Senator Asks Quackenbush to Release Quake Data

When key hearings probing the actions of Insurance Commissioner Chuck Quackenbush open today in the state Senate, the subject will be confidential documents detailing a pattern of violations by insurance companies after the Northridge earthquake.

Senate Insurance Committee Chairwoman Jackie Speier (D-Daly City) wants the documents--compiled by the Insurance Department’s own investigators--made public. Quackenbush has been just as adamant that the reports should remain confidential.

The documents were prepared by the Insurance Department to evaluate how insurance companies handled the costliest natural disaster in the nation’s history.

The Times obtained the reports on four companies, which document 3,137 violations in 2,477 claim files examined. The two most common infractions were failure to properly explain policy benefits and unsupported depreciation reductions.

Behind the numbers, though, are individual tales of what homeowners went through in dealing with their claims. Some struggled with their insurance companies for years before coming to settlements; a few are still embroiled in litigation.

“If they had just given us the money at the beginning, we could have torn the house down and rebuilt it,” said Irwin Kourland, whose Bel-Air home suffered major foundation damage.

Others, however, were surprised to hear that violations had been found in their files and said they believed they had been treated fairly.

The reports are at the center of the Quackenbush controversy. Required by state law to perform occasional market conduct studies of insurance companies, teams of Insurance Department investigators chose at random Northridge quake claims with Allstate, State Farm, 20th Century and Farmers Home Mutual in 1997 and 1998.

Insurance Department officials then confronted the companies with the findings, threatening to seek billions of dollars in fines. Instead, insurers were asked to donate a total of about $12 million to foundations controlled by Quackenbush’s political associates.

Insurance Department officials did not respond to requests for comment on the findings of the market conduct surveys.

Gary Garbowitz of Woodland Hills was one of the 20th Century policyholders whose claim was reviewed by the state.

Although he was never contacted about the review, he said he was not surprised to hear from a reporter that state investigators found his insurer had failed to do a “necessary and proper” inspection of his home and property after the earthquake.

“That sounds like me, all right,” said Garbowitz, who had bought his home less than a month before the quake and had not yet moved in. The initial settlement, according to the report, was for $7,706.

Garbowitz said he at first assumed that was fair. Then friends advised him to check further.

“Thank God I started to talk to people,” he said. “They said, ‘Did you look under the carpet, did you check your chimney?’

“It was kind of on-the-job training for me. I learned what I had to do to cover myself.”

He hired his own inspectors, who determined that the damage not found by the insurance company would cost nearly 10 times the initial settlement. In 1996, the company issued him an additional check for $70,468, according to the report.

“I paid them for the insurance, but they didn’t help me,” Garbowitz said. “I had to prove everything myself. It was like they were trying to do anything to pay me the least amount of money they could.”

After the second settlement, he sold the still mostly unrepaired house “as is” for less than he had originally paid for it. It was time, he said, to move on. “You get tired, you don’t even want to deal with it anymore,” Garbowitz said.

Will Hector of West Hills said he felt vindicated when told that Insurance Department inspectors looking at his 20th Century file found similar violations.

“They nickeled and dimed it,” said Hector, a semiretired real estate agent. The report said Hector had been offered a “low settlement.”

He sued the insurer, leading to an out-of-court settlement last year that allowed him to make repairs.

“We still have one more room to do,” he said of the renovation. “We’ll finish up this year.”

Investigators also found that Allan Boardman’s claim had not received a “proper investigation” from 20th Century, now known as 21st Century. In addition, they reported that the check sent to Boardman “contains wording that incorrectly indicates full and final settlement.”

Several months later, when Boardman’s contractor said the actual costs to make repairs would be double the original estimate, the company was not receptive.

“I believe the document they sent back discouraged us from filing a second claim,” he said. “They left open the possibility that I could file a dispute.”

Boardman decided not to press further, although he considered legal action. “Half of it would have gone to the lawyers, anyway,” he said. “The hell with that.”

Investigators reviewing Kourland’s claim file with State Farm found eight violations, including “unreasonable delays,” an “unreasonably low settlement offer” and inadequate notice of policy changes.

That last violation was the subject of a bad-faith lawsuit filed on behalf of more than 100 State Farm claimants, including Kourland, whose policies had been quietly altered in 1985. State Farm settled the suit for $100 million, the largest known single payout by an insurer for Northridge earthquake claims

Kourland said he and his wife had moved out of their Bel-Air home and begun what turned out to be more than a year’s worth of repairs before the suit was settled. Citing confidentiality provisions of the settlement, he declined to disclose how much he received from the insurance company.

But he said that if the claim had been paid promptly, he and his wife would have been able to rebuild. “We were out of pocket,” Kourland said. “We never got back what we had to lay out.

On the other hand, Tom Fewless of Canoga Park and Wartin Korkin of North Hills were surprised to hear that violations had been found in how Allstate settled claims.

State investigators reviewing their files said their insurer, Allstate, made unsupported depreciation reductions and failed to explain settlement reductions. But both said they felt fairly compensated.

“We were very, very satisfied,” said Korkin. “They were always on time and did what they promised. They gave us what we thought was fair.”

Fewless said his claim was still not entirely settled. “But it’s not their fault,” he said of Allstate, saying he was waiting to find a replacement pattern for vintage china.

The violations found by Insurance Department investigators fell under the California Insurance Code and the state Code of Regulations. They included:

* Companies failing to clearly explain all benefits and time limits of policy. The reports listed 484 violations in this category. Investigators noted that letters sent to policyholders were “vague, equivocal and ambiguous.”

* Companies making unsupported depreciation reductions. The infraction, of which 435 were cited, includes too much depreciation taken for such things as fireplaces, “which are known to have long life spans,” investigators wrote as an example.

* Insurers failing to explain settlement reductions. There were 429 citations in the category, which includes not fully explaining reductions made because of depreciation.

* Companies failing to perform necessary and timely damage investigations after the quake. There were 349 such infractions cited.

A spokesman for State Farm Insurance said that the company responded to the report with hundreds of pages of rebuttal that dealt with every violation found. He declined to talk about the specifics, saying that to do so would be a violation of state regulations. He said, however, that the company is trying to provide state legislators with the information they are seeking in some form.

“We in fact are in the process of cooperating with Sen. Speier, working to find a way to present our case without violating the confidentiality laws,” said William Sirola of State Farm.

Representatives of Allstate and 21st Century declined all comment on the content of the reports, citing their confidentiality. Farmers Home Mutual did not return calls requesting comment.

State law gives Quackenbush the sole authority to release the reports. At today’s Senate Insurance Committee hearing, Speier said she will again ask Quackenbush to release the surveys. If he is concerned about individual privacy, she added, he can strike out the names of policyholders.