Riot Insurance Cancellations Spark Anger

Before Leola Speed opened a hat shop in South Los Angeles two years ago, many area residents had to travel to the Westside and other parts of the city to buy hats for church.

Although Leola’s Hat Fashion and Accessories is only open at night and on Saturdays because Speed works full time as a clerk for Los Angeles County, she said the business had been breaking even.

Then came the news that Speed’s shop is one of about 1,200 South Los Angeles businesses whose riot insurance is being canceled by Crusader Insurance Co.

“I could do without a telephone, but I couldn’t do without insurance,” Speed said. “Insurance is major. It is the next important thing to rent.”

Speed’s bare-bones Crusader policy covers fire and riot damage and costs about $60 a month. The 53-year-old businesswoman is shopping for another insurance company, but if her policy goes up even $10 or $20 a month, she said, she will have to close the Florence Avenue shop and work out of her home.

Crusader, a primary insurer of small businesses in South Los Angeles, is dropping riot coverage for customers in the areas hardest hit by last year’s violence. The Woodland Hills-based company paid out $21 million in riot-related claims last year, and Crusader officials say future civil unrest could bankrupt the company. Crusader’s decision comes at a time when businesses, especially small businesses, are being touted as a key for economic renewal.

County Supervisor Yvonne Brathwaite Burke said she fears that difficulty in obtaining insurance could spell the end for some entrepreneurs already struggling against crime problems and the weak economy.

“The retaining and development of small business is critical to our efforts to rebuild Los Angeles,” said Burke, who on Tuesday called for a county inquiry into Crusader’s action. “Los Angeles County, already hit hard by the recession, desperately needs the jobs (small businesses) provide.”

Another entrepreneur affected by Crusader’s move is Earl Ivie, who has owned and operated Jolly Jug Liquors in South Los Angeles since 1971.

The store, which sells liquor and groceries, is a neighborhood hangout in an area where there are few such businesses. Ivie, a tall, easy-going man, knows many customers by name and allows some of them to buy goods on credit.

The Imperial Highway store was not damaged by rioters, but a few months later the 62-year-old Ivie decided to sell the business and retire. Ivie is angry that he may have to lower his asking price because the new owner could have trouble getting insurance.

“I’m sick and tired of paying for the beating Rodney King got,” Ivie said. “He didn’t deserve it, and we don’t deserve to pay for it.

Ivie said his Crusader policy cost $3,700 a year, but in shopping around for a new insurance company he has found that a replacement policy is going to cost about $5,000 a year.

For Delcomber Communications, being canceled by Crusader was another blow for a store already struggling to recover from $100,000 in riot losses and the shooting death of co-owner Raul Delcomber during a failed robbery.

Delcomber Communications’ riot coverage expires April 11, and company President Bobby Graham said he has found a replacement policy but would not disclose the price. The store, which sells beepers and cellular telephone equipment, has operated since 1985 at Manchester and Normandie avenues. Graham said the store has 6,000 customers, about 60% of whom live in South-Central.

Graham regards the insurance situation as understandable given crime in the area that has led him to purchase bulletproof windows and security cameras and hire security guards.

“It hurts small businesses,” Graham said of the difficulty in obtaining insurance. “But you have to survive these things.”

Graham said is he determined to keep the business open in honor of Delcomber.

“Especially with him losing his life, I can’t see myself letting go,” he said. “That would mean his death was for nothing.”

Many business people and insurance brokers have praised Crusader for aggressively insuring small business in South Los Angeles. However, they also criticize insurance companies they believe are restricting the sale of policies out of fear that there will be violence associated with the Rodney G. King civil rights trial.

George Bivins, an independent insurance broker who is a member of the Black Business Assn. Insurance Committee, said many insurance companies are not offering quotes on policies to central city businesses until after the trial.

“They’ll verbally tell you that, but they will not put it in writing,” said Bivins, who has been an insurance broker in the area for 23 years. “I’m sitting here with a lot of business that I’m not able to write until this trial is over.”

Farmers Insurance, the largest insurer of small businesses in South Los Angeles, is one of the companies that Bivins believes is not selling policies.

Farmers spokeswoman Lorraine Enriquez said the company has not banned the sale of insurance policies in South Los Angeles because of the King trial. However, she said that Farmers can reject business owners if the company’s underwriting department determines that the policy would pose too great a risk.

Enriquez declined to say what the company considers an unacceptable risk in South Los Angeles.

Ivie said Crusader’s action, along with price increases throughout the insurance industry, are signs that small businesses in South Los Angeles are not valued for services they provide.

“I was really frustrated when I got the letter” about riot coverage being dropped, Ivie said. “I haven’t had any claims. I think it is just plain blatant redlining in the truest sense of the word. They are targeting people in this area.”