New Rates for Quake Coverage Called Unfair

The adoption of new insurance rates that would vary vastly across the state and be especially costly to most San Fernando Valley homeowners met a wave of angry reaction Friday from the halls of the Capitol to the streets of Northridge.

Los Angeles Mayor Richard Riordan’s office called the rates “unfair” in an angry letter to Insurance Commissioner Chuck Quackenbush, and urged changes in the rate structure. The letter stated that the rates would “adversely affect thousands of Angelenos who live in the San Fernando Valley.”

Council members representing the Valley erupted in a bitter chorus, characterizing the rates as both bad science and bad politics.

“Somebody smoking marijuana?” asked an astonished press deputy to Los Angeles Councilman Hal Bernson, who was out of town.

“I think this is Looney Toons,” said West Valley Councilwoman Laura Chick. She demanded a new structure with lower rates taking into account the city’s strong seismic code and additional reductions for homeowners who pay for seismic strengthening.

Across the Valley, homeowners had much the same reaction.

“This just doesn’t make any sense, no sense at all,” said 62-year-old construction worker John Schroeder of Northridge, shaking his head over rates that would cost him nearly three times as much as a neighbor in nearby Sylmar.

“I was here for that 1971 Sylmar quake and there was a helluva lot more damage than what we had here in the recent Northridge quake,” Schroeder said. “So why should I pay any more?”

Even Gov. Pete Wilson weighed in gingerly with critics of the plan.

At the Hollywood Roosevelt Hotel he told a television reporter that the 19 rating levels were too many.

“I would hope, I would expect there will be a review before it’s put into effect, and the insurance commissioner has said that will take place,” Wilson said.

The governor said he agreed with the concept that there should be zones with different rates, but he wouldn’t say how many.

In Sacramento, state Senate Democratic Leader Bill Lockyer of Hayward promised “legislative oversight and corrective work next year.”

Though Lockyer cautioned that the Legislature is limited in what it can do now, state Sens. Tom Hayden (D-Los Angeles) and Herschel Rosenthal (D-Van Nuys) both promised to fight the rate structure.

“Although I understand the rates were going to be higher, I think this is out of line,” Rosenthal said. In a letter to Quackenbush, Hayden demanded a review of the standards used to set the rates. He said the rates put his Valley constituents “on the hook to pay unjustified and possibly arbitrary premiums until the rates are challenged, a process that could take up to six months.”

Responding for Quackenbush, Deputy Insurance Commissioner Richard Wiebe defended the process for setting the rates despite what he described as an unpleasant day filled with calls of protest and consternation over the disparities.

“The process of setting the rates was a sound one,” Wiebe said. “If there are adjustments to be made in the rating plan, there is ample opportunity for the commissioner to consider additional evidence.”

But, Wiebe added, the commissioner has not yet decided how to undertake the review he promised Thursday.

The rates, approved by the new California Earthquake Authority this week, would be 40% higher in much of the San Fernando Valley than in most of the rest of Los Angeles. But rates in most of the Valley would be 2 1/2 times those in Sylmar and San Fernando, areas at the heart of the damage and casualties in the 1971 Sylmar earthquake.

Also at the much lower rate would be Palmdale, which lies astride the San Andreas fault, on which Southern California’s most powerful quakes are expected to occur.

Several wealthy Westside communities--including Brentwood, Pacific Palisades and Malibu, but not Santa Monica--would pay a rate less than half that of the Valley and only 60% of that of the rest of Los Angeles. There are other dramatic differences elsewhere in the state.

San Francisco Bay Area residents--where most of the highest rates would be applied--would pay 4 1/2 times more than Eureka residents. Eureka was placed in the lowest rating category despite the fact that it has had many damaging earthquakes and could face a tsunami danger.

In her letter to Quackenbush, Riordan chief of staff Robin M. Kramer cited the Eureka rates.

“On the surface, it seems unfair that a Valley resident would have to pay $780 to insure their home, when a homeowner who owns a comparable home in Eureka . . . would have to pay only $200 for the same insurance coverage,” Kramer said.

Times staff writer John Glionna contributed to this story.