Senate OKs Bill to Kill Quake Plan : Insurance: Governor, commissioner support repeal of state-backed program, calling it costly and underfunded.

The Senate on Friday approved legislation supported by Gov. Pete Wilson and Insurance Commissioner John Garamendi to abolish the state’s troubled earthquake insurance program for homeowners.

Twice during the past three months, a coalition of rural and urban senators whose districts had been hit by earthquakes was able to narrowly beat back attempts to repeal the 2-year-old venture.

But opponents of the earthquake insurance system regrouped, bringing an amended version of the bill by Assemblyman Phillip Isenberg (D-Sacramento) back to the Senate, where it was approved on a 24-11 vote Friday.

The bill returns to the Assembly, where a version has already been approved. The homeowner-financed disaster preparedness program would go out of business on Jan. 1, 1993.

In the wake of the devastating 1989 Loma Prieta earthquake in the Bay Area, the Legislature swiftly enacted the program as a means of providing up to $15,000 to help insured homeowners pay the large deductibles carried on their earthquake policies sold by private insurers.

But the program is woefully underfunded, critics argued, and gives Californians the false promise that their claims will be covered by the state. Homeowners pay from $12 to $60 a year in surcharges to finance the coverage.

Critics of the insurance plan also warned that if the Big One strikes California, the financially strapped state general fund would be held liable for billions of dollars in claims when the insurance fund is broke.

Although Wilson and Garamendi are locked in a nasty fight over Proposition 103 automobile insurance rebates, both supported abolition of the earthquake insurance venture.

“The earthquake fund has no reserves at this time,” Sen. Art Torres (D-Los Angeles) told the Senate. “This means that if an earthquake occurred tomorrow or a moment from now, there would be no assets to make payments.”

Sen. Barry Keene (D-Ukiah), whose North Coast district includes Humboldt County, which was damaged by earthquakes April 25 and 26, said that in creating the program the state “overpromised” and “overcommitted” itself to something it cannot deliver.

“We are setting state government up for a very large fall because there won’t be nearly the money needed to pay for any major earthquake,” he told the Senate.

But Sen. Frank Hill (R-Whittier), who helped create the program two years ago, said that although the undertaking is flawed, it can be repaired. It is better than no program, he said.

“We cannot make earthquakes go away. . . . The question is: Should we start planning for a calamity that we know is going to come?” Hill asked. “Once we abolish this, we will never have a disaster program.”

He warned that it would cost $50 million to shut the program down, rebate insurance policy surcharges to homeowners and finish making payouts for damages already incurred. “Are we going to create a $50-million hole in the state budget because we are going to give everybody their money back?”

Sen. Cecil Green (D-Norwalk), who fought to retain the insurance protection, said officials should be given more time to work out problems in the program.