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Home Insurance Coverage

October 03, 1994

"Some Leadership in the Home Insurance Mess," editorial, Sept. 11:

New claims may be only part of the household insurance problem. I recently received a letter stating that my insurer of eight years was going to cancel my standard policy because of "evidence of lack in pride of ownership and poor housekeeping." They sent an inspector out a month ago, at a time when most of us were still undergoing recovery. My house had been completely repaired and upgraded at that time, yet they still plan to cancel my policy.

I think that you should review cancellations based on absurd reasons. These untimely inspections are giving the insurance companies a way to discriminate against those of us living in areas such as Sherman Oaks. My insurer seems to be trying to revoke my policy for bogus reasons because I have now requested earthquake coverage.

BONNIE FLAMER

Sherman Oaks

Your editorial praising Insurance Commissioner John Garamendi's proposal for dealing with the problem of earthquake insurance availability ignores reality.

The looming crisis is caused in part by inadequate rates for homeowners insurance and earthquake insurance. Garamendi's proposal does not address either.

The primary reason homeowners insurance is less available is the excessive exposure to earthquake losses created by California's mandatory earthquake offer law. Many insurers have far more exposure to earthquake losses on their books than they can safely handle. Expanding the California Fair Plan does nothing to alleviate this problem.

Insurers are attempting to get a handle on the property insurance they sell and their excessive earthquake exposure in order to minimize the risk of insolvency should another major quake hit a densely populated area. Fair Plan losses are paid by private insurers and their policyholders. Expanding the Fair Plan increases the risk of insolvency.

The only way companies can decrease exposure to earthquake insurance losses is to discontinue selling homeowners insurance policies. Expanding the Fair Plan discourages companies from selling homeowners policies because the larger the market share, the larger your Fair Plan assessment.

Garamendi's proposal ignores all this and puts the future financial stability of insurers at greater risk when adequate rates and removing the mandated earthquake coverage offer could resolve the problem.

DAVID E. FOUNTAIN

Director of Communication

Personal Insurance Federation

Sacramento

The Times stated that the Legislature "ducked its responsibility" to act in response to the growing homeowners insurance crisis.

As the author of AB 1388, I believe I am entitled to respond that it was not for lack of leadership, nor lack of work, that serious legislative efforts addressing the problem failed. Throughout the closing days of the legislative session, I, along with my Insurance Committee consultants, legislative staff and all interested parties, put in long hours in an attempt to hammer out a solution. Senate Insurance Chairman Art Torres conducted an extraordinary night hearing of his committee on the next-to-last-day of the two-year legislative session in a last-ditch effort to pass legislation.

In the final analysis, our efforts failed because there was simply lack of agreement among the parties most directly involved as to the best course of action.

I believe that AB 1388 was credible compromise legislation aimed at relieving the crisis. It would have allowed insurers to satisfy the existing mandate to offer earthquake coverage by offering a policy written through the California Fair Plan.

While I respect the insurance commissioner's efforts to provide some interim solution, I am convinced that no unilateral action by his department can provide an adequate solution.

JUANITA M. McDONALD

Chairman, Assembly Insurance Committee

D-Carson

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