollars. Here is a list of the most costly insured losses resulting from civil disorders:
Estimated insured losses* City Date (in millions) Los Angeles Aug. 11-17, 1965 $182.6 Detroit July 23, 1967 162.4 Miami May 17-19, 1980 103.5 New York July 13-14, 1977 90.1 Newark July 12, 1967 58.7 Baltimore April 6-9, 1968 52.6 Chicago April 4-11, 1968 48.8 Washington April 4-9, 1968 45.3 New York April 4-11, 1968 15.8 Pittsburgh April 4-11, 1968 7.5
* Inflation-adjusted dollars
Source: Western Insurance Information Institute
