April 2010


Terra firma is a Latin phrase meaning "solid earth" (from terra "earth" and firma "solid") but lately the earth has been feeling anything but solid. 

Everyone would agree that the recent stream of earthquakes across the world, the most recent being Tuesday’s deadly 6.9 magnitude earthquake in China, is alarming. For California residents, Easter Sunday’s Mexicali earthquake, perhaps given its relative proximity, was especially frightening.  Yes, we’re sturdy and resilient Californians.  Yes, we’re used to living in earthquake country -- but this 7.2 magnitude event along the Baja Peninsula on Sunday afternoon occurred in the wake of two massive killer quakes in Latin America just weeks earlier.  (On January 10, 2010 a quake measuring 7.0 magnitude killed over 220,000 people in Haiti - and near Santiago, Chile on February 27, 2010, a huge 8.8 magnitude quake killed over 450 people.) 

Comparatively, the Chilean temblor was a much stronger earthquake - perhaps as much as 500 times stronger than the event in Haiti - but it was much deeper below the earth’s crust which experts indicate greatly helped dissipate the impact.   Chile also has newer construction and their building officials have strictly enforced the seismic requirements of their local building code.  That may account for more people surviving the event, but it doesn’t mean there was less damage.  In fact, the Santiago Times reports the Chilean event resulted in some $29.7 Billion of damage.

What on earth is going on?  

The Los Angeles Times reported that California has experienced larger earthquakes in 2010 with increased frequency.   According to the Times there have been 70 quakes greater than magnitude 4.0 so far this year. “That's the most of any year in the last decade… and, it's only April,” the Times reported.  To put our “70 quakes in four months” into context, there were only 30 quakes in the entire 12 months of 2009 and 29 in 2008. Even quake experts from CalTech are unable to explain the mysterious quake frequency.  CalTech Seismologist Kate Hutton admits, “there's no real correlation with any cause."

How these recent earthquake events and heightened concern regarding the frequency will impact deductibles and earthquake insurance pricing is anyone’s guess.   The earthquake marketplace remains relatively soft with lots of carriers offering coverage at rates at or near pre-2005 (Hurricane Katrina).  From a catastrophe perspective, the last two years have been relatively quiet.   No major hurricanes have hit the East Coast in the last 18 months. The absence of damaging hurricanes has translated into lower earthquake rates here in California.   Even still, with rising delinquencies, some Boards are having a very difficult time retaining this important coverage.   And yet, with mounting seismic activity, doing nothing isn’t an appropriate response either.

Earthquake coverage remains relatively expensive, and it’s almost always carriers who have filed to do business in California on a non-admitted basis.   Meanwhile, CC&Rs are silent on maintaining earthquake coverage.   The Board of Directors may well have a responsibility to “repair” after a catastrophic earthquake, but the authors of these documents really don’t want to compel the Board to purchase earthquake coverage to “fund” that repair obligation. 

To really prepare for the next California earthquake, a few suggestions for Boards:

Emergency preparation.   Form an Emergency Response Committee which is armed with a resident list and current cell phone contacts.   This will enable volunteers to check on neighbors that may be disabled or infirmed.  After an earthquake, you need to know who in your community may require extra assistance.

Identify First Responders in your Community.   If you have individuals in your community that know First Aid and are trained to perform CPR, know who they are and where they live.

Fire often follows an earthquake.  Know where the emergency gas shut-off valves are.   It’s wonderful to survive an earthquake, but the potential for fire after the event presents an exposure that you’ll want to avoid – and quake-damaged gas pipes are nearly always the culprit.  Make sure you have volunteers who know where the shut-off valves are, and how to operate them.  Too much hassle?   Then consider investing a little in the community by having automatic gas shutoff valves professionally installed.

Encourage individual owners to purchase individual earthquake protection. Such coverage is readily available either via the California Earthquake Authority or outside earthquake markets.  Even in the absence of a master earthquake policy, it’s imperative for individual owners to purchase their own coverage – and especially to purchase Earthquake Loss Assessment coverage to protect against the special assessment that may follow an earthquake.



So where did this month's quake rank in recent California quake history (measured by magnitude)?

1. Landers (6/28/92)

7.3 magnitude

2. Cape Mendocino (4/25/92)

7.2 magnitude

3. Southeast of Mexicali (4/4/10)

7.2 magnitude

4. Off the coast of Northern California (6/14/05)

7.2 magnitude

5. Hector Mine  (10/16/99)

7.1 magnitude

6. Honeydew (8/17/91)

7.0 magnitude

7. Loma Prieta (10/18/89)

6.9 magnitude

8. Northridge (1/17/94)

6.7 magnitude

The 1994 Northridge, CA Earthquake registered a magnitude 6.7, killing 57 people and causing over $20 Billion in damages.

9. San Simeon (12/22/03)

6.6 magnitude

10. Off the coast of Northern California (6/16/05)

6.6 magnitude

11. Off the coast near Eureka (1/9/10)

6.5 magnitude

12. Joshua Tree (4/23/92)

6.2 magnitude

13. Central California (9/28/04)

6.0 magnitude

14. Humbolt County (2/4/10)

5.9 magnitude

15. Sierra Madre (6/28/91)

5.6 magnitude

16. Northridge (10/30/07)

5.6 magnitude

*U.S. Geological Survey

Evaluate a Master Earthquake Proposal at least once a year.  Since most Directors & Officers Liability policies have a specific exclusion for suits against a Board that may occur as a direct result of an earthquake, the Board of Directors should review Master earthquake coverage every year.  If you have this coverage currently, now is an excellent opportunity to meet with your insurance agent/broker to review the amount of protection you maintain and, perhaps revisit lower deductibles, if you can afford them.   If your Association currently doesn’t have master earthquake coverage, now is the time to consider it and get ballots out to assess the owners’ response.

Whether it’s community preparedness or considering Master earthquake coverage, there are positive steps a Board of Directors can take to prepare the community against the calamity which may result from the next big quake.  The time to address these issues is now – since managing to keep your feet on Terra firma appears to be less of a sure thing these days.

This letter contains only a general description of coverage and is not a statement of contract. For a more detailed description of the policy conditions and exclusions, please consult the policy itself.
For more information please visit us at: www.timothycline.com
or call us today at: (800) 966.9566