Allstate Ordered to Pay ’94 Quake Damage Claim

In the latest of several financial aftershocks for Allstate Insurance Co. since the 1994 Northridge earthquake, a federal court jury has concluded that the company wrongfully refused to pay for quake damage to a Hidden Hills home, although its owner filed her claim more than 10 months after what the company says was a one-year deadline.

Allstate must pay for about $18,000 in structural damage discovered by Jacqueline Davidson at her $1.5-million estate in August 1995, company attorneys said Wednesday.

Davidson--the ex-wife of entertainer John Davidson--originally claimed about $245,000 in damages, Allstate lawyer Ron Kent said.

Although the required payment in Davidson’s case was significantly reduced, the verdict--delivered in U.S. District Court last week--will have a significant extended impact, her attorneys said, stimulating a flood of new claims against insurers by homeowners who were similarly denied coverage.

Allstate has already agreed to pay about $5 million and reevaluate about 9,000 Northridge earthquake cases in a separate class-action suit that awaits a federal judge’s approval, and should anticipate a flood of additional claims in light of last week’s verdict, attorney Merak Eskigian said.

“There are a lot of cases out there, still,” he said. “This verdict was a sign of what is going to happen with future claims.”

Eskigian and fellow attorney Mark Goshgarian successfully argued that Allstate improperly denied coverage to Davidson by interpreting the policy’s claim-filing period of one year to have begun with the earthquake. The plaintiffs contended that the filing period should begin when the damage was detected.

Davidson--who was in Honduras during the Northridge quake and is rarely at home for extended periods--had no way of knowing what kind of damage her five-bedroom house suffered because most of it occurred at the foundation, Eskigian said.

When she returned home several days after the temblor, Davidson said the only damage she knew about immediately was broken plates and souvenirs, most of which had already been swept away by friends who were house-sitting. At that time, she figured the damage to be about $500.

Only later, when a friend was helping her with other repairs, did she notice the additional damage, Davidson said. She reported the damage to her insurance company immediately, she said.

After what Davidson said was a cursory inspection by an Allstate adjuster, her claim was denied.

Eskigian argued that Davidson and other policyholders with quake damage should have been informed by Allstate to check for possible damage done by the Northridge temblor immediately after it occurred.

“It is not reasonable for somebody . . . who has no training or experience in structural engineering to be held responsible . . . for analyzing potential damage,” he said.

Particularly when the one-year deadline on their policies was approaching, Allstate clients should have been instructed to seek a professional opinion on possible damage, Eskigian said.

Allstate spokeswoman April Hattori acknowledged that no such instruction was given by the company. “They knew about the one-year deadline because it’s on their policy,” she said. “We honored the contract we had with our policyholders.”

Kent, the company lawyer, said Davidson’s case is not indicative of a larger problem with policyholders. “Her situation is very unusual,” he said.