A couple of months ago, Lake Oswego climate consultant Mark Trexler was contacted by his brother. He was thinking about buying earthquake insurance, but couldn’t understand the contract.
“I read it and it didn’t make any sense at all to me,” Trexler said.
So he looked at his own earthquake policy. He’d had it since 2009, it cost about $700 a year.
It was just as confusing as the policy his brother had reviewed, Trexler said. He couldn’t even figure out basic information, like whether damage from a volcanic eruption was covered.
“It said in one place that volcanic eruptions were specifically included. And it said in another place in the policy that they were specifically excluded,” said Trexler.
Then at the bottom of the policy there’s a rider, it canceled the volcanic eruption exclusion. So in the end, volcanic eruptions are covered.
“Is the language intentionally written to make people think they have insurance when they really don’t? Is the insurance company simply assuming that if bad things happen it’ll be a class action lawsuit that’ll drag on for years, so it posses less of a problem to them?" Trexler asked. "The only thing that’s really clear is that the situation is left just incredibly ambiguous.”
Trexler took his questions to the Oregon State Insurance Division.
It said earthquake insurance is so complex it could only check the policy if Trexler lodged a complaint. So that’s what he did.
“It’s a reasonable policy that’s met our standards,” said Insurance Division spokesman Jake Sunderland.
He said every insurance policy sold in Oregon, including Trexler’s, is checked by the state to make sure it does what it claims to do.
“Those contracts need to be fair," Sunderland said. "They need to be not unfairly discriminatory. And we are reading every contract to make sure that when you go out and buy it, you can trust that it is going to provide what you think it is going to provide."
But why is the language so confusing?
Sunderland thinks one reason is that most insurance companies do business in more than one state. “Instead of writing 50 contracts for 50 states. They’ll write one contract and then amend it or add endorsements at the end of it, to customize it for the state,” he said.
So for earthquake insurance, the original contract is written very narrowly — to exclude absolutely everything except earthquake damage. Then local problems are added as riders. For example, around Mount St. Helens that means volcanic eruptions.
Back in Lake Oswego, Mark Trexler’s main question revolved around earth movement.
His home is on a hill and he wanted to know whether he’s covered if an earthquake triggered a landslide that sent it to the bottom.
Here’s what his policy says: "We do not insure for loss caused directly or indirectly by … earth movement. Meaning land shock waves or ... landslide."
“So what does that mean?" Trexler wondered. "I mean was your house knocked down by the shock? Or did it fall down two minutes later because the earth had moved as a result of the shock? What’s the covered occurrence? And it’s impossible to tell.”
A state flyer about earthquakes dated 2009 says earthquake insurance doesn’t cover losses caused by landslides.
But Sunderland said that’s wrong. He said state experts have read Trexler’s policy, and landslides are covered.
“What the contract is saying is that the insurance company isn’t going to pay when there’s a landslide. But if the cause of the damage is an earthquake, you’re going to be covered," Sunderland said.
Trexler called his insurance company and broker about this issue and got two opposing answers. They were “as clear as mud," Trexler said.
The state’s assurances are comforting, he said. "But it’s still disconcerting that the contract itself seems to say the opposite than what the insurance commission is saying not to worry about.”
The state says getting earthquake insurance is a personal decision. Individuals should consider their own risks. Like: is your home on a hill? And where does it stand on earthquake maps?