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INSURANCE CRUNCH : For Homeowners, Persistence Is Best Policy : Californians are finding it harder to insure homes since Northridge quake.


Claudia and Flip Banando's 72-year-old Craftsman bungalow in Monrovia has been hit hard by earthquakes. In the past decade, quakes have twice destroyed their chimney, once sent a patio wall flying, knocked an attic beam askew and even nudged the house slightly off its foundation.

After the 1991 Sierra Madre quake, centered only a few miles away, caused $40,000 worth of damage to their house, Claudia Banando recalled how relieved they were that they had earthquake insurance.

But last year, when they were notified by their insurance carrier, 20th Century Insurance Co., that their policy would not be renewed, the Banandos had no idea that obtaining another homeowner's insurance policy, let alone earthquake coverage, would be a months-long ordeal.

Homeowners insurance--which used to be plentiful--is getting scarcer and scarcer in California. Before the 1994 Northridge earthquake, a consumer could shop around, compare prices and get the best homeowners coverage for the dollar. Earthquake coverage was readily available for an additional fee.

But since the Northridge quake, the California insurance market has been on shaky ground. Nine of the top 10 homeowners insurance carriers have left California or stopped writing new business here since the Northridge quake resulted in $10.4 billion in insurance claims.

The difficulty in getting homeowner's insurance has meant headaches--but not serious trouble, so far--for the state's real estate industry.

"If the real estate market was grinding to a halt, we'd hear about it right away," said Richard Wiebe, a deputy to Insurance Commissioner Charles Quackenbush. Although he does not believe it is a crisis, the newly elected commissioner is making the insurance problem one of his top priorities, Wiebe said.

The reason so many companies have put a moratorium on selling new homeowners insurance boils down to their reluctance to sell earthquake insurance. Insurance companies say that the peril of quakes--unpredictable and devastating as they can be--is simply no longer an insurable risk at current prices.

And since, by state law, companies that sell homeowners insurance must also offer earthquake coverage, the companies have chosen not to sell any more insurance at all.

For home buyers, who must almost always secure insurance before a lender will fund their mortgages, the search for an insurer has become a top priority--and a bigger expense--over the past year.

"I've experienced a great deal of difficulty placing insurance," said Phil Jones, the broker-owner of Prudential California Realty of Long Beach. "The outlets we work with take longer to approve insurance and the policies are more expensive."

Jones said he has talked to some homeowners who have decided not to report losses from burglaries or water damage for fear of losing their coverage. "They've been told by their carrier that one more claim would cause them to lose their policy. The likelihood of getting coverage in this market--especially with a cancellation on their records--is tough," he said.

Bernard Priceman, a realtor with the Jon Douglas Co. in Encino, said that securing homeowners insurance used to be a low priority, frequently left up to the last minute. Not any more.

"The minute an escrow opens, I begin to bombard my buyer with the request to find insurance and then to secure it," he said. "It's become something you have to be aware of. If you don't go into escrow with your eyes wide open, you won't be able to close your escrow on time. You'll be able to close, but you'll probably be delayed."

It took the Banandos several months to find an insurer last year, partially because they were not alerted to the insurance shortage and took their time looking for a new insurance agency.

"Our insurance payment always fell at a terrible time of the year, financially. We wanted to wait a month or two so the payment would come due at a better time of year for us," Claudia said. "Then, of course, we also waited until the last minute to look into it" because of simple procrastination, she said.

But when she did get out the telephone book and start calling insurance agencies, Claudia quickly found out that it was not going to be easy to find a new insurer.

"I must have made 10 phone calls and most of them would not even talk to me. They just said they weren't taking anyone new and then hung up. Only two or three of them even asked follow-up questions. The first one always was, 'When was your house built?' As soon as they heard me say '1923,' they did not want anything to do with us. They said they did not want any houses built before 1945."

Because she is a 30-year member of the Automobile Assn. of America, Claudia found she could get homeowners insurance with that agency. But they demanded to know details about her house that she was not aware of, including whether it had been rewired electrically, what kinds of plumbing renovation had been done and if there was a new roof on it.

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