Quackenbush Blasts Insurers on Time Limits

Insurance Commissioner Chuck Quackenbush on Monday blasted insurance companies who have refused to pay for Northridge earthquake damage because of a one-year time limit, saying they are hiding behind an incorrect reading of the law, are abusing consumers and using a stalling tactic to avoid paying fair claims.

Unlike floods or tornadoes, Quackenbush said, quake damage is often hidden and takes longer to detect. His reading of the time limit statute is that homeowners have one year to file a damage claim once they actually discover full quake damage.

“Some of the companies are using this as a blatant stall tactic to [avoid] paying out claims,” Quackenbush said. “I don’t think [they] are being faithful to their customers, the consumers, and we’re going to try and rectify that.”

The vast majority of Northridge quake damage claims have been settled, Quackenbush said. But his new legal opinion, he hopes, will shortcut legal battles in 450 cases now in the courts between insurance companies and homeowners, and to pressure companies “to pay the righteous claims,” he said.

Consumer groups say that thousands of consumers have been denied quake claims because of this one-year time limit. Quackenbush said his legal opinion will undoubtedly prompt more consumers to file for reopened quake damage claims.

Quackenbush said he would also support a bill introduced by Assemblyman Wally Knox (D-Los Angeles) to retroactively cover Northridge quake claims, and to prevent insurance companies from refusing to pay claims simply because they were filed more than a year after an earthquake.

Insurance companies promptly blasted Quackenbush, and said they would continue to fight the issue in court.

“I’m really upset and appalled by this political stunt,” said Ric Hill, a 20th Century Insurance spokesman. “He’s trying to use 20/20 hindsight without using the facts.”

20th Century has denied 1,500 to 2,000 Northridge quake claims because of the one-year time limit. Consumer advocates say that 20th Century and Allstate have been the most aggressive in denying quake claims based on a time limit.

Hill contends that 20th Century is correctly following the law. “I don’t think it’s proper for the commissioner to lobby the courts” on a time limit issue. “That is a private, civil matter to be worked out in court,” he said

Allstate spokeswoman Nancy Anderson said that in half the “late” quake damage claims, her company found the claims to be reasonable and paid the claim. “There are some circumstances where we don’t think there was a reasonable explanation for the lateness” of the claims, so Allstate refused to pay them. “We have to let the courts decide” in those cases, Anderson said.

Some consumer activists said that Quackenbush’s statements will have little legal impact, and that he is being too soft on insurance companies who refuse to pay “late” quake damage claims.

“Quackenbush is taking a stand that will have zero legal effect” because it probably won’t be admissible in most individual quake cases, said attorney Debra Wegman, who represents some homeowners suing 20th Century.

“The only thing that would make an impact is if the Insurance Department enforces the unfair claims practices act. He could impose penalties and fines, and revoke the licenses of companies to practice business in this state. And he hasn’t done anything,” Wegman said.

Eleven months ago Quackenbush’s own legal staff wrote a draft memo that came out on the side of consumers on the one-year time limit issue. Since then, consumer activists have been pressuring him to release that legal opinion.

“He’s been sitting on this for a year,” said Philip Roberto, with the Proposition 103 Enforcement Project. “He’s like a chameleon who changes color only when his actions are exposed to the light of day.”

Quackenbush has been seen by many as a supporter of the insurance industry, especially since he received major campaign contributions from insurance companies, including a donation by 20th Century. After he was elected, Quackenbush reduced 20th Century’s Proposition 103 rebate by $36 million from what his predecessor John Garamendi had ordered the company to pay.

Quackenbush offered his legal opinion at the Woodland Hills home of Barbara Shugar, who said she needs $180,000 to cover repairs left by the quake.

One month after the temblor, a 20th Century Insurance claims adjuster found only cosmetic damage at Shugar’s house. More than a year later, Shugar discovered major structural and asbestos damage when repairs began, so she filed another claim with 20th Century. The company’s second inspector agreed that her home had major quake damage, Shugar said.

But 20th Century refused to pay her claim because it was filed more than a year after the January 1994 quake. “She was denied coverage because of that one year statute of limitations. Clearly to me that is an abuse,” Quackenbush said.

On Monday Shugar led Quackenbush around her home, where her daughter and two grandchildren live. She pointed out quake cracks in her stucco walls, and cracks in her ceilings that are exposing asbestos, and led him outside where sizable quake cracks line the patio next to her swimming pool.

She told him that 20th Century’s first claims adjuster saw the same thing he was looking at. “And the adjuster said this didn’t meet the deductible?” Quackenbush asked.

Shugar, 61, had planned to retire this year, but she continues to commute 120 miles a day to her job to pay for a home equity loan she took out to make some cosmetic quake repairs. She said she doesn’t have the money to finish all the repairs.

“20th Century had a responsibility to put my house back in the condition it was before the earthquake. That’s what I was paying [insurance] premiums for,” Shugar said, as she began to cry. “I’m really mad at this . . . company. They have a responsibility to protect us.”

20th Century said Sunday that Shugar knew about the serious quake damage to her home by summer 1994, and that she didn’t file a follow-up damage claim promptly.

Another homeowner present was Michael Ward, who also sued his insurance company, Allstate, over unpaid quake damages.

Ward, who has multiple sclerosis and is in a wheelchair, told Quackenbush that Allstate’s inspectors found only modest damage in his Van Nuys home on their first visit. Later, contractors discovered $200,000 in damage to Ward’s home, but Allstate denied his follow-up claim because of the one-year time limit, he said.