20th Century Insurance plans to reenter California's homeowners insurance market, five years after the Northridge earthquake nearly drove the company out of business.
State Insurance Commissioner Chuck Quackenbush announced an agreement Tuesday that allows the Woodland Hills-based insurer to begin writing homeowners policies this summer in exchange for establishing a $6-million fund to help compensate earthquake victims with ongoing financial hardships. The insurer was also assessed a $100,000 fine for improper handling of earthquake claims.
Like most of the state's other major insurers, 20th Century will offer earthquake insurance through the California Earthquake Authority, a state-run pool that insulates insurance companies from much of the risk of earthquake coverage. The risk is now shared among more companies and, indirectly through higher deductibles, with homeowners.
20th Century, once the state's eighth-largest homeowners insurer with 236,000 policies, was allowed to exit the market in 1994 after it was almost bankrupted by $1 billion in Northridge claims.
Later, the company was accused of delaying claims or offering insufficient settlements. Although the company said more than 99% of its earthquake-related claims were settled without litigation, juries have sided with homeowners in some prominent cases.
In December, a jury ordered 20th Century to pay a Northridge family $3.3 million in damages for failing to promptly pay its earthquake claim. Earlier in the year, another jury found 20th Century guilty of fraud and bad faith for denying a Tarzana couple's Northridge claim. That jury awarded $6.75 million, which a judge later reduced to $500,000. Both cases were appealed by the company and have since been settled out of court. No terms have been disclosed.
Consumer advocates say 20th Century brought its problems on itself by concentrating its business in Southern California, particularly in more affluent communities.
"The real concern we have is that the state watches 20th Century so that it doesn't saturate all its business in one area, like the Valley," said Jamie Court, a lobbyist with Santa Monica-based Proposition 103 Enforcement Project.
20th Century spokesman Ric Hill said the company will continue to seek a low-risk, conservative niche but that it has already diversified geographically in the auto insurance market, and plans to continue. Hill said about a third of the company's auto policies are now written in Northern California, compared with 5% before Northridge, and the company now writes auto insurance in Arizona, Nevada, Oregon and Washington.
Consumer advocate Court said the company should also be forced to repay part of a Proposition 103-related refund amount that was waived because of 20th Century's financial difficulties.
20th Century was initially ordered to refund $123 million to customers as part of the proposition, which ordered rate rollbacks and refunds from the state's insurers. 20th Century ultimately paid $46 million.
20th Century's parent company, 20th Century Industries, is now more than half-owned by insurance giant American International Group. It reported net income of $101 million last year, compared with its $498-million loss in 1994. Its stock price had recovered to pre-earthquake levels by early 1998 but has fallen 34% in the last year as increasing competition in the auto insurance market has battered much of the insurance industry's stocks. On Tuesday, the stock closed down 25 cents at $17.63 on the New York Stock Exchange.
Liz Pulliam can be reached at firstname.lastname@example.org.