Quake Insurance Plan Stirs Anger in Valley, at Capitol

The adoption of new insurance rates that would vary vastly across the state and be especially costly to most San Fernando Valley homeowners met a wave of angry reaction Friday from the halls of the Capitol to the streets of Northridge.

Los Angeles Mayor Richard Riordan’s office called the rates “unfair” in an angry letter to Insurance Commissioner Chuck Quackenbush, and urged changes in the rate structure. The letter stated the rates would “adversely affect thousands of Angelenos who live in the San Fernando Valley.”

Council members representing the Valley erupted in a chorus of vituperation, characterizing the rates as both bad science and bad politics.

“Somebody smoking marijuana?” asked an astonished press deputy to Los Angeles Councilman Hal Bernson, who was out of town.

“I think this is Looney Tunes,” West Valley Councilwoman Laura Chick said. She demanded a new structure with lower rates taking into account the city’s strong seismic code and with additional reductions for homeowners who pay for seismic strengthening.

Mid-Valley Councilman Richard Alarcon said the rate disparities are so “huge as to be unrealistic.”

And County Supervisor Mike Antonovich said the rates reeked of politics.

“Were there political manipulations from Northern California, where they have more earthquakes, to have Southern California bear the brunt of the costs for their earthquakes?” Antonovich asked.

Across the Valley on Friday, homeowners had much the same reaction.

“This just doesn’t make any sense, no sense at all,” said 62-year-old construction worker John Schroeder of Northridge, shaking his head over rates that would cost him nearly three times as much as a neighbor in nearby Sylmar.

“I was here for that 1971 Sylmar quake and there was a helluva lot more damage than what we had here in the recent Northridge quake,” Schroeder said. “So why should I pay any more?”

Even Gov. Pete Wilson weighed in gingerly with critics of the plan.

Interviewed at the Hollywood Roosevelt Hotel by a television reporter, Wilson said the 19 rating levels were too many.

“I would hope, I would expect there will be a review before it’s put into effect, and the insurance commissioner has said that will take place,” Wilson said.

Wilson said he agreed with the concept there should be zones with different rates, but he wouldn’t say how many.

In Sacramento, state Senate Democratic leader Bill Lockyer of Hayward promised “legislative oversight and corrective work next year.”

Although Lockyer cautioned that the Legislature is limited in what it can do now, state Sens. Tom Hayden (D-Los Angeles) and Herschel Rosenthal (D-Van Nuys) both promised to fight the rate structure.

“Although I understand the rates were going to be higher, I think this is out of line,” Rosenthal said. “I’m not sure we can eliminate the California Earthquake Authority, but I think we can look at the rating and what they used as evidence for the decision.”

In a letter to Quackenbush, Hayden demanded a review of the standards used to set the rates.

He said the rates put his Valley constituents “on the hook to pay unjustified and possibly arbitrary premiums until the rates are challenged, a process that could take up to six months.”

Responding for Quackenbush, Deputy Insurance Commissioner Richard Wiebe defended the process for setting the rates despite what he described as an unpleasant day filled with calls of protest and consternation over the disparities.

“The process of setting the rates was a sound one,” Wiebe said. “If there are adjustments to be made in the rating plan, there is ample opportunity for the commissioner to consider additional evidence.”

But, Wiebe also said, the commissioner has not yet decided precisely how to undertake the review he promised Thursday.

The rates, approved by the new California Earthquake Authority this week, would be 40% higher in much of the San Fernando Valley than in most of the rest of Los Angeles.

But rates in most of the Valley would be 2 1/2 times those in Sylmar and San Fernando, areas at the heart of the damage and casualties in the 1971 Sylmar-San Fernando earthquake.

Also at the much lower rate would be Palmdale, situated astride the San Andreas fault, on which Southern California’s most powerful quakes are expected to occur.

Several wealthy Westside communities--including Brentwood, Pacific Palisades and Malibu, but not Santa Monica--would pay a rate less than half that of the Valley and only 60% of that in the rest of Los Angeles.

There are other dramatic differences elsewhere in the state.

San Francisco Bay Area residents--where most of the highest rates would be applied--would pay 4 1/2 times more than Eureka residents. Eureka was placed in the lowest rating category, despite the fact that it has had many damaging earthquakes and could face a tsunami danger.

In her letter to Quackenbush, Riordan Chief of Staff Robin M. Kramer cited the Eureka rates.

“On the surface, it seems unfair that a Valley resident would have to pay $780 to insure their home, when a homeowner who owns a comparable home in Eureka . . . would have to pay only $200 for the same insurance coverage,” Kramer said.

Lockyer aide Harland Goodson criticized similar disparities in San Francisco, where every ZIP Code would pay the same rate, even though areas such as the Marina district are subject to the serious hazard of soil liquefaction during earthquakes, while others are on bedrock.

“We have felt all along that the science doesn’t support the disparity in rates that are being proposed,” Goodson said.

On the streets of the Valley the new rate structure produced a mix of anger and pessimism by homeowners who now wonder whether earthquake insurance will be within their reach.

“I don’t think these rates are fair, they’re just way too much money,” said Mike Milkovich as he stood outside his Northridge home. “But fair or not, I’m going to pay them. We have to.”

With a measuring tape hanging from his right pocket, John Schroeder sized up what needs to be done to make earthquake insurance a fairer prospect for everyone.

“These insurance companies took it in the gut two years ago,” he said. “So they’re all scared they’re gonna come up losers again. What we should have is a pool of companies to offer this kind of insurance. That way they’ll absorb the loss, when it comes.

“Either that, or the day is coming when this kind of insurance is just gonna be the domain of rich people, not folks like me.”

Henry and Rosemarie Munoz were lucky; they had insurance--enough to receive more than $350,000 to rebuild their home on Rayen Street in Northridge.

But the insurance company was not so lucky and recently went out of business. On Friday, as they stood in the frontyard admiring the sprawling home that Munoz has largely rebuilt with his own hands, he and his wife were not sure they could even get insurance.

“We’re lucky we had insurance the first time around,” Henry Munoz said. “So, we know that it’s worth the price you pay for it.”

But Alvin Fink, a retired San Fernando Valley dry cleaner, isn’t sure he can count on any insurance company when the Big One comes.

He lives a block from the site of the old Northridge Meadows apartment building, where 16 residents perished in the 1994 quake.

The 64-year-old Fink received only $40,000 damage to his house. But without insurance, he had to pay out of pocket to rebuild.

“I don’t care what the premium is--it’s the deductibles that kill you,” he said. “Even if I would have had insurance during the last quake, my deductible would have been more than the damage. So I still would have ended up footing the bill.”