Farmers Pays $100,000 Fine to Settle Quake Coverage Charges

Farmers Insurance Group has paid a $100,000 fine to settle 8-month-old charges that it illegally failed to offer earthquake coverage to some people, the California Insurance Department announced Wednesday.

The settlement follows an investigation that began after a consumer complained to the department that Farmers--the state’s third-largest homeowners insurer--had failed to offer her quake insurance after the 1989 Loma Prieta earthquake.

After investigating, the department alleged last June that “Farmers had failed to make accurate and complete earthquake insurance offers in 150 of 200 files examined.”

Farmers spokesman John Millen called the violations “merely technical infractions” of the state law that says insurers may not sell a homeowners policy without also offering earthquake coverage.

Farmers agreed to the settlement more than a month ago, Millen said, adding, “The timing of this release--following a major earthquake--I find somewhat curious.”

Millen said all customers signed forms indicating either acceptance or rejection of earthquake coverage, but he acknowledged that the process violated the law because the paperwork was not complete.

The department directed Farmers to mail a special quake insurance offering to everyone who became a new homeowners policyholder between Jan. 1, 1992, and April 21, 1993.

The department also said it will conduct “a full examination” of Farmers next month “to verify ongoing compliance with the law.” Farmers has about 13.5% of California’s homeowners insurance market.