Clearing Up More Questions on Condo Quake Coverage

I don’t want to repeat myself, but my column three weeks ago on condo earthquake insurance requires some serious elaboration.

There have been numerous calls from insurance agents or brokers and condo owners expressing doubt, or more frequently confusion, about some of what I said, particularly the point that loss assessment coverage can be purchased on a stand-alone basis.

Stand-alone did and does mean that other available earthquake coverages need not be purchased at the same time.

But I should have made it clear that a regular fire and theft policy must be purchased before a condo owner can buy quake insurance.

And I also should have stated more directly that the loss assessment coverage described can be purchased only through 13 companies that are participants in the state entity, the California Earthquake Authority (CEA).

The other 94 companies selling homeowners insurance, with 29% of the market share, have not chosen to participate in the authority. Most often, they offer little or no loss assessment coverage.

The 13 participants--or members--are State Farm, Farmers, Allstate, USAA, the Auto Club of Southern California, the California State Auto Assn., CNA, Prudential, Guidant, Armed Forces, Mercury, Liberty Mutual and the Fair Plan. Golden Eagle will become a 14th participant on Jan. 1.

There are about 3 million owners of condos and other common interest developments in California, so we are not talking about negligible numbers. More than 2 million of them can buy condo quake coverage without changing their carrier to a CEA participant to qualify.

Loss assessment coverage is vital for condo owners when damaging earthquakes occur, as they inevitably will at some point in the future of urban California.

What is such coverage?

When damaging quakes happen, condo associations cannot commence repairs until they assess their members for uncovered common quake damage, either to defray deductibles on a master policy, or more if there is no quake master coverage.

Loss assessment policies help the individuals pay these assessments, which otherwise they may not be able to cover.

The Legislature authorized the CEA to sell through its participating companies three specific forms of condo coverage, and the CEA has chosen these limits: (1) Up to $25,000 to repair structural damage inside individual condos; (2) Up to $5,000 for personal contents; (3) up to $50,000 for loss assessments.

There hasn’t been a lot of publicity about these forms of coverage, and CEA Director Greg Butler says only 5% of the eligible owners have bought any of them and fewer than 3% have bought loss assessment.

Leo Robinson, an insurance broker from Newport Beach, and one of those calling me, observes:

“Just about every day, we get pamphlets from insurers all over the state telling us about their products. Seldom do we receive anything from the CEA.”

But, now, Butler says, a pamphlet is in the works, and there’s a CEA person to call with questions about buying condo coverage.

Her name is Diana Curd and her number is (916) 492-4300.

“Give her a call,” Butler suggests. “If it is a member company, and the agent doesn’t have the correct information, we’ll work with the regional office of the company to see that it gets it. She may even call the agent herself.”

The CEA is changing. It is about to up its offer of contents coverage, for owners of single-family homes and condos, from $5,000 to $100,000.

And it probably will change more.

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When Democrats Gray Davis and Phil Angelides take office as governor and state treasurer, they will appoint new members to the CEA board.

The board, to which Republican Insurance Commissioner Chuck Quackenbush also appoints a member, currently has three Republicans. Soon, there will be a 2-1 Democratic majority.

Butler was a Quackenbush aide before becoming director of the CEA and he has a contract lasting only until next May. A change in directorship, and perhaps broad policies, appears likely.

But under Butler, the condo loss assessment is already a good deal. The annual price for $50,000 in coverage (for condos valued at more than $135,000 that have quake coverage on their master policy) varies according to the perceived risk of quakes. It is $25 in Sacramento, $95 in most of Los Angeles, and $175 in parts of Riverside and Ventura counties. Orange County prices range from $25 in the south to $95 in the north. Deductibles are 15% ($7,500). Prices are higher for those whose condo associations carry no master policy that includes quake coverage.

Strangely, because of a lower $3,750 deductible, the prices for $25,000 loss assessment coverage are actually more--$145 in most of Los Angeles and northern Orange counties; $270 in parts of Riverside and Ventura.

Of course, those who have their insurance with companies that do not participate in the CEA may want to know how they were left in the lurch.

State earthquake insurance laws do say that companies not participating in the CEA must offer their individual homeowner policyholders quake coverages equivalent to the CEA’s, and this also applies to two of the condo coverages--but not to loss assessment.

A few non-participating companies will sell $5,000 in loss assessment coverage only.

Condo associations, incidentally, cannot buy loss assessment for their individual condo owners through the master policies. Those are purchased from commercial carriers. Individuals must buy their own coverage.

That’s as clear as I can make it, after discussing this with Butler and several insurers who confirmed these details.

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Ken Reich can be contacted with your accounts of true consumer adventure at (213) 237-7060, or by e-mail at ken.reich@latimes.com.