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Wednesday, July 20, 1994
Valley Edition
Section: Metro
Page: B-6

Angry Homeowners to Meet Over Canceled Quake Coverage; Insurance: Decision by 20th Century leaves some policyholders unable to get new coverage.;


As many as 300 disgruntled homeowners reeling from the imminent
cancellation of their earthquake policies by Woodland Hills-based 20th
Century Insurance Co. plan to meet tonight to air their grievances.

The meeting is scheduled for 7 p.m. at First Presbyterian Church of
Granada Hills, 10400 Zelzah Ave.

Battered by more than $600 million in quake claims, 20th Century has
begun mailing 45-day nonrenewal notices to its 90,000 quake
policyholders--including those with unresolved claims from the Northridge
quake--and stopped selling new homeowner policies.

A spokesman for 20th Century said Tuesday that only 3,400 of the
company's 43,000 quake-related claims, or about 8%, remain unresolved.

The company will also phase out all homeowner coverage over the next two years, under an agreement negotiated earlier this summer with the California Insurance Department.

Almost three-quarters of 20th Century quake policyholders live in seismologically vulnerable Los Angeles County.

Paul S. Castellani, 20th Century group vice president, declined an invitation to attend tonight's policyholders' meeting.

In a letter to Michael Ramirez-Mares, chairman of the 20th Century Policyholders Quake Action Group, Castellani said the company "will continue to be vitally concerned with the fair and prompt resolution of all our policyholders' claims resulting from the Northridge earthquake."

However, he added, "We believe it is quite difficult to address the individual concerns of our insureds in the forum you propose."

Many companies are limiting the number of new quake policies they sell, fearing that claims arising from another temblor as big or bigger than last January's disaster would financially ruin them.

They are also pressuring state insurance officials to drop the requirement that forces companies that sell homeowners insurance to offer quake policies as well.

For example, last week, Farmers Insurance Group, California's third-largest homeowners' carrier, said it plans to raise the deductibles on most of its quake policies from 10% to 25%. So, a homeowner with $200,000 of quake insurance would have to pay at least the first $50,000 out of pocket--and perhaps more if the deductible was broken down into categories, as some companies do--instead of $20,000 currently.

As they start looking for new quake insurance, those who still have unresolved claims against 20th Century are getting hit by yet another financial aftershock of the January disaster: Very few other companies are issuing quake policies. And, as a rule, companies that are issuing policies will not sell them to 20th Century customers, or any other quake victims for that matter, until those homeowners settle claims with their former insurer and make repairs.

The industry practice, little noticed until now, has become painfully apparent to quake victims like Tom McVarish of Granada Hills.

"My damage is in excess of $100,000 and 20th Century is doing additional studies to determine if my foundation is sound," McVarish said. "They just sent me a check today, but I can't do the repairs until they do the foundation study, which should have been done three months ago.

"So, I really don't have a home that I can go out and get coverage on," he said.

McVarish and his wife, Jan, said that together they had called 10 insurance companies seeking quake coverage. "Once they find out you have a lot of damage, they don't want to go any further," Jan McVarish said.

Bill Schulz, a spokesman for the state Insurance Department, said he understood that sort of frustration, but the insurance practice isn't new.

"Generally speaking, if you have not settled a claim for existing damage, it is nearly impossible to get coverage from a new company," said Schulz.

"However, if the damage has been estimated by a contractor and a company has reached an agreement to begin repairs, as long as that damage is specified, companies including the Fair Plan will write coverage," he said. The issuer of the replacement policy is most interested in avoiding liability for existing damage, he said.

The California Fair Plan, an industry-financed insurer of last resort, issues fire and earthquake coverage for homeowners statewide, but provides less coverage for higher premiums than most private companies charge.


Copyright (c) 1994 Times Mirror Company


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