For the most part, the Baltimore-Washington Corridor withstood the Aug. 23 earthquake with little damage. The natural event amounted to several seconds of shaking followed by an early end to the workday — a minor annoyance compared to the larger inconvenience and expense of unscheduled structural inspections to ensure public safety.
In Maryland, those temporarily displaced by the quake were limited to about 500 residents of an apartment building and a condominium building in Prince George’s County’s Hillcrest Heights community (near Oxon Hill). The Maryland Department of Environmental Resources initially estimated $250,000 in damages to the condominium building and $400,000 to the apartments.
The apartment residents returned to their homes a day later, after repairs were made and engineers deemed the buildings safe. Condominium residents were allowed to return to their homes three days after the earthquake.
The more widespread consequences of the earthquake, however, were to be found in the way people reacted to the event. Predictably, there was an increase in the demand for earthquake insurance.
And, not surprisingly, some people managed to find opportunity in the aftershock.
Few Are Covered
One of the most obvious questions homeowners and business owners had was whether insurance covers their property against earthquake damage.
The short answer is “No,” unless the owner has added a specific endorsement for earthquake damage to the policy.
“Generally, earthquake insurance is not sold as a stand-alone policy in Maryland,” said Tina Quigley, a spokesperson for the Maryland Insurance Administration (MIA). “The supplemental policies also work a little differently from standard homeowners’ policies. Instead of paying a flat deductible, the method of figuring the deductible for earthquake damage is based on a percentage of the cost to repair, rebuild or replace a home.”
Percentages generally range from 2% to 20%.
Unlike homeowners insurance, business coverage for earthquake damage is available either in the form of an endorsement or as a separate policy for small business owners. For these policies and endorsements, deductibles are figured as a percentage of the limit of liability. And unlike flood insurance, earthquake coverage is available from private insurance companies.
Vehicles are a different story. The MIA notes on its web site that personal and commercial automobile policies may include earthquake damage to owned or leased vehicles if the customer has purchased comprehensive coverage.
Risk vs. Cost
According to “The Business Owner’s Guide to Commercial Insurance,” an MIA publication, Maryland has recorded 62 earthquakes since 1758. Twenty-five earthquakes have occurred in the state since 1986, and most of those have occurred in the Columbia area of Howard County.
A detailed list of these events on the Maryland Geological Survey web site shows much of the Columbia activity to be concentrated in the Allview Estates area. Other Maryland earthquakes have struck areas of Baltimore City, Baltimore County, Cecil County, Harford County and, most recently, Montgomery County.
According to Charles McCabe, president and CEO of McCabe Insurance Associates of Columbia, the demand for earthquake endorsements has been historically low in Maryland.
“It’s not something people often buy here, but when something like this happens, our phone starts ringing,” he said.
In the days immediately following last month’s earthquake, McCabe estimated that his agents received roughly one telephone call every hour from people inquiring about earthquake insurance or asking to add it to their policies.
“So far it hasn’t reached the level of activity we had in 1993,” McCabe said, when a 2.7 magnitude tremor felt in Columbia touched off a scramble for insurance that resulted in 435 of his customers adding earthquake endorsements to their policies.
On the plus side, he noted that supplemental insurance for earthquake coverage in Maryland is very affordable for homeowners, especially when compared with riskier areas of the country.
“For typical premiums the added cost is between $50 and $100, but the same coverage could cost thousands of dollars in California,” McCabe said.
Fear Breeds Opportunity
The Business Monthly learned of at least one suspected scam in which flyers offering earthquake inspection and repair services appeared in a Silver Spring community one day after the quake. That anonymous tip could not be independently confirmed, however.
“That is a scam that does happen,” said Angie Barnett, president and CEO of the Better Business Bureau of Greater Maryland (BBB), “but we’re not aware of this happening anywhere in Maryland after the latest earthquake.”
Typically, she said, scammers move quickly to prey on businesses or individuals who are shaken up and not thinking clearly after a quake. “They target people with concerns or who are owners of older houses,” she said.
Warning flags could include contractors driving unmarked vehicles, who are unable to produce estimates on letterhead forms, who do not wear uniforms or who cannot provide proof of their identity or association with the company they say they represent.
“All contractors are required to have a Certificate of Authority to operate in the state,” said Quigley, while insurance producers and agents offering earthquake coverage must be licensed by the MIA.
The BBB’s online features (http://greatermd.bbb.org) also can be used to check for complaints about the company offering services.
Although the tremor was limited to the eastern United States, sympathetic vibrations were felt as far away as the West Coast, where the California Earthquake Authority (CEA) quickly appropriated the quake to advance its own agenda.
The CEA, a publicly-managed, privately-funded organization that provides catastrophic residential earthquake insurance, hastily issued a press release invoking the quake while it was fresh in federal lawmakers’ minds. The release called on Congress to take up the issue of earthquake insurance affordability in California.
“It’s a fact that all federal taxpayers are seriously exposed to the massive costs of earthquake damage,” said CEA CEO Glenn Pomeroy in the release. “Making earthquake insurance more affordable helps families rebuild and their communities recover, but it also reduces federal taxpayers’ financial risk.”
The concerns about the recent event have even reached the halls of Congress, which is slated to discuss the Earthquake Insurance Affordability Act (S.637 – Feinstein) when it returns from recess in September.
