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EARTHQUAKE: THE LONG ROAD BACK : Legislators Hope to Revive State Quake Insurance Fund Killed Last Year : Politics: Supporters admit the program has flaws but say it could have provided L.A. homeowners with $5,000 each after Northridge temblor. Critics say only a nationwide plan can work.


SACRAMENTO — In the wake of the Northridge earthquake, several legislators hope to revive a short-lived state insurance fund to help homeowners repair earthquake-damaged homes in the future--even as opponents insist that the state cannot afford such a program.

The effort to re-create the fund comes a year after legislators urged by Insurance Commissioner John Garamendi concluded that the California Residential Earthquake Recovery Fund was bordering on insolvency and had to be dismantled.

Critics say the only way such a program can work is to spread the costs nationwide by creating a federal coffer for all types of calamities, including hurricanes and tornadoes in the South, East and Midwest, and volcanoes and earthquakes in the West.

Backers of the defunct California fund acknowledge that the program had flaws but say Los Angeles homeowners with damaged property could have received several thousand dollars each under the program.

"It probably seemed like good politics at the time (to abolish it)," said Assemblyman Rusty Areias (D-San Jose), who tried to keep the fund in place and Monday plans to introduce legislation reinstating it.

"I feel badly for the people who advocated the repeal of that program, but what we said will happen has happened," said Areias, who is chairman of an Assembly committee on earthquake safety. "They took the risk and we all lose."

If the earthquake fund had been in place when the Northridge temblor hit, Areias and other officials estimate, the fund would have contained about $350 million. If 60,000 to 70,000 Los Angeles-area homeowners applied for coverage, they could have received checks for $5,000 or more each.

In the absence of a disaster fund, people whose homes were damaged are left to make claims against private insurance, if they had quake coverage, or seek loans from the Federal Emergency Management Agency. The state also offers tax breaks for rebuilding.

Then-Gov. George Deukmejian pushed for the creation of the California Residential Earthquake Recovery Fund after the Loma Prieta earthquake in October, 1989.

At the time, officials were rushing to find ways of responding to the $7.9-billion damage in the San Francisco area, and the program won near unanimous support in the Legislature.

As it was envisioned, homeowners were supposed to pay $12 a year into the fund if they lived in areas where the risk of earthquakes is low, and $60 if they lived in high-risk areas. The payments would be made when they paid their homeowners insurance premiums. In exchange, the state promised to pay as much as $15,000 to owners of single-family houses for quake damage, with a $3,500 deductible.

Deukmejian viewed the fund as a supplement to private earthquake insurance policies, which commonly have deductibles of 10% of the policy's value. On a $200,000 policy, the homeowner must pay the first $20,000 in damage.

Areias said the legislation never promised to pay the full $15,000. All it guaranteed was a prorated share of whatever was in the fund. In the short time the program was in place, homeowners whose residences were damaged by quakes in 1992 received $120 million in payments.

After the 7.6 quake in the Mojave Desert and the 6.7 quake in Big Bear in 1992, 4,900 people from as far as Los Angeles and San Diego filed claims, and received checks averaging $6,439. The fund also was in place in April, 1992, when a 7.1 quake rocked Northern California. In all, 1,370 homeowners received money after that quake.

"It was a godsend," said Pat Tomasini, who received checks totaling $13,000 after her home in the Victorian town of Ferndale was destroyed by the April, 1992, quake.

"That's a big, big help," added Tomasini, who has rebuilt. "It can pay for foundations, it can pay for a lot of things. When you have no house, you have no collateral. That ($13,000) is your security."

Areias blamed legislators from areas where the risk of quake damage is low for undermining the program. Their constituents did not want to pay the minimum $12 annual premiums, he said. He also criticized Garamendi for not trying harder to make the program work.

When he was a state senator, Garamendi was among legislators who voted to create the fund. But when he became insurance commissioner and was faced with the prospect of administering the program, Garamendi began sounding warnings that the program was unworkable.

The focus of his criticism was that the program promised more than it could deliver. In an interview after the Northridge quake, Garamendi called the program a "bait and switch" because of an implied promise that people who paid their premiums could have collected up to $15,000. The fund never could have paid everyone who was eligible, he said.

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