Quake Victims Gain Key Ally in Claims Fight

Insurance Commissioner Chuck Quackenbush will announce today that he is taking up the cause of 1994 Northridge earthquake victims whose insurance companies used a one-year deadline to reject homeowners’ claims for damage discovered after the time limit had passed.

It’s not known what form Quackenbush’s plan will take, nor if he can legally force insurance companies to reopen these claims immediately.

Hundreds of homeowners have sued 20th Century, Allstate and other companies over disputed claims, and some quake cases are now coming to trial. It is also not known how Quackenbush’s plan might affect those cases.

At least 10,000 homeowners have been refused payments by insurance companies because of so-called “late” damage claims, and hundreds of millions of dollars are at stake if insurers are forced to pay these claims, consumer advocates said.

Assemblyman Wally Knox (D-Los Angeles) has introduced a bill to cover Northridge quake claims retroactively and prevent insurance companies from denying claims in the future simply because they were filed more than 12 months after the quake.

The spot Quackenbush has chosen to announce his plan is Barbara Shugar’s Woodland Hills residence, which remains ravaged from the Northridge quake.

A month after the quake, a 20th Century claims adjuster inspected Shugar’s home and concluded that it suffered only cosmetic damage. But more than a year later, a contractor working on the house discovered major foundation cracks and asbestos damage.

20th Century then reinspected her home, and a second claims adjuster agreed that her home had suffered major damage, Shugar said, but the company refused her new claim anyway because she filed it more than a year after the January 1994 quake.

She has sued the insurer for refusing to pay $180,000 to cover quake repairs in her home.

Claims from other consumers who found unsuspected internal and structural quake damage more than a year after the disaster were rejected because of the 12-month limit.

In May 1996, attorneys inside Quackenbush’s department wrote a draft memo saying that insurance companies could be acting in bad faith if they denied quake claims because of a time limitation. This prompted intense lobbying by insurance companies and consumer groups for Quackenbush’s support.

Word of Quackenbush’s announcement surprised both consumer groups and insurance companies, in part because of Quackenbush’s reputation for siding with insurance companies.

Pressure from political and consumer quarters has also been building for Quackenbush to take a stand on the time limit for earthquake damage claims.

Quackenbush’s plan will be “another weapon to convince the courts that denying these claims is wrong,” said attorney Glenn Kantor, who has filed 45 quake damage suits against 20th Century Insurance and Allstate.

“It would be a great gesture for Quackenbush to come out in support of homeowners and in support of waiving the time statute. We haven’t seen much support from him so far,” said George Kehrer, founder of CARe, a nonprofit homeowners advisory group.

Insurance companies are surprised that Quackenbush is now coming out on the side of consumers. “This is a judicial function for the courts to decide. I do not know why the commissioner is jumping off the pier on this,” said John Bollington, 20th Century’s general counsel.

20th Century, based in Woodland Hills, has denied 1,500 to 2,000 Northridge quake claims, citing a time limit. If 20th Century were forced to pay all these claims, it could face $50 million to $100 million in damage payments, Kehrer estimated.

The company argues that one year is enough time for a homeowner to discover earthquake damage, even if 20th Century’s own claims adjusters missed some of it during inspections.

Kantor, Shugar’s attorney, said 20th Century and other insurers have an obligation to pay valid claims, especially when homeowners relied on their expertise only to later discover damage.

“20th Century never said, ‘Go out and hire a contractor and an engineer because you can’t trust us,’ ” he said.

Shugar, 62, worries about the asbestos damage because her daughter and two grandchildren live with her, and she doesn’t have the money to pay for repairs.

She hopes Quackenbush can force insurance companies to pay the thousands of quake damage claims they have turned down.

“They have to play fair ball with people and cough up whatever it takes to make things right,” Shugar said.