State Quake Insurance Survives Repeal Attempt : Legislature: Both sides admit that the program is seriously flawed. But proponents argue that it’s better than nothing.

The state Senate refused Thursday to abolish a new program providing earthquake insurance for California homeowners.

The repeal legislation, supported both by Gov. Pete Wilson and Insurance Commissioner John Garamendi--but for different reasons--would have refunded premiums of up to $60 a year paid into the program by homeowners so far.

Although the repeal failed on a 23-13 vote, the issue may be brought before the Legislature again.

The 5-month-old program is the nation’s first such earthquake compensation system for homeowners, but both proponents and opponents of repeal say it is seriously flawed.

Proponents of eliminating the program warn that it is running so short of funds that it could not cover damages even in a moderate earthquake, not to mention the kind of massive quake predicted to hit California, perhaps within this decade.

Those in favor of the insurance program concede that the program’s lack of funds is a serious flaw.

However, they cite two destructive quakes last month in rural areas of the state and cautioned against abolishing an admittedly inadequate program without something to take its place.

The program is financed by a surcharge on existing homeowner policies, ranging from $12 to $60 a year, and is expected to raise $350 million a year in premiums. After a homeowner pays a $1,000 deductible on a house valued up to $200,000, the program is supposed to provide compensation for up to $15,000 in damages.

In the wake of the massive Loma Prieta quake, the Legislature and then-Gov. George Deukmejian enacted the program as a way to fill the gap caused by the reluctance of insurance companies to sell earthquake coverage with a deductible less than 10%. This left the first $15,000 uncovered.

“This program can be fixed,” insisted Sen. Frank Hill (R-Whittier), co-author of the legislation that established the earthquake protection plan in the wake of the devastating 1989 Loma Prieta earthquake in the Bay Area.

The vote that sent the repeal bill to defeat crossed the usual party and urban versus rural alignments as members of the Senate tried to assess how their actions would be interpreted by constituents in this election year.

Sen. Barry Keene (D-Ukiah), whose North Coast district includes communities struck by the Petrolia temblors April 25, asserted that he now favors eliminating the program because it gives homeowners false expectations of being fully covered in the event of severe earthquake damage.

Sen. Art Torres (D-Los Angeles), chairman of the Senate Insurance Committee, told the Senate that the insurance program, which started collecting premium surcharges Jan. 1 after a six-month delay, is so short of funds that it cannot cover damages of the Petrolia and Desert Hot Springs earthquakes of last month.