In the early hours Sunday morning, Northern California shook with the largest earthquake it has experienced since 1989. The South Napa Earthquake, as it is being referred to by the U.S. Geological Survey, was a magnitude 6.0 event that was felt as far as 150 miles from the epicenter. USGS estimates that within that radius “15,000 people experienced severe shaking, 106,000 people felt very strong shaking, 176,000 felt strong shaking, and 738,000 felt moderate shaking.”

Preliminary damage reports have prompted the declaration of a state of emergency by Gov. Jerry Brown. Dozens of people have been injured and electrical service has been interrupted in much of the area. In spite of the severity, given the quake’s location, much of the post-event coverage posted online has focused on piles of shattered wine bottles…

Unfortunately for those private homeowners with extensive wine collections, loss of their favorite vintage may not be covered by insurance. Damage caused by earth movement, like damage caused by flooding, is often excluded from standard homeowners coverage. Thus, in the case of the South Napa Earthquake, for those wine connoisseurs with only homeowners insurance, their wine likely will be an uncovered loss. Those more fortunate or prudent might have had their collection insured under a separate “all-peril,” itemized, floater policy.

In the end, earthquake coverage is a sensible proposition for the millions of Californians who live daily with heightened earthquake risk. It is easy to forget that five of the 10 most costly earthquakes to strike the U.S. took place in California. Yet, only a fraction of Californians own an earthquake policy.

The single largest writer of earthquake coverage in California is the California Earthquake Authority (CEA). The CEA is a publicly managed, privately funded, state residual market entity that was created after the Northridge earthquake to provide the coverage necessary to maintain the viability of the homeowners’ insurance market, since California mandates that companies that sell homeowners insurance also sell earthquake coverage.

Whether motivated by cost consciousness or obliviousness to the risk, according to Glenn Pomeroy, the CEA’s CEO, California’s current state of earthquake coverage is “not a rosy picture.” Only 11 percent of Californians with homeowners insurance have an earthquake policy, down from a high of 30 percent two decades ago.

The CEA provides a number of policies that range broadly in price and coverage options so that Californians of all walks of life can ensure their property is covered.

On the lower end, the CEA offers a base-limits policy. This product is designed to provide basic protection against earthquake damage. The policy will pay to repair or replace a dwelling – subject to a deductible – but it excludes some items from coverage such as pools, patios, fences, driveways and detached garages. Only covered, structural damage counts toward meeting the deductible. The base-limits CEA policy pays up to $5,000 to repair or replace personal property and provides $1,500 for any additional living expenses incurred if the home is uninhabitable while being repaired.

More recently, the CEA began offering a new “Homeowners Choice” product, which offers additional selections in coverage and more immediate policy benefits. The product allows a consumer to put together a more customized policy that allows for separate deductibles for the dwelling and the personal property within. Significantly, this policy offers insureds a choice of a 15% or 10% deductible for each coverage. Other coverages include $1,500 in coverage—subject to no deductible—for emergency repairs to protect the covered property from further damage, secure the residence premises, or restore habitability of the dwelling.

Many CEA participating insurers offer CEA’s higher coverage limits to their policyholders. For an additional premium, up to $100,000 in personal property coverage and $25,000 for Additional Living Expenses/Loss of Use coverage is available.

Homeowners in Napa with CEA policies who are currently picking through the remains of their wine collection might take heart. Provided their loss is substantial enough, unlike their neighbors with no such policies, they may be covered.

For other Californians, this could be a teachable moment on earthquake under-insurance. A lesson that they can put into practice immediately, since the CEA does not limit buying or selling CEA products in any way after an earthquake. For policy information, contact a participating insurer today.

Featured Publications