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Sunday, November 21, 1993
Orange County Edition
Section: Business
Page: D-1

Insurers Under Intense Pressure to Resolve New Fire Claims; Coverage: One survey says 48% of homeowner cases remain unsettled in Oakland. Watchdog groups say companies will have to do better in Laguna, other areas.


Smoke was still in the air when the first insurance workers arrived
to help customers burned out of their homes by last month's Laguna Beach

Within days, meetings were being held to explain to policyholders how
the claims process works and to hand out insurance checks to cover living

The quick response from insurance representatives was meant to put
customers at ease, said Jeanine Raquet, regional underwriting manager for
Allstate Insurance Co. "We are there for them."

Clearly, the insurance companies, which so far have received more than
$435 million in claims from the Laguna blaze, are under intense pressure
to show they can do a fair and competent job.
Their treatment of victims of the latest Southern California
firestorms will be closely scrutinized by government authorities and
consumer advocates who were appalled by the flood of complaints from
policyholders after the Oakland hills fire two years ago that destroyed
more than 3,000 homes.
Allegations of marketing misrepresentations and abuses associated with
claims handling in Oakland prompted the California Department of
Insurance to levy a $1-million penalty--the largest in state history--on
And results of a recent random survey by the consumer group
Policyholders United, which show that 48% of homeowner claims still
remain unsettled in Oakland, has given the entire insurance industry a
public relations black eye. In contrast, the major insurance companies
involved reported to the state that all but about 4% of the claims had
been settled.
The Oakland Hills fiasco spurred Sen. Art Torres (D-Los Angeles),
chairman of the state Senate Insurance Committee, to hold an
investigational hearing last month and to promise corrective legislation.
Already, legislation sponsored by state Sen. Nicholas C. Petris
(D-Oakland) has been enacted that requires insurance companies to provide
more thorough explanation of available homeowner coverage when policies
are purchased or renewed.
Meanwhile, Torres, State Insurance Commissioner John Garamendi and
United Policyholders have vowed to monitor the Southern California
situation closely to determine whether the insurance companies have
"We believe there ought to be a higher sense of responsibility to
policyholders as a direct result of the Oakland fire, and we anticipate
there will be. But in all honesty, with insurance companies you never
know what to expect," said Elena Stern, press secretary to Garamendi.
Stern said Garamendi has met personally with the chief executives of
most of the insurance companies involved in the Southern California fires
"to give his demands on how they will respond."
While Laguna Beach fire victims so far seem satisfied with the
response of their insurance companies, those familiar with the Oakland
Hills situation say it is still much "too early to tell" how the
companies ultimately will perform.
"After the fires, no one was really worried about insurance. Pretty
much everyone felt they were fully covered," said Lisa Ramer,
administrative assistant to Petris.
"But later they found out their policies were lacking," she said,
often as a result of low-balling by insurance agents who had routinely
underestimated the actual cost of home replacement in the competition to
sell policies with lower premiums.
But there are indications that the insurance companies learned at
least a few lessons in Oakland that will benefit owners of the more than
366 homes destroyed in Laguna Beach, Emerald Bay and El Morro Trailer
Park. Already some of the burned area's leading insurance carriers,
including Farmers Insurance Group and State Farm Insurance Group, have
said that in some instances in which policyholders are underinsured for
their home contents, coverage will be raised above the policy limits--one
of the many concessions that insurance companies ultimately made in
Also, State Farm and Farmers, after learning in Oakland about the
delays in rebuilding homes after a large catastrophe, have agreed to
extend the time limit for reimbursing families for additional living
expenses from one year to two.
Some insurers are also tackling the problem that even the most deluxe
homeowners policies often lack coverage to meet upgraded modern building
codes for hillside construction. This became a major issue in the Oakland
catastrophe, which produced about $1.7 billion in claims.
Jeff Beyer, Farmers' vice resident of public relations, said his
company plans to soon file an application with the state to add coverage
for code upgrades to all of its homeowner property policies.
Beyer said Farmers' customers who lost their houses in the hills of
Laguna Beach will be "dealt with individually" on the code issue. In some
cases where code upgrade coverage was not purchased, he said, "we will
provide an opportunity for them to retroactively purchase it" at the
original, pre-fire cost.
Robert Blodgett, a State Farm spokesman, said the company has just
received state approval to add 10% to the face value of its premiums
toward the cost of rebuilding homes to comply with new codes. The added
coverage is being provided at no additional premium cost, according to
the state Department of Insurance.
Moreover, he said, the extra coverage will apply to fire victim
customers in Laguna Beach as well as those in Pasadena, Altadena, Malibu,
Calabasas and Riverside.
Fortuitously, all the fires broke out after Oct. 26, the date that the
company filed with the state Department of Insurance to amend its
policies. Therefore the upgraded coverage became effective for fire
Raquet said Allstate, however, will not make concessions on code
upgrades. "If somebody's contract does not have building code upgrade
coverage, we would stand by the contract," she said.
But Raquet said Allstate also "learned a lot from Oakland,"
particularly about the importance of assigning claims adjusters on a
permanent basis to fire victims.
When adjusters were rotated in Oakland, she said, it irritated the
fire victims who felt that each time they received a new adjuster that
they "were starting all over again."
Raquet also said Allstate representatives rushed to Laguna Beach to
seek out policyholders, while in Oakland they waited for victims to file
claims. "We are trying to be out there and proactive and just make the
process as easy as possible for our customers," she said.
Patty Lombard, executive director of the Western Insurance Information
Service, an insurance trade association, said group meetings that
insurers are holding with their customers in Laguna Beach stem from
industry recognition that in Oakland the claims process was not explained
well to policyholders.
"They thought the insurance adjuster would come and give them a check
and life would be perfect," she said.
For the first time, she said, insurance industry representatives were
available in Laguna Beach to answer questions at federal disaster
assistance application centers. Also, she said, the Western Insurance
Information Service plans to send a representative to all community
meetings of fire victims.
Sen. Torres said he is impressed by the improvements he has seen in
the industry's response in Southern California. "Their record is better
so far," he said. "They showed up faster and are more aware of the issues
they need to confront, such as code upgrades, and that is all healthy."
But outreach efforts by insurance companies are greeted with
skepticism by Ina De Long, founder and president of Policyholders United,
which says it represents several hundred California insurance consumers.
"I think it is public relations to say we are here for you and you
don't need outside help," said De Long, a former disaster supervisor for
State Farm.
United Policyholders is striving to link Oakland fire victims with
those in Laguna Beach who could benefit from their consumer perspective
on insurance issues.
It is important for people insured by the same companies, De Long
said, to meet and compare notes to ensure that they all receive the best
She said she hopes that Laguna Beach fire victims will fare better
than their counterparts in Oakland. "It is too early to tell," she said,
"but the industry needs to be aware that everybody is looking over their
shoulder, and I am the first one there on my tippy-toes."


Copyright (c) 1993 Times Mirror Company


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