That Old House Might Have Big New Insurance Problems

When Peg and Ron Hardiman of Altadena first were warned that 20th Century Insurance Co. was going to cancel their homeowners policy in two years, they were not too worried. It seemed there was plenty of time to buy a new policy.

But that was before they learned that nearly every restriction insurance companies have on selling new homeowners policies to California residents applies to them--and that the insurers have been enforcing them more vigorously.

Since the Northridge earthquake, it has been hard enough for ordinary buyers to secure new homeowners policies. But for those with special problems, it has become a real challenge.

“We had an older home, built in 1923,” Peg Hardiman said. “Our house was not bolted to the foundation. Our roof, electrical system and plumbing had not been upgraded since 1980. We had a claim within the past three years. And we lived in a ZIP Code where they weren’t selling.”

*

About the only thing the Hardimans had going for them was that they were outside the Altadena brush-fire zone and therefore did not face that restriction.

The Hardimans’ insurance expired Aug. 20. Their mortgage holder is demanding that they secure insurance, or they will be issued a very expensive, fire-only policy. The couple have applications pending, but, despite what seem to them countless inquiries, they say they have nothing in hand.

With the impending creation of a state earthquake insurance authority, some companies are talking about resuming sales, after many months of curtailing them sharply. But prevailing underwriting standards may mean continuing difficulty for the Hardimans and others in their situation.

Still, several agents and a spokesman for the state Insurance Department insist that even such parties have options.

In August, the Insurance Department, despairing of directly aiding all those who were calling for assistance, began referring callers to three statewide agents associations for free help.

Jerry O’Kane, chief executive officer for the largest of these, the Insurance Brokers and Agents of the West (at [800] 772-8998), said that in the first four weeks of referrals his group received 540 calls.

“We do refer them on to two or more insurance brokers in their area who have specifically agreed to help us with these cases,” he said. “Then, two weeks later, we follow up. We get a lot of panicked people. But in the first 174, all but five had received coverage.”

One warning O’Kane had, however: “Being able to pay for the coverage is very important. It can be four times as much as homeowners coverage in the past, $2,000 a year instead of $500.”

*

Dave Morgan, an agent with Grosslight Insurance in Thousand Oaks, talked about two other restrictions the Hardimans did not mention.

“Some companies have told people they will not write [coverage for] houses that are not all copper-plumbed,” he said. “And the companies don’t want any houses on fuses. They must be on circuit breakers.”

Even when sales of homeowners policies resume, Morgan warned, “There will still be those who have trouble buying. . . . It’s not going to be wide open right away.”

For example, Morgan said ZIP Code restrictions, which he insists should not be considered redlining, are a continuing problem for some.

He said that in some areas, such as Altadena, which was close to the 1991 Sierra Madre earthquake, many more people than normal have purchased earthquake insurance.

“Where there’s an overload in these heavily hit areas, the insurers don’t want to increase their exposure,” he said.

The prices Morgan gave were somewhat lower than O’Kane’s. But they were still going up. Coverage costs have risen from $300 for modest homes to $600 and in some cases $900, he said.

A discouraged Peg Hardiman said in an interview: “As soon as you get on the phone with the agents we’ve called, sometimes they ask you your ZIP Code. But most of them, the very first question is the date of your construction.”

Either way, she said, their answers were negative on obtaining coverage.