A 6.0-magnitude earthquake occurred in Napa County, California early in the morning on Sunday, August 24. Citing the U.S. Geological Survey, the Los Angeles Times reported that it was the strongest earthquake to hit the Bay Area in almost 25 years. In addition to direct damage to structures, the quake reportedly triggered at least 65 aftershocks and 50 fires, causing an estimated total of up to $1 billion in property damage.
The Times spoke of damage to everything from outlying mobile homes to main street commercial buildings and historic structures at the former naval base on Mare Island. As this blog has discussed in the past, the need to purchase vintage construction materials may affect the cost of repairing or replacing older structures. Mobile homes are also seen as increasingly vulnerable to severe weather and natural disasters, due to environmental trends and the aging of the current inventory.
A spokesman for PG&E said the company has responded to hundreds of calls about potential gas leaks and dispatched crews to perform door-to-door inspections of gas structures to ensure their safety. This is critical, as gas leaks pose a major risk to structures of all types. Meanwhile, local officials throughout the Bay Area are still assessing the earthquake's impact on municipal infrastructure and are expected to push for a federal disaster declaration, according to the Times.
At a post-quake news conference, Napa Public Works Director Jacques LaRochelle said the department was working to restore full services to residents as quickly as possible. LaRochelle cited damage to the water system as the most pressing issue. Burst water lines can cause substantial damage to otherwise sound structures.
Percentage of U.S. homeowners with earthquake insurance on the decline
The USGS has reportedly determined that the center of the Sunday morning earthquake was near a key point in the San Andreas fault system, which runs between the Pacific and North American tectonic plates. It's a powerful reminder that much of the state is prone to seismic activity due to its precarious position straddling a moving volcanic chasm. Despite this significant risk factor, the vast majority of California homeowners do not have earthquake insurance. According to the California Earthquake Authority, just 12 percent are covered for this common disaster.
Bloomberg Businessweek notes that the proportion of homeowners with earthquake coverage has been on the decline nationwide in recent years and is currently only about 7 percent, according to the Insurance Information Institute. Coverage levels are falling even faster in western states, where the percentage of homeowners with earthquake insurance has dropped by more than 50 percent in the last year. The source also notes that the USGS recently produced updated seismic risk maps, which showed a widespread increase in earthquake risk.
As with flood insurance, home buyers may be required to purchase earthquake coverage as a condition of receiving a mortgage for a property located in a high-risk area. It is possible that Bay Area insurance carriers may experience an influx of inquiries about earthquake policies as a result of Sunday's events. This blog previously looked at how Oklahoma insurers have been seeing more homeowner interest in earthquake coverage as a result of increased seismic activity in the state.
Insurance companies can position themselves to effectively handle new business and update values for currently insured structures by implementing a single valuation system that can provide accurate replacement cost estimates for residential, commercial and farm & ranch properties.