20th Century Defends Cancellations : Insurance: The company president says homeowners’ coverage could be dropped in accordance with underwriting standards.
In response to a California Department of Insurance investigation of its practices since the Northridge quake, 20th Century Industries said Friday it is not violating the state’s June 9 order by canceling some of its homeowners’ policies ahead of schedule.
James O. Curley, president of the Woodland Hills-based insurer beset by quake losses and angry policyholders, defended the cancellations made before the end of the two-year grace period promised under the order.
Insurance Commissioner John Garamendi declined through a spokeswoman to comment on 20th Century’s statement.
Garamendi said earlier this week that the Insurance Department was investigating whether 20th Century was violating the department’s order--or at least the spirit of the order--by not renewing all of its existing homeowner policies for two years.
Curley said, “Although existing homeowner and condominium owner policies will be renewed for two years, 20th Century will continue to apply its usual underwriting standards.
“That process may result in the company canceling some homeowners policies midterm, as provided by the California Insurance Code due to reasons such as fraud, misrepresentation or non-payment of premiums,” he said.
The company also may not renew a policy, said Curley, “based upon careful evaluation of the risks and may consider factors such as claim frequency and substantial change in the insurable condition or use of the property.”
Since the January disaster, 20th Century has canceled some homeowners’ policies, saying quake damage made their homes no longer insurable. One cancellation notice obtained by The Times is dated June 14, five days after the company agreed not to leave its policyholders stranded.
“We would really like to know what the quid pro quo was in that agreement,” said Michael Ramirez-Mares, president of the 20th Century Policyholders Quake Action Group. “It’s not clear from the order why the commissioner agreed to it, or why he agreed without holding hearings to allow our neighbors to tell the commissioner face to face what the impact would be on us.”
The agreement was reached after 20th Century said claims from the Northridge quake had left the company’s cushion against future losses dangerously depleted. Since then, many other companies have limited the number of new homeowners policies they will issue in California--or have stopped selling them altogether.
Under its deal with the state, 20th Century is supposed to gradually get out of the quake insurance business during the next 12 months and out of homeowners’ insurance in three years.
That will leave the company with just its lucrative cut-rate auto insurance business, the main engine that has driven its growth and earnings for many years.
But 20th Century’s car insurance business could be vulnerable to a consumer boycott.
A high percentage of the company’s homeowner customers also have 20th Century auto insurance. At a meeting last week, more than 100 of those homeowners said they were thinking about canceling their car insurance because they believe 20th Century has treated them shabbily since the quake.
“They negotiated their extraction from the homeowners market in part because they saw their auto business was viable,” said Ramirez-Mares, a criminal defense lawyer forced out of his Granada Hills home by the quake.
“But if 20th Century wants to stay in our neighborhood and be our local carrier, they have to finish the business of taking care of our damaged homes,” he said.
The 20th Century policyholder group also intends to keep the pressure on state regulators, who have met several times with insurance industry executives and consumer advocates recently to seek possible solutions to the insurance crisis. Another meeting is scheduled next week.
The group wants Garamendi to guarantee replacement coverage--including earthquake protection--for 20th Century customers dropped by the company before they have settled their claims from the Northridge quake and made the repairs.
“I find it unconscionable that an insurance company that collected premiums over time from its customers would leave the insured in a condition where they are unable to obtain (replacement) insurance,” said Kathy Trapani, president of CARe, a Northridge-based consumer group formed to deal with quake-related insurance problems. It now has more than 2,000 people on its mailing list, most of them San Fernando Valley residents.
“There’s a moral obligation that needs to be fulfilled here,” Trapani said. “If 20th Century doesn’t have the finances to do it, someone needs to carry these people until they are insurable.”
