Earthquake Loss Assessment Coverage
Earthquake Loss Assessment is a coverage that is typically associated with Condominiums and Townhouses. The building portion of a condominium or townhouse is usually insured by the homeowners association (HOA). The contents and improvements of each unit are insured by the unit owner. An earthquake loss assessment would be the result of damage to the building after an earthquake.
There are three principle reasons for unit owners receiving an earthquake loss assessment: 1) the HOA did not have earthquake coverage on the building, 2) the HOA did not have enough earthquake coverage on the building and 3) the HOA had a large earthquake insurance deductible. Most earthquake policies have a 15% deductible. Unit owners would be assessed their proportionate share of the deductible.
EXAMPLE: The building had an earthquake insurance policy with a 15% deductible. The building was insured for $1,000,000.00 and there were 15 unit owners in the building. The deductible for this policy would be $150,000.00 (15% of $1,000,000.00). Each unit owner could be assessed $10,000.00 ($150,000.00 divided by 15 unit owners).
If the unit owner had an earthquake insurance policy and if that policy had earthquake loss assessment coverage the unit owner could submit a claim to the earthquake insurance carrier for an amount up to the limit of coverage purchased in the policy. Today after the Northridge Earthquake, the California Earthquake Authority is the principle seller of Earthquake Loss Assessment coverage (ELA). To purchase ELA the insured would have to buy condominium/townhouse coverage from a participating insurance company. My insurance companies that participate with the California Earthquake Authority are Mercury Insurance Company and Safeco Insurance Company.
This article(s) represents the views and opinions of Garrett Parkinson and not the Insurance Companies that he represents or illustrates in his articles.