By KATHERINE PETERSEN
Homeowners may have easier access to earthquake insurance with the passage of two new state laws in late 1995. Under the laws, an earthquake disaster insurance fund of $10.5 billion may be created to assist California homeowners. The two laws--the California Earthquake Authority and the Mini Policy Act--were written for revitalizing the homeowner market, according to a state report.
The earthquake authority, composed of the governor, the state treasurer and the state insurance commissioner, would manage the multibillion-dollar fund of public and insurance-company money.
Richard Wiebe, deputy state insurance commissioner, warned that its establishment is dependent on many issues, including IRS approval of tax-exempt status, acceptance by 75 percent of the companies writing residential quake insurance, and final approval by the state Legislature.
Wiebe said such a fund could have covered the Loma Prieta quake, which had $1 billion in residential losses.
After the Northridge quake, which sustained more than $4 billion in losses, insurance companies fled from residential coverage largely because they have to offer quake coverage on renewals, said Steve Young of the Insurance Brokers and Agents of the West.
Wiebe said his boss, Insurance Commissioner Charles Quack-enbush, has advised congressional committees that "a national disaster insurance program is the only answer to such catastrophes."
Young said the Natural Disaster Protection Partnership Act is pending in Congress.
The Mini Policy Act would create slimmed-down earthquake insurance policies that can be sold as of Jan. 1 by any registered insurance company that has had its rates and policy forms approved by the State Insurance Department, Young said. At presstime, none had been approved, he said.
The policies would cover basic structural damage, a deductible of no more than 15 percent, limits on contents of either $5,000 or 10 percent of the structural loss, and no more than $1,500 in additional living expenses. There would be no coverage for swimming pools, patios, decorative features or masonry fences and chimneys.
"This will make it more enticing for insurance companies to offer homeowners policies that include earthquake coverage," said Van Freidin, president of Sexton and Freidin Insurance in Sunnyvale. He said that previously companies would have had to pay the cost of replacement rather than the insured amount.
This article appeared in the Sunnyvale Sun, February 7, 1996.
©1996 Metro Publishing, Inc. All rights reserved.