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21st Century faces possible class action lawsuit over Northridge claims

On Jan. 3, 2001, a California law firm filed a complaint against 21st Century Insurance Co. alleging that the company "mishandled" home insurance claims after the 1994 Northridge earthquake.

The lawsuit was filed on behalf of 21st Century policyholder Stephanie Baruch, and seeks class action status that would cover more than 37,000 21st Century policyholders who made claims following the Northridge earthquake.

Baruch alleges that 21st Century tried to save money by lowballing repair estimates and denying subsequent claims. 21st Century allegedly sent unqualified estimators, contractors, and engineers to evaluate damaged homes, many of whom either underestimated damages or attributed them to pre-existing conditions that would not be covered by 21st Century.

The class action lawsuit could cover more than 37,000 21st Century policyholders

When policyholders found additional damages and tried to make new claims, the lawsuit alleges, 21st Century systematically "denied the supplemental claims on the basis of a time bar, instead of addressing each claim pursuant to the terms and provisions of the policy."

"There was a pattern of conduct designed to defraud policyholders," says Brian Kabateck, the attorney who filed the complaint. "In addition to having all 21st Century earthquake claims reopened and reviewed, we're seeking to halt the allegedly unethical business practices that created the insurance mess to begin with."

"We are familiar with [Baruch] and her case, and the details of her case do not fit with what I know of the complaint," says Rick Hill, vice president of communications for 21st Century.

21st Century says it never had a policy of denying claims based upon time limits. Hill says Baruch's complaint omits important facts about her case, including that she did, according to company records, receive a supplemental claim payment more than a year after the earthquake. The company denied a third claim because Baruch filed it in 1998, more than four years after the original damage, and because 21st Century believed it had already paid for the repair in question, Hill says.

The complaint is the first Northridge-related lawsuit filed under legislation that went into effect on Jan. 1, 2001, allowing policyholders to sue their insurance companies to reopen Northridge claims.

The Northridge earthquake resulted in huge payouts for home insurers. 21st Century alone paid $1.2 billion in claims.

After the earthquake, insurers including 21st Century, Allstate Insurance Co., Farmers Insurance Co., and State Farm Insurance Co., avoided allegations of claims mishandling by paying money into non-profit foundations set up by ex-Insurance Commissioner Chuck Quackenbush. It was later found that Quackenbush used the funds, which totaled far less than the billions of dollars the companies would have paid in fines, for his personal and political gain. In November 2000, the California insurance commissioner and attorney general filed a complaint in state Superior Court seeking to void those donations, calling them illegal and beyond Quackenbush's authority.

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