EARTHQUAKE: THE LONG ROAD BACK : Revival of State Quake Insurance Proposed

Legislation calling for revival of a state-run earthquake insurance program for homeowners was introduced Monday in the Assembly.

“We are learning the hard way that repealing the old program was a mistake,” said Assemblyman Rusty Areias (D-San Jose), the bill’s author.

The earthquake insurance program was repealed in 1993 after critics claimed that it was bordering on insolvency. If the program had been in place when the Northridge quake hit, Areias said, it would have contained about $350 million, enough to provide 60,000 to 70,000 Los Angeles homeowners with checks for $5,000 or more each.

The new proposed prepaid recovery program would provide homeowners with up to $13,000, after a $2,000 deductible, to repair homes damaged by earthquakes, Areias said.

It would be a mandatory insurance program and cost the average homeowner $25 to $75 annually, the amount varying depending on seismic zones, the value of the property and the type of structure. Homeowners who failed to pay would face a secondary or non-foreclosable lien on their property. Mobil homes and condominiums would not be covered.

County tax collectors would collect the fees. The state Department of Housing and Community Affairs would administer the program.

“Earthquakes in California are inevitable,” Areias said, “and it is intelligent public policy to plan ahead for the disaster we know will occur.”

Critics of the previous program contended that California, despite its size, is not large enough to adequately fund such a repair program and that the state is misleading the public into a false sense of security over what the state can provide in the event of a major quake. The answer lies in a nationally based insurance program, the critics say.

A spokesman for the insurance industry said Monday it has no position on Areias’ bill, but prefers the national approach, which would cover all types of disasters, including damage by earthquakes, hurricanes, tornadoes and volcanoes.

Rep. Norman Mineta (D-San Jose) has introduced such a bill in Congress.

“We favor a national approach for two reasons,” said Tim Hart of the Assn. of California Insurance Companies. “First, there is not enough capacity in California to absorb the kind of losses that would be created by a catastrophic quake. Secondly, the federal government is obligated to pay its debts and can print money.”