Suit Accuses Earthquake Insurer 20th Century of Fraud

A class action suit has been filed against 20th Century Insurance alleging that the company fraudulently denied at least 428 Northridge earthquake damage claims because of an incorrect interpretation of a statute limiting the time customers have to file such claims.

The suit, filed in Los Angeles Superior Court last week, seeks at least $37 million in damages.

Lawyers who filed the suit claim that 20th Century altered its policy after the fall of 1994 about how to handle “late” damage claims because of the company’s financial problems.

“In doing so they saved millions, if not more, by screwing everybody,” said Lisa L. Loveridge, one of the plaintiff’s attorneys.

The suit contends that California law gives customers one year from when they notice significant damage to file a damage claim. Because a lot of earthquake damage is hard to detect, the suit contends, the time limit begins to run when a policyholder discovers serious damage, or what lawyers call “delayed discovery,” and not from the moment an earthquake hits.

Twentieth Century, based in Woodland Hills, would not comment on the suit.

The suit says that 20th Century routinely denied damage claims made after the one-year anniversary of the Jan. 17, 1994, Northridge earthquake.

The suit also alleges that 20th Century did not properly investigate these “late” claims. Instead, the company told its claims adjusters to tape record interviews with customers to get them to admit the entire damage stemmed from the Northridge quake, and in effect, to concede the policyholders knew of the damage from the day of the quake, thus making these claims invalid.

Twentieth Century was hit with 46,000 quake damage claims; the company says that its final damage bill will be $1 billion.

After the quake, 20th Century needed a big capital infusion to stay in business. That money came from American International Group, a New York insurance company that is now 20th Century’s largest shareholder.

Once AIG got involved, 20th Century took a harder line on “‘late” claims to protect AIG’s investment, the suit says.

Although most of 20th Century’s Northridge quake damage claims have been settled, the company was hit with about 200 lawsuits from customers, and some of those cases are now nearing trial.