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Tuesday, January 19, 1999

Quake Toppled Companies, Renewed Others;


On Jan. 17, 1994, the San Fernando Valley's business community got the wake-up call of a lifetime.
For some business owners, the terrifying temblor was a startling jolt that roused them from years of vocational slumber, and helped create invigorated enterprises that today enjoy revived revenues and increased profits.
For others, the deadly Northridge shaker came out of the night like an icy hand, pulling the covers off firms that, already weakened by years of regional recession, could not take the weight of the shifting earth and the resulting structural collapse.
The toll exacted by this seismic alarm clock was staggering: at least 57 people dead and an estimated $40 billion in damage, making it the costliest natural disaster in U.S. history.

More than 22,000 firms in the region, most of them in Los Angeles County, turned to the Small Business Administration for help on the heels of the 6.7 magnitude quake. They collected more than $1.4 billion to replace broken fixtures, water-logged inventory and crushed computers.

With destruction on such a scale, it's unsettling to think of any "winners" arising from these scattered ashes.

Still, there are firms, even industries, that have emerged from the adversity stronger than ever. It is testament to the resilience of the entrepreneurial spirit and the strength of the desire to make a buck.


A large steel beam came crashing down into the office from which Al Gold ran his not-quite-50-year-old business, Gold's Graphics Mfg. Inc., a Pacoima-based company that makes, among other things, promotional banners typically strung on light poles.

During the Northridge earthquake, the roof on Gold's Graphics gave way.

"If I'd been in the building, I would have been killed," said Gold, who founded the company and serves as its chairman and CEO. "The whole place was a mess.

"I thought we were done for."

As luck would have it, two days before the earthquake, Gold had moved $1.5 million worth of inventory to new, rented space two blocks from his existing facility. Though the new place had no heat or power, at least it was still standing. So he moved the rest of his operation to the new facility and started over.

Gold took advantage of the involuntary remodeling to go high-tech. Investing $5 million, including more than $1 million in loans from the SBA, Gold revamped his operation and in the process, quadrupled his sales.

"Before I was kind of fat and happy," said Gold. "Then, we were in a crisis, and we had to prevail."

Gold, who received a Phoenix award from the Valley Economic Development Center for his post-quake comeback, said that bringing his company back from the brink gave him one of the biggest thrills of his life.

"We've gone through an awful lot, but we've come out better than we were."

That better-than-ever sentiment was echoed by John Rooney, president of the Valley Economic Development Center.

"There was a big shakeout, and a lot of businesses went under," Rooney said. "But there was a lot of capital infusion into the area. The businesses that did survive invested in their businesses and have become more competitive."

Rooney added that he also saw an emotional effect from the quake.

"It created a real entrepreneurial spirit," he said. "There's a can-do attitude."


Of course, not every story has had a happy ending.

Woodland Hills bankruptcy attorney Kenneth Jay Schwartz said fully half of his clients, homeowners and business owners, mention the earthquake as the root cause of their slide into bankruptcy.

"A lot of people are still trying to dig out from the effects of the earthquake," said Schwartz, who's been a bankruptcy lawyer since 1981. "A lot of people would mark that as the beginning of their decline but they just kept holding on."

Before surrendering to bankruptcy, some business owners tried to sell, but couldn't find buyers.

"We noticed an incredible drop in the number of businesses for sale for six to nine months after the earthquake," said Peter Siegel, publisher of California Businesses for Sale magazine. "People wanted to get out, but they couldn't get the price they wanted for their business."

Some of the most heart-rending post-quake stories come from businesses and homeowners who are still fighting with their insurance companies over unpaid or underpaid claims.

Those gripes have led to one of the flourishing post-quake growth industries: attorneys handling claims against insurers and contractors.

"We had tons of earthquake work, but the construction defects work stopped," said Alan I. Schimmel of Schimmel, Hillshafer & Loewenthal in Sherman Oaks. He estimates that, even taking into account the decreased load in other types of cases, the earthquake increased his firm's business by 25% to 30% overall.

"We have 17 bad-faith cases," against the Farmers Insurance Group and its related insurance exchanges, said Schimmel, who represents several homeowner associations. "We're talking about literally thousands of families."

Farmers Group, the nation's third-largest insurer, also was the focus of ire Sunday as a small group of North Hills condo owners and their supporters held a public protest against what they contend was unfair treatment by the insurer. While acknowledging that Farmers has paid them $2.5 million, the group says the insurer owes them thousands more, funds they say are needed to bring their building back to pre-earthquake condition.

Lorraine Enriquez, a spokeswoman for Farmers, said the company feels it has handled the North Hills case--and Northridge claims in general--fairly.

"Farmers has done an excellent job of settling the majority of Northridge earthquake claims," she said, with only 183 claims still unresolved out of 36,750 filed.

Last month, Woodland Hills-based 20th Century Insurance was ordered to pay $3.3 million in damages to a Northridge family that filed suit after the company failed to promptly pay earthquake claims.

It was one of 12 suits filed against 20th Century as a result of earthquake disputes, according to company spokesman Ric Hill. In four of those cases, more than $4 million in additional payouts were ordered. The rest, he said, were dismissed or a determination was made that the claims were not valid.

Hill, who has been with the company for 22 years, defended his firm's handling of earthquake claims.

"Twentieth Century has been extremely responsive to policyholders, without a doubt," said Hill, who added that the company to date has spent about $1.057 billion on claims and the "evaluation effort" associated with those claims.

Hill, whose parent company posted a 16% increase in profits for the first nine months of 1998, could not give a breakdown on how much of that $1 billion plus went to reimburse policyholders and how much was for internal administrative costs.

As more court cases are filed, and findings appealed, the insurance issue threatens to keep the wounds of the Northridge earthquake fresh in the minds of many for years to come.

For many others, the quake will be remembered as the day we awoke to find that we were stronger and smarter than even we had suspected.

Said Rooney, of the economic development center:

"It's been an amazing experience--that I never want to repeat." Making Contact:

The Valley Economic Development Center has a $6-million loan fund available to help businesses harmed by the Northridge earthquake. For more information, call (818) 907-9977 and ask for Roberto Barragan. *

Valley @ Work runs each Tuesday. Karen Robinson-Jacobs can be reached at * SHARED MEMORIES: Quake survivors reveal naked truth about preparedness. B3


For the Record;
Los Angeles Times Friday, January 22, 1999
Valley Edition; Metro; Part B; Page 3; Zones Desk;
2 inches; 45 words;
Type of Material: Correction

Quake suits--An article Tuesday incorrectly stated the number of lawsuits related to the Northridge earthquake filed against 20th Century Insurance. Less than 230 suits have been filed, 12 have gone through litigation, about 100 are pending and others have been settled or dropped, according to a company spokesman.



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