Letters to the Editor

Shake, Rattle, and Roll;Musical Notes;Puni, Unlike Muni, Keeps Rolling Along

Shake, Rattle, and Roll

Finding faults in an earthquake story: Your recent article "Rubble With a Mortgage" (Aug. 1, by Marc Herman), concerning earthquake insurance, contained several factual errors, some of which were erroneously attributed to me as a spokesman for the California Earthquake Authority. Your reporter drew a large number of rather generalized conclusions about earthquake insurance based on what clearly was a significant misunderstanding about the nature and origins of earthquake insurance in California.

I would like SF Weekly to correct those errors so that your readers will have a better understanding about earthquake insurance and can make good decisions based on accurate information.

1) The article states that after the Northridge earthquake, "Sacramento separated seismic damage from other household disasters, like fire, termites, or a Muni bus crashing into the yard." Sacramento did not separate earthquake damage from other household disasters. Earthquake damage has never been covered by basic homeowners' policies. The insurance industry sought to repeal the statutory provision that requires insurers selling homeowners' policies in California to also offer earthquake policies. The Legislature declined to repeal that requirement and it remains in effect today as an important protection for homeowners and consumers.

2) The article states, "The [California Earthquake A]uthority's basic job was to draft, market, and sell a new, publicly backed earthquake insurance policy." This statement contains several errors. The California Earthquake Authority was created to establish a shared risk pool for private insurers. It did not draft the basic earthquake policy that is now the dominant earthquake insurance policy available in California. The Legislature, with the support of groups like Consumers Union, drafted the policy in recognition that without a basic, catastrophic insurance policy, consumers would be left with no protection against earthquake losses.

The CEA does not sell earthquake policies directly to consumers. Policies are sold by agents and other representatives of the 19 insurance companies that voluntarily joined the CEA. Most important, the CEA is not publicly backed. No public money of any kind is used to administer the CEA or to pay claims after an earthquake. The CEA is funded exclusively by premiums and by the private insurance companies that are members.

3) The article states, "The problem was, the CEA came up with a terrible product ...." As noted above, the basic earthquake policy was approved on a bipartisan vote of the Legislature, with the support of Consumers Union, well before the CEA was even created. The creation of a basic or catastrophic earthquake policy was seen at the time as a necessary step in preserving a residential homeowners' insurance market.

4) The article states, "[The] deductible is a flat 15 percent ...." While the basic policy that was approved by the Legislature contains a 15 percent deductible, CEA policyholders have the option of purchasing policies with a 10 percent deductible.

5) The article states, "Nor did the policy cover much. It was limited to your house's walls, roof, and foundation." Like all insurance policies, the CEA policy contains exclusions. However, it covers much more than walls, roof, and foundation. Policyholders may purchase up to $100,000 in coverage for the contents of their home. The policy pays for all costs to restore the home to pre-earthquake condition once the deductible has been met. It will pay up to $15,000 for emergency living expenses if your home is uninhabitable, it will pay for emergency repairs to make your home safe, and it will pay to remove debris, stabilize soil, and upgrade your home to current building codes.

6) The article states, " ... the CEA policy does not cover what it calls "contents' ...." The basic earthquake insurance policy includes up to $5,000 in coverage of contents. CEA policyholders have the option of increasing coverage for contents up to $100,000.

7) The article states, "So only if your house is gravely damaged will you get some money to repair it, usually capped at $350,000." There is no "usual" cap on CEA coverage and no cap of $350,000. The CEA policy covers the cost of repairing your home up to the full-insured value as indicated under Coverage A of your homeowners' insurance policy. If the Coverage A value of your home is $1 million, the CEA will pay up to that amount to repair your home, once you have met your deductible.

8) The article states, "Renters basically have to hope their landlords have paid extra for earthquake insurance. Even then, you'll have to pay to replace your possessions." CEA insurance up to $100,000 is available for renters who wish to cover the contents of rented property.

As you can see, your article was prepared and printed with some very significant errors. Please do your readers the service of providing them accurate information on something as vital as earthquake insurance for residents of the San Francisco Bay Area.

Tupper Hull
Spokesman, California Earthquake Authority

Marc Herman responds: 1) Yes, homeowners' policies have treated earthquake coverage separately from other coverage. But the fact is that prior to 1994 it was possible and convenient to include comprehensive earthquake coverage with a regular homeowners' policy. That wasn't so after 1994, when suddenly "[y]ou couldn't get homeowners' insurance in California because of this earthquake issue," as Hull himself said. The Legislature, by the very fact of creating the CEA, decided to treat earthquake insurance differently from other types of policies.

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