Post-Quake Insurance Cancellations Probed : Consumers: State is checking whether 20th Century illegally terminated homeowner policies. Some customers have been unable to get new coverage.

State insurance officials are investigating whether earthquake-battered 20th Century Insurance Co. is illegally canceling homeowners policies, leaving some customers unable to obtain replacement insurance.

Insurance Commissioner John Garamendi said Wednesday that Woodland Hills-based 20th Century has canceled an unknown number of its 240,000 homeowner policies, some only days after agreeing last month to renew them for two years.

That agreement sent shock waves through the California insurance market, causing many other companies to limit the number of new homeowner policies they issue--or stop selling them altogether.

That ripple effect is leaving homeowners whose 20th Century policies are being canceled stranded.

“We’re very much aware that the insurance industry in many different ways is attempting to reduce its quake exposure,” Garamendi said.

“Some of those mechanisms are legal, others are not,” he said. “The ones that are not we will stop.”

The investigation is headed by Nettie Hoge, the Insurance Department’s chief of consumer services.

“We’re going to very carefully scrutinize whether they (20th Century) are circumventing either the order or the intent of the order,” said Hoge, a lawyer who previously worked for Consumers Union.

Hoge said the Insurance Department has received about 10 formal complaints from 20th Century customers who have lost their homeowner coverage since the Jan. 17 quake.

But others believe the problem is more widespread.

“About 10% of our 350 members have had their homeowner policies canceled and several others have been told they might be carried to their next renewal date, but then not renewed,” said George Kehrer, executive director of CARe, a Northridge-based consumer group formed after the quake.

Based on what has happened to his members, Kehrer said, there may be several thousand more 20th Century policies being canceled or not renewed.

“They’re playing games with people,” he said.

A spokesman for 20th Century said the company has not kept tabs on the number of homeowner policies it has canceled since the quake.

The spokesman said the company’s reasons for canceling policies are confidential between the insurer and its policyholders. The state’s ninth-largest insurer, 20th Century announced in June that it would withdraw from the California homeowner market, citing $600 million in quake-related claims that wiped out two-thirds of its cushion against future losses.

Meanwhile, about 200 outraged 20th Century policyholders met Wednesday night at the First Presbyterian Church in Granada Hills to demand action.

“We’re tired of being taken advantage of,” said Michael Ramirez-Mares of Granada Hills, president of 20th Century Policyholders Quake Action Group.

The state’s order calls for the company to phase out its quake policies over the next year.

To minimize the impact of the withdrawal on 20th Century customers with existing homeowner coverage--including 90,000 with quake protection--Garamendi ordered the company to offer two more annual renewals.

But less than a week after agreeing to comply with the order, 20th Century launched a drive to cancel homeowner policies for a variety of reasons.

For instance, some customers’ policies were canceled because they had quake damage.

One cancellation notice obtained by The Times reads: “Your residence sustained damage in the recent earthquake(s) and, therefore, does not meet our underwriting guidelines. The earthquake damage has caused physical changes in the property insured against, which has resulted in the property becoming uninsurable.”

That notice is dated June 14, only five days after the Insurance Department insisted that 20th Century continue protecting current customers.

At the time, Garamendi said the company’s existing homeowner policyholders “should have an average 2 1/2 years to get a new policy.”

Other customers were told their homeowner coverage would be canceled because they had too many claims last year.

Marcella Contreras of Mission Hills has been without homeowner insurance since her 20th Century coverage ceased July 1.

Contreras said she had a homeowner policy with the company for eight years before her first claim, for $710 of wind damage, last November. Since then, 20th Century has paid or agreed to pay $30,000 for quake damage and $99,000 to a friend of Contreras who was bitten by the family’s nervous, 110-pound Rottweiler the day after the quake.

“What do we do? We can’t get anybody to cover us because we have quake damage,” she said. “In order to for us to get repairs going, we have to get the money from 20th Century.”

Contreras said she has only received $5,000 from the company.