INSURANCE CRUNCH : For Homeowners, Persistence Is Best Policy : Californians are finding it harder to insure homes since Northridge quake.

SPECIAL TO THE TIMES

Claudia and Flip Banando's 72-year-old Craftsman bungalow in Monrovia has been hit hard by earthquakes. In the past decade, quakes have twice destroyed their chimney, once sent a patio wall flying, knocked an attic beam askew and even nudged the house slightly off its foundation.

After the 1991 Sierra Madre quake, centered only a few miles away, caused $40,000 worth of damage to their house, Claudia Banando recalled how relieved they were that they had earthquake insurance.

But last year, when they were notified by their insurance carrier, 20th Century Insurance Co., that their policy would not be renewed, the Banandos had no idea that obtaining another homeowner's insurance policy, let alone earthquake coverage, would be a months-long ordeal.

Homeowners insurance--which used to be plentiful--is getting scarcer and scarcer in California. Before the 1994 Northridge earthquake, a consumer could shop around, compare prices and get the best homeowners coverage for the dollar. Earthquake coverage was readily available for an additional fee.

But since the Northridge quake, the California insurance market has been on shaky ground. Nine of the top 10 homeowners insurance carriers have left California or stopped writing new business here since the Northridge quake resulted in $10.4 billion in insurance claims.

The difficulty in getting homeowner's insurance has meant headaches--but not serious trouble, so far--for the state's real estate industry.

"If the real estate market was grinding to a halt, we'd hear about it right away," said Richard Wiebe, a deputy to Insurance Commissioner Charles Quackenbush. Although he does not believe it is a crisis, the newly elected commissioner is making the insurance problem one of his top priorities, Wiebe said.

The reason so many companies have put a moratorium on selling new homeowners insurance boils down to their reluctance to sell earthquake insurance. Insurance companies say that the peril of quakes--unpredictable and devastating as they can be--is simply no longer an insurable risk at current prices.

And since, by state law, companies that sell homeowners insurance must also offer earthquake coverage, the companies have chosen not to sell any more insurance at all.

For home buyers, who must almost always secure insurance before a lender will fund their mortgages, the search for an insurer has become a top priority--and a bigger expense--over the past year.

"I've experienced a great deal of difficulty placing insurance," said Phil Jones, the broker-owner of Prudential California Realty of Long Beach. "The outlets we work with take longer to approve insurance and the policies are more expensive."

Jones said he has talked to some homeowners who have decided not to report losses from burglaries or water damage for fear of losing their coverage. "They've been told by their carrier that one more claim would cause them to lose their policy. The likelihood of getting coverage in this market--especially with a cancellation on their records--is tough," he said.

Bernard Priceman, a realtor with the Jon Douglas Co. in Encino, said that securing homeowners insurance used to be a low priority, frequently left up to the last minute. Not any more.

"The minute an escrow opens, I begin to bombard my buyer with the request to find insurance and then to secure it," he said. "It's become something you have to be aware of. If you don't go into escrow with your eyes wide open, you won't be able to close your escrow on time. You'll be able to close, but you'll probably be delayed."

It took the Banandos several months to find an insurer last year, partially because they were not alerted to the insurance shortage and took their time looking for a new insurance agency.

"Our insurance payment always fell at a terrible time of the year, financially. We wanted to wait a month or two so the payment would come due at a better time of year for us," Claudia said. "Then, of course, we also waited until the last minute to look into it" because of simple procrastination, she said.

But when she did get out the telephone book and start calling insurance agencies, Claudia quickly found out that it was not going to be easy to find a new insurer.

"I must have made 10 phone calls and most of them would not even talk to me. They just said they weren't taking anyone new and then hung up. Only two or three of them even asked follow-up questions. The first one always was, 'When was your house built?' As soon as they heard me say '1923,' they did not want anything to do with us. They said they did not want any houses built before 1945."

Because she is a 30-year member of the Automobile Assn. of America, Claudia found she could get homeowners insurance with that agency. But they demanded to know details about her house that she was not aware of, including whether it had been rewired electrically, what kinds of plumbing renovation had been done and if there was a new roof on it.

Their requests sent her scurrying to Monrovia City Hall, peering through microfiche records of city permits to see what kind of work had been done on her home before she moved in a dozen years ago.

By the time she gathered as much information as she could and got back in touch with an agent, a new stumbling block was in place.

She was told the policy had changed. "They said I would have to have had my car insurance with them for five years in order to get homeowners insurance. That eliminated us. It seemed everyone kept adding conditions that eventually eliminated us," she said.

While finding insurance can be more time-consuming and securing it may be more expensive than in the past, most people in the realty industry say it is not impossible.

"At a broker's meeting recently we asked, 'Who's had difficulties getting policies?' A lot of hands went up," said Marcia Salkin, public policy manager for the California Assn. of Realtors. "But when we asked who had failed to have a transaction go through, not one hand went up."

The perception of the insurance problem--whether or not it is seen as posing a threat to the state's important real estate industry--makes a difference in how soon it will be resolved.

Without a bona fide "crisis" and resulting public pressure on the state Legislature, it seems unlikely that a solution will be reached soon. Currently, all parties are entrenched in their positions and seem unwilling to compromise.

The insurance industry is pushing for "de-linkage"--a repeal of the mid-1980s state law (which was backed, incidentally, by the insurance industry) that linked the sale of earthquake and homeowners insurance. Get rid of that law, the industry argues, and homeowners insurance will once again be readily available.

But realtors and consumer protection groups oppose de-linkage, countering that once the state law is repealed, earthquake insurance will become impossible to obtain.

Quackenbush, a Republican elected last fall with the help of $2.3 million in contributions from the insurance industry, favors de-linkage, Wiebe said, but not without a guarantee from the insurance industry that it would continue to offer some kind of earthquake coverage, at least for catastrophic events.

"Commissioner Quackenbush is working with some of the major carriers to try to get them back into the market," Wiebe said. Some of that negotiating includes allowing companies to charge more for their coverage, hoping rate increases will lure companies back into the market. "If rates have to go up, then rates have to go up," Wiebe said, adding that Quackenbush recently approved an increase for Allstate and has rate increase proposals from several other companies pending.

A long-term solution, most experts seem to agree, is passing state and federal legislation that addresses the problem of high-risk natural disasters. There has been some talk of establishing a statewide earthquake insurance pool, but so far no state proposals have been introduced.

But a federal solution--the Natural Disaster Protection Plan--has been working its way through Congress for nearly two years now. The plan proposes the establishment of a federal insurance pool that would spread the risk of all kinds of catastrophes (earthquakes, volcanic eruptions, hurricanes, tornadoes) nationwide and protect insurance companies from financial collapse in the event of a major disaster.

Quackenbush went to Washington to lobby on behalf of the plan the second week he was in office, Wiebe said, and it seems to be popular with nearly all sides in the insurance wrangling, with the notable exception of consumer groups, which fear that such a pool will really mean a taxpayer bailout of the insurance industry.

Philip Roberto, of the Prop. 103 Enforcement Committee, said his group opposes the federal plan. "The problem we have is that it would cap the insurance industry's losses but pay out all the claims to victims. In a sense, the federal government would be reinsuring the insurance industry. Under this plan, taxpayers would ultimately foot the bill in a major catastrophe," Roberto said.

Along with the opposition from consumer groups, the bill faces an uphill battle this year in a Congress concerned with budget cutting and convinced that states should deal with their own problems independently and not look to Washington for solutions. Even those optimistic that it will eventually pass concede that action is not likely before the end of this year.

The Banandos eventually solved their problem by turning to the agent they had had for many years before transferring to 20th Century a couple years ago to take advantage of lower rates.

"We had been with Farmers for many, many years and my husband knew the agent personally. Finally, he just went crawling back to them, begging them to take us back. Even then, the agent had to jump through several hoops to get the company to take us back, but at that point, we were grateful to get any insurance," she said.

The whole experience lasted at least three months, the Banandos said, and was a major hassle.

"I spent a lot of hours on the telephone playing phone tag with all these places that do not have anyone answering the telephone anymore. You call these places and leave your name and by the time they return the calls it's already a few days later," she said.

It was also frightening when she began worrying that the family would never find insurance, she said. "It was scary, knowing how much we need the insurance, and not finding anyone to take us."

Klein is a Monrovia free-lance writer.

Where to Seek Homeowners Insurance

The following list of insurance companies writing new homeowner policies in California is provided by the state Department of Insurance based on a survey of the industry. It is believed to be accurate as of mid-February, according to Candysse Miller, deputy press secretary to Insurance Commission Chuck Quackenbush, but could change from day to day, given the state of the current insurance market.

"Consumers should use the list only as a guideline," Miller cautioned. "We recommend homeowners work through independent insurance brokers, who represent several companies."

Telephone numbers for the listed companies can be obtained by the calling the Insurance Department's hot-line at (213) 897-8921.

Companies Writing New Homeowners Policies

Ranked from largest to smallest based on dollar volume of premiums written.

1--State Farm Fire & Casualty Co.

2--USAA.

3--State Farm General Ins. Co.

4--Firemans Fund Ins. Co.

5--Federal Ins. Co.

6--Associated Indemnity Corp.

7--Prudential Property & Casualty Ins Co.

8--Interins Exchange-Auto Club.

9--Civil Service Employees Ins Co.

10--Century-National Ins Co.

11--Western Mutual Ins Co.

12--California Capital Ins Co.

13--California Casualty Ins Co.

14--USAA Casualty Ins. Co.

15--Aetna Ins Co.

16--American Economy Ins. Co.

17--Liberty Mutual Fire Ins. Co

18--Hartford Underwriters Ins. Co.

19--American Manufacturers Mutual Ins.

20--AMCO Ins. Co.

21--Residence Mutual Ins. Co.

22--CalFarm Ins. Co.

23--American Bankers Ins. Co.

24--Assurance Co. of America.

25--Unigard Security Ins. Co.

26--Oregon Mutual Ins. Co.

27--Insurance Co. of North America.

28--Continental Casualty Co.

29--Pennsylvania General Ins. Co.

30--American National Fire Ins. Co.

31--Vigilant Ins. Co.

32--Amica Mutual Ins. Co.

33--Standard Fire Ins. Co.

34--Employers Fire Ins. Co.

35--Valiant Ins. Co.

36--Allied Mutual Ins. Co.

37--Northern Ins. Co. of New York.

38--CNA Casualty of Calif.

39--California Casualty Indemnity Exchange.

40--Government Employees Ins. Co.

41--Grange Insurance Assn.

42--Allied Property & Casualty Ins. Co.

43--Mercury Casualty Co.

44--Armed Forces Ins. Exchange.

45--Merced Mutual Ins. Co.

46--National Automobile & Casualty Ins. Co.

47--Massachusetts Bay Ins. Co.

48--National General Ins. Co.

49--Nationwide Mutual Fire Ins. Co.

50--Tokio Marine & Fire Ins. Co. Ltd.

51--American Casualty Co. of Reading.

52--Eagle West Ins. Co.

53--CIGNA Ins. Co.

54--Fidelity & Deposit Co. of Maryland.

55--Allegiance Ins. Co.

56--Century Indemnity Co.

57--Commercial Union Ins. Co.

58--Mutual Service Casualty Co.

59--Wawanesa Mutual Ins. Co.

60--General Accident Ins. Co. of America.

61--Valley Forge Ins. Co.

62--Omaha Property & Casualty Ins. Co.

63--Minnesota Fire & Casualty Co.

64--Valley Ins. Co.

65--TOPA Ins. Co.

66--Bankers Standard Ins. Co.

67--American Loyalty Ins. Co.

68--American National Property & Cas Co.

69--American Modern Home Ins. Co.

70--AMEX Assurance Co.

71--American States Ins. Co.

72--MIC General Ins. Corp.

73--American Family Home Ins. Co.

74--Preferred Risk Mutual Ins. Co.

75--Sutter Insurance Co.

76--Rocky Mountain Fire & Casualty Co.

77--Yasuda Fire & Marine Ins. Co.

78--Hanover Ins. Co.

79--Mid-State Mutual Ins. Co.

80--Electric Ins. Co.

81--Pacific Employers Ins. Co.

82--American Ins. Co.

83--National Fire Ins. Co. of Hartford.

84--Church Ins. Co.

85--First General Ins. Co.

86--Golden Eagle Insurance Co.

87--Lutheran Benevolent Ins. Exchange.

88--Royal Ins. Co. of America.

89--American Protection Ins. Co.

90--Royal Indemnity Co.

91--Modern Service Ins. Co.

92--Safeguard Ins. Co.

93--CSE Safeguard Ins. Co.

94--Midwest Mutual Ins. Co.

95--National Surety Corp.

96--Nippon Fire & Mar Ins. Co. Ltd.

97--Jefferson Insurance Co. of New York.

Source: California Department of Insurance.

Builder Survey Update

Omitted builders--Two home builders were omitted from the results of The Times' 24th annual survey of residential building in Southern California.

Greystone Homes Inc. of Los Angeles, with 1994 sales volume of $204 million, would have ranked No. 8 in the survey. The company built 732 single-family homes and 45 condo units in 1994. No projections for 1995 business were disclosed by president Jack R. Harter.

Tri-Mark Development of Woodland Hills, with '94 sales of 275 homes for revenue of $47.5 million, would have ranked No. 24. The company projected that it would build 300 homes this year for $52 million in sales, according to president John Landau.

For the record--And due to clerical and editing errors, several companies were ranked incorrectly in the survey. The correct ranking is Shea Homes, with $153.4 million in 1994 sales, No. 12; Forecast Homes, with $117 million, No. 13; Van Daele Development Co., $110.9 million, No. 14; Barratt American Inc., $109.3 million, No. 15; the Akins Companies, $88.3 million, No. 16; Beazer Homes of California, with $85 million, No. 17; Inco Homes Corp., $65 million, No. 18, and Laing (John) Homes (California), $61.8 million, No. 19.

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