State Honoring Quake Insurance Claims : Damage: Homeowners hit by April temblors are compensated despite drive to repeal new program. Critics say major earthquake would bankrupt system.

Even though the Legislature is considering repeal of the state’s new residential earthquake insurance program, the first claims payments have begun going out to nearly 2,000 victims of April’s Desert Hot Springs and Humboldt County quakes.

But even if the program is repealed, as Insurance Commissioner John Garamendi and Gov. Pete Wilson have sought, claims from those temblors will be honored because they occurred while the coverage existed, a spokesman for Garamendi said Thursday.

Spokesman Kenneth Burt said that at a rate of about 100 claim payments a day, the state is sending 1,610 homeowners a total of $12.4 million to recompense them for damage suffered in the April 25-26 quakes of magnitudes 6.9, 6.5 and 6.2 in Humboldt County.

He said about $440,000 is going to 120 claimants hit by the magnitude 6.1 quake near Desert Hot Springs on April 22.

The payments cover the first $15,000 of damage to single-family homes, with a $1,000 deductible.

Burt said the residential earthquake fund has accumulated $24.5 million from surcharges of $12 to $60, depending on the seismic risk of the area, levied since Jan. 1 on homeowners policies throughout the state.

That is more than enough money to pay claims against the first damaging earthquakes the state has experienced since the program started, he said.

Garamendi has cited studies of annual quake damage in California, indicating that money collected under the surcharges will not be sufficient to pay all claims over a long period.

He has warned that an early major quake in an urban area would bankrupt the fund, leaving a choice between paying claimants with general state revenues or not at all. Wilson, criticizing Garamendi for not being more aggressive in marketing state earthquake insurance, agrees that the program should be repealed because of its financial instability.

The repeal failed to pass by three votes in the state Senate last month, but the chairman of the Senate’s insurance committee, Art Torres (D-Los Angeles), has vowed to seek reconsideration.

In the meantime, the only quakes leading to claims have occurred mostly in rural areas or small towns, and thus there has been little financial strain on the fund.

Burt said in the Humboldt County earthquakes, 1,690 claims were made for amounts from $1,001 to $15,000. Another 310 homeowners submitted claims for $1,000 or less, but these will not be paid because they are less than the deductible.

He said in the Desert Hot Springs quake, 120 homeowners sought reimbursements from $1,001 to $15,000.

The state Department of Insurance, which administers the fund, has contracted with two national insurance adjuster firms to review all claims. Burt said some were disallowed because they involved commercial buildings that were not covered or because homeowners had not paid the surcharge when it was billed. If a homeowner has not received a bill for the surcharge, he or she is automatically covered.

Insurance adjusters billed the state $1.4 million in the Humboldt County earthquakes and about $100,000 in the Desert Hot Springs temblors, Burt said. Therefore, the cost to the state residential earthquake insurance system for April’s temblors, including claims and adjusting, is about $14.3 million.