Quake coverage harder to get (and keep)

As I watch news coverage about the high cost of rebuilding caused by hurricanes and other recurring catastrophes, I often wonder why property owners continue to rebuild in high-risk areas. From my detached perspective, I also wonder why we taxpayers must subsidize what seems to be poor judgment, very consciously applied. If the homeowner wishes to reap the benefits of the amenities associated with living in that particular part of the earth, why must the rest of us bear the very high risk of its destruction?

This week, I received a wake-up call that suggests than I too may be living in a high-risk part of the earth. I got a letter from Safeco, my homeowners insurance carrier, advising me that it would no longer provide earthquake coverage for my home when my policy renews next month. This new policy applies to all homes and condos which are either solid masonry construction or built prior to 1950. In metropolitan St. Louis, that probably includes a majority of homes inside I-270, and almost everybody in the City.

I’m surprised I hadn’t heard about this before. My agent told me that Safeco came up with this new policy back in February, and has been notifying policyholders piecemeal as the renewal date of the policy approaches. My agent notes that many other companies have been conditioning their earthquake coverage in similar ways for some time. Most companies condition their coverage on one of the two conditions identified by Safeco: year of construction (with the cutoff varying between 1940 and 1960) or construction materials. The company my agent will seek to use for me will provide earthquake coverage for masonry dwellings on poured concrete foundations but not stone or concrete block foundations. My poured concrete foundation is the exception in my neighborhood, where it appears that about 90% of the foundations are stone.

This is a very unfortunate development for the St. Louis area. The region is known positively for its abundance of solid brick homes. But the area is also vulnerable to earthquake activity from several area faults, most notably the New Madrid fault. Brick and other masonry construction is more vulnerable to quake damage than frame construction. If the insurance industry abandons the area with respect to earthquake coverage (as it has for storm damage in many hurricane-prone areas), we will all risk almost total uninsured loss when (not if) the overdue major quake strikes. That’s a very unattractive prospect not only for homeowners, but also for many of the businesses who provide the jobs on which our community relies.

I like living in St. Louis. But now I may need to reassess the risk of doing so.