Quake Victims Struggle to Reach Insurance Settlements

A retired schoolteacher and his wife say they have just about had all they can take from their homeowners insurance company. They continue to do battle with their insurer over how much compensation they should receive for damage their Sherman Oaks condominium sustained in last year’s Northridge earthquake.

Over the past 15 months, they say, they have sat through eight grueling deposition sessions with a whole group of lawyers. Their insurance company has also sued the couple and their condo association, alleging that they didn’t take adequate steps to protect the uninhabitable property from further loss after the quake.

The insurance company was ordered in a private hearing in February to pay nearly $100,000 to the policyholders. But a sizable portion of that money is going to repay the couple’s lawyers. All this legal wrangling has not gotten their condo fixed, and they still don’t know when their unit will be ready for occupancy.

Thousands of residents in the San Fernando Valley and Ventura County are still trying to get their quake-damaged homes and condos fixed. Some have yet to receive settlements from their insurance companies. Many more have received settlements but are now finding the extent of their damage was significantly more than what they settled for. The property owners are having to go back to their insurers and ask for more money.

Insurance companies maintain that they’ve made some mistakes but that they’ve done as good a job as could be expected under the circumstances. It hasn’t been easy, they say, to instantly beef up their local staffing and respond to an avalanche of claims. Marsha Davis, public affairs coordinator for State Farm Insurance Cos. in Westlake Village, reported that roughly 95% of her company’s 120,000 earthquake-related claims have been settled. State Farm and other companies, Davis said, are hard at work trying to settle with the few remaining property owners who haven’t received final settlements.

“The insurance companies are saying that 95% of claims have been settled. While this may be true on the surface, many people are discovering more damage as they undertake repairs,” said Michael Palache, partner at Rubin, Palache & Associates, a Los Angeles public insurance adjusting firm. Palache’s company makes its own damage estimates on behalf of clients, and helps those clients negotiate with their insurance companies. While Palache’s company is not authorized by state law to negotiate officially with an insurance company, he conceded that it happens all the time under the umbrella of advising and assisting the policyholder.

Many insurance companies brought in adjusters from other parts of the country who summarily concluded that certain damages were more cosmetic than structural, Palache said. Now, however, many homeowners are discovering more structural damage as they or their adjusters pick up carpets and open up walls. That, Palache said, is causing lots of tension between policyholders and their insurance companies.

There are still many thousands of unresolved insurance claims stemming from last year’s major temblor, said Bill Rake, president of another public insurance adjuster, The Greenspan Co., which has offices in Encino.

“There’s a merry-go-round with adjusters. When an owner makes an agreement or understanding with an adjuster, that adjuster seems to disappear and a new one wants to start from scratch,” Rake said.

Another problem, Rake said, is “there are a cadre of engineers who are earning their livelihood off of insurance companies, and there is a propensity for them to conclude that problems are the result of a pre-existing condition or some sort of construction defect that would justify denying a claim.” Finally, Rake said, once insurance companies have agreed to a settlement, they are reluctant to agree to pay out more when more damage is discovered.

“Many of the first adjusters sent out by insurance companies had no appreciation for the damage they were looking at. There was a lot of structural damage that wasn’t readily apparent,” Rake said. Even after more damage was uncovered, “the insurance companies became defensive of the original low damage estimates,” he said.

What can property owners in such predicaments do?

One option is to hire a public insurance adjuster. California’s public insurance adjusters--licensed by the Department of Insurance--aren’t cheap.

Most are charging policyholders contingency fees between 10% and 15% of whatever they recover from an insurance company.

Adjusters who come into a situation after an insurance company has made its initial settlement offer charge 20% to 30% of any increase they are able to get for the property owner over the original insurance company offer. Most fees are subject to negotiation, and some adjusters will agree to a fixed versus contingency fee arrangement.

Policyholders who exercise the option in their policies to demand a so-called appraisal will probably have to hire a lawyer.

This process is usually the same as an arbitration hearing with a neutral “judge” or “umpire” who decides how the dispute between insurer and insured will be handled. Lawsuits are also an option in some cases--though many policies make filing a lawsuit very difficult.

Properly documenting a claim is essential. “Most people don’t know how to sufficiently support their claims,” said Rake of The Greenspan Co. “You can’t just bang the table and be emotional. You need to properly document your claim so that the insurance company has no choice other than to consider it.”

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Ron Galperin is an attorney with Wolf, Rifkin & Shapiro in West Los Angeles.