INSURANCE

Quake Victims Can Sue State Farm: A state appeals court ruled that Northridge earthquake victims may sue their insurer under the state’s Unfair Competition Act. A lawyer for the policyholders said the ruling, issued Thursday, is significant because it strips away the industry’s claimed exemption from such lawsuits. The policyholders charge, among other things, that State Farm Mutual Automobile Insurance Co. misled them by quietly reducing coverage under their earthquake insurance policies in 1986, a move that didn’t come to light until they filed claims following the 1994 quake. State Farm contended that the suit was out of line because such violations are enforceable only under the state Insurance Code and only by the insurance commissioner. But the Court of Appeal for the 2nd District disagreed, saying the suit may go ahead under the broader Unfair Competition Act. State Farm has not decided whether to appeal, but a lawyer for the giant insurer said the ruling could cause havoc because it “creates a right that didn’t exist before. Now anyone that doesn’t like what’s going on can become a private insurance commissioner.”