Earthquake Insurance Coverage

Here on the east coast, most people probably don't know or don't care that their property insurance policies -- both commercial and personal lines policies -- exclude coverage for losses due to earthquakes. The HO-3 (10/00 edition), for example, provides:

SECTION I – EXCLUSIONS

A.        We do not provide insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area.

2. Earth Movement

Earth movement means:

a.         Earthquake, including land shock waves or tremors before, during or after a volcanic eruption;

caused by or resulting from human or animal forces or any act of nature unless direct loss by fire or explosion ensues and then we will pay only for the ensuing loss.

Even with its "anti-concurrent causation" prefatory language, I, myself, never considered the earthquake exclusion to be of any potential consequence to the financial security of my home and contents. Until yesterday.

Some of you may have heard about the trio of "micro" earthquakes that hit central and north New Jersey residents earlier this month ranging from 2.3 to 3.0 in magnitude. According to the New York Times, no damage or injuries were reported after any of the three. Quoting Dr. Won-Young Kim, director of the Northeast Seismic Network and a senior scientist at the Lamont-Doherty Earth Observatory, in Palisades, NY, the Times reported: “I don’t think people should worry,” he said. “Earthquakes are not unexpected here. It’s just an indication that Planet Earth is evolving.” The New York Times' Science Section includes a topic on earthquakes, with many informational links. 

In keeping with its particular journalistic tack, the New York Post reported the New Jersey quakes in a different, more alarming way, predicting that "[t]he Big Apple is due for the Big One" and claiming that unnamed seismologists call the geological fault lines crisscrossing Manhattan "a perfect storm for a temblor that could topple older buildings, cause billions of dollars in damages and kill people citywide."  The Post article states:

The city should expect a jolt like that last one every 100 years, the experts warn - which means we're overdue. Jersey's recent baby quakes, which caused no damage and failed to rise above 3.0 in magnitude, may have been warning shots, they say. 

A 6.0-magnitude quake could cause as much as $200 billion in damages, according to a 2003 study by the New York City Area Consortium for Earthquake Loss Mitigation. 

Now I'm no more an alarmist than the next person, but the concept of geologic recency does strike a chord.  Yes, the largest earthquake to hit the greater New York City area was only a 5.2 magnitude "moderate" quake in 1884, but growing up in northern New Jersey and Rockland County, I did learn that those areas are relatively active, seismologically speaking.  And not just northern New Jersey and southeastern New York.  Did you know that there was a 2.4 magnitude quake just south of Albany last Wednesday and another of a 2.1 magnitude at 10:46 a.m. in the same area just yesterday? 

People and businesses in California know that earthquake coverage is available for purchase under separate, coverage-specific policies through the California Earthquake Authority.  Is earthquake coverage available here in New York?  I don't know, since I've never asked.  Back in 2006, AP Online reported that Allstate was dropping earthquake insurance to most of its 407,000 quake customers nationwide as a part of a larger move to reduce exposure to catastrophic losses, but would still be renewing earthquake coverage in New Hampshire, New York, and Pennsylvania. Will I ask about earthquake coverage?  Probably, if only to satisfy my curiosity to know. If any agents or brokers who read this blog would like to comment on the availability and approximate cost of such coverage, please do.

Those who live and work in the metropolitan New York City area, have you made any preparations for "the Great New York Earthquake"?  Something to think about.  Not that we all don't have enough to think about right now in these economically quaking and crumbling times.  With insureds reported to be canceling or reducing insurance coverages to save money, I don't see there being a rush on buying earthquake policies. Just please don't be surprised to learn that your homeowners or businessowners policy doesn't cover earthquake related damage if it does occur.