Nader to Discuss State Earthquake Insurance Reform

Seminal consumer activist and current Green Party presidential candidate Ralph Nader will speak today at 7:30 p.m. about earthquake insurance reform at the Sepulveda Unitarian Universalist Society church in North Hills.

Nader was invited by Community Assisting Recovery (CARe), a nonprofit group set up after the Northridge earthquake to help homeowners settle their earthquake claims against insurance companies.

Nader is expected to discuss insurance reform in general as well as his opposition to the proposed California Earthquake Authority, a plan devised by state Insurance Commissioner Chuck Quackenbush.

Under Quackenbush’s proposal, legislation would create the CEA, which would be funded partly by private insurance companies who join the plan, but would be supervised by the state. Companies would then sell homeowners earthquake insurance polices, but the CEA would set strict limits on damage claims.

Most big insurance companies favor Quackenbush’s plan. The state Senate will probably take up the CEA proposal again next month.

But critics have blasted the CEA proposal. “This is low grade coverage,” said George Kehrer, director of Community Assisting Recovery. “It’s basically a bailout for the insurance industry.”

Under the CEA plan, a homeowner’s quake policy would insure damage only to the dwelling, with up to a 15% deductible. If there were an earthquake, the policy would not cover damage to cinder-block garden walls, patios, decks, detached garages and swimming pools. There would be a $5,000 limit on personal property damage, and a $1,500 limit to additional living expenses, Kehrer said. “That’s less than one month’s rent,” he complained.

The Northridge quake produced $14.5 billion in insurance claims. Of that about $8.5 billion was from residences. If the CEA had been in force during the Northridge quake, “homeowners would have only gotten $3.5 billion at best,” Kehrer said.

In the past, Nader has talked about setting up a special nationwide insurance fund that would cover catastrophic claims.

Since the Northridge quake, many homeowners--and those who want to buy homes--have been in a scramble to get homeowners insurance. State law requires companies that offer basic homeowners insurance to also offer earthquake coverage as an option. But after the quake, many insurers simply stopped writing additional homeowners policies, or offered them with restrictions.

A state Department of Insurance survey shows that less than 1% of the insurance industry is now writing new homeowners policies without any restrictions. About 81% in the industry have set restrictions before they will offer additional homeowners policies, and many companies won’t insure homes built on hillsides or pilings, or homes built before 1960.

State Farm, Allstate and Farmers, which together have 55% of the California homeowners insurance market, won’t offer any additional policies on residences in brush fire areas or on major earthquake fault lines.

As a result, there has been a flood of applicants to the California FAIR plan, a state-run insurer of last resort that offers bare bones coverage. The FAIR plan now has 63,000 earthquake policies, up from 27,000 two years ago.

But last month Quackenbush limited the FAIR plan to writing new policies only to inner city neighborhoods and brush fire areas, saying the FAIR plan, with 3% of the homeowners insurance market, was growing too fast.

Quackenbush hopes that by setting up CEA, it will encourage more private insurance companies to get back into the home insurance market.

CARe estimates there are at least 3,300 unsettled quake insurance claims, many of them filed in the San Fernando Valley. Those policyholders are still trying to settle their insurance claims more than 18 months after the Northridge quake.

20th Century Insurance, based in Woodland Hills, has been a key target of consumer groups. The state Department of Insurance launched an investigation into 138 open damage claims filed against 20th Century after policyholders complained they were being treated unfairly.

All told, 20th Century was hit with 46,000 Northridge quake damage claims, 36,000 of them from homeowners, the rest from auto policies.

Kehrer says that 20th Century “has been very difficult from the beginning” at settling claims.

Nonsense, countered 20th Century’s spokesman Rick Dinon. The company is still settling cases, and in the past three months it has settled 470 more quake cases, he said. 20th Century currently has about 1,000 unsettled quake claims. 20th Century figures its final quake damage tab will be $1 billion.

Of those 1,000 open cases, many are disputes over additional living expenses, not over building repairs, Dinon said.

About 200 lawsuits have been filed against the company over unresolved quake claims, Dinon said.