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Metropolitan Digest / LOS ANGELES COUNTY NEWS IN BRIEF

Cancellation Spurs Call for New Riot Insurance Program

April 09, 1993|ELSTON CARR

During a county inquiry Thursday on the cancellation of riot insurance for South-Central Los Angeles businesses, county and state officials called for the reinstatement of a national riot insurance program.

In the wake of civil disturbances in the 1960s, the Federal Riot Reinsurance Program was created to cover the losses of insurance companies that provided riot coverage. The program was canceled in 1982 because of a lack of funding.

"I support federal reinsurance because I feel that if we are going through an era of potentially high risk of civil disturbance, we need to make sure that no one company takes a disproportionate risk," said Supervisor Yvonne Brathwaite Burke, who called for the inquiry.

The inquiry was prompted by the disclosure that Crusader Insurance Co. had canceled the riot coverage of about 1,200 businesses in riot-affected areas. The company paid $21 million in riot claims, and officials say they fear that more civil unrest could bankrupt it.

Crusader officials said their decision indicates a larger social problem in which small companies are forced to shoulder the burden of insuring high-risk areas.

"Crusader Insurance Co. supported inner-city commerce, and the riot nearly put us out of business," said Crusader Executive Vice President Cary L. Cheldin. "I believe that many other insurance companies have avoided such support of inner-city commerce, and they were not so greatly damaged by the riot."

During the hearing, four Crusader policyholders who had their policies canceled rejected Cheldin's portrayal of his company as a scapegoat.

"During the civil unrest we stayed at our store in the dark with guns trying to protect our store even though we knew we had coverage with our insurance," said Diane Sims-Jones, co-owner of Astro mini-market in South-Central. "We feel like the thanks that we get for this is a slap in the face. You accepted our premiums for eight months (after the riots) and then canceled us. You didn't lose a dime from our store."

The Insurance Commission is scheduled to deliver recommendations regarding Crusader's decision to the Board of Supervisors on May 6.

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