Policy on Insurance Should Put a Premium on Service to the Public

Earthquakes in California are inevitable. So, too, is it inevitable that some earthquake victims will have problems getting claims addressed by their insurance companies in a timely and satisfactory fashion. That is an unfortunate reality that we have worked hard to change at the California Department of Insurance.

Consider the record: Since late 1994, the department has facilitated the payment of $78 million to earthquake victims through our intervention and mediation efforts. This is beyond the more than $12 billion paid out by companies without our intervention or mediation.

Further, we succeeded in getting four insurance companies to review their claims from the Northridge earthquake and readjust them to benefit policyholders. In addition, we negotiated with an insurance company to create a $6-million relief fund to which anyone can apply to seek relief for a claim that he or she believes has not been handled properly.

One of the key obstacles we faced following the Jan. 17, 1994, Northridge earthquake was related to the timeline allowed for a person to file a claim. When I took office in January 1995, we were only a few weeks away from the one-year deadline to file a claim.

One year is simply not long enough, considering some of the latent damage that can come as a result of earthquake damage that may have been initially missed, even by experienced claims adjusters. The burden of damage discovery within what I consider to be an unreasonable time frame was unfairly dumped on the untrained and inexperienced eye of the homeowner. Unless the damage was obvious--a crumbling wall, a collapsed ceiling--even trained professionals may have had difficulty spotting it.

The one-year deadline issue has been the subject of a court ruling but still is not specific enough, and companies continue to take advantage of the gray areas that exist. We must wipe out those gray areas. The law must be changed so that we can avoid delay, confusion and claims denials when the next quake hits California.

Three years ago, I asked the Legislature to pass a law to give policyholders as long as 10 years in which to file a claim with an insurance company following an earthquake. That legislation got killed. After that, I asked state Sen. Jackie Speier (D-Daly City), chairman of the Senate Insurance Committee, to carry a similar bill, SB 622. That bill is now stuck in the Assembly inactive file, awaiting a vote on the floor.

SB 622 in its amended form would help clear up the law that causes many problems for victims who are being turned away by their insurance companies because claims were not filed on time. Specifically, it would codify a California Supreme Court ruling that says the statute of limitations begins not from the date of the earthquake but when a homeowner reasonably should have discovered damage that exceeded the deductible.

My department pursues claims on behalf of policyholders based on the Supreme Court’s ruling. However, companies continue to exploit loopholes in the ruling, forcing consumers into costly, time-consuming litigation.

That’s wrong, and that’s why I have supported consumers in this battle against the insurance industry. We cannot afford to doom future earthquake victims to years of legal fighting against insurance companies, with their legions of lawyers, just to get a legitimate claim paid. We must change the law before the next earthquake hits. The first step is to pass SB 622.