Insurers Farmers, State Farm lead in riot damage claims.

Farmers Insurance Group of Cos. and State Farm Insurance Cos. are the insurers expected to take the hardest hits from the Southland riots, but even workers' comp and auto insurers were busy last week adding up damage.

Farmers estimates its losses will total $70 million, and State Farm puts its hit at $41 million.

Unofficial property damage figures for the Los Angeles area have ranged from $700 million to $1 billion. But insurance industry experts say it will take weeks to compile actual damage figures and determine how much is covered by insurance.

Mid-Wilshire-based Farmers is the top writer of multi-peril commercial business policies in the state, which is why it faces the highest losses, said John C. Millen, Farmers spokesman.

By late last week 500 Farmers policyholders had filed claims, Millen said, and the insurer expects to receive 1,000 claims totaling at least $70 million. It's unlikely Farmers-covered damages would top the $100 million figure at which the company is re-insured to recoup on losses, he noted.

"In contrast with the myth that insurance companies don't write in South Central Los Angeles, we do have very heavy coverage there," Millen said. "That is clear when you look at the $70 million we expect to pay out in losses."

State Farm is estimating 1,100 claims will be filed and the company will pay out $41 million, said spokeswoman Brenda Smith. "Even though this is substantial, it won't be our worst loss ever," she said.

State Farm paid out $330 million for damages incurred by policyholders in the Oakland fire last year. Likewise, Farmers has paid out more than its riot estimate for natural disasters, including $120 million in the 1989 San Francisco earthquake, Millen said.

At a news conference shortly after the riots, representatives from the major insurance companies tried to dispel fears that they would raise rates or stop writing coverage in the inner city.

Echoing that stance, Millen said Farmers will continue to write policies in South Central Los Angeles and at the same rates.

Last week, with about 85 percent of expected total claims reported, the state pool known as the California Fair Plan -- in effect, like an assigned risk system to insure businesses denied coverage by traditional insurers -- had set loss reserves at $28.9 million for a reported 337 reported claims, said spokesman Mike Harris.

There was no indication of insurers abandoning the Los Angeles market because of the riots, Harris said. But he added, "We're sure that there will be some companies that will not continue to write insurance in the area simply because of fear."

The state Department of Insurance last week set up an internal task force to handle problems such as failure by insurers to pay claims and to monitor any moratoriums insurers might try to place on underwriting in the affected areas, said Bill Schulz, spokesman for the department. He said it will take a few weeks to determine how many damaged businesses were uninsured or underinsured.

Javier Rodriguez, executive director of the Hispanic Agents and Brokers Association, said 60 percent of the owners of damaged businesses he has contacted were underinsured.

"They don't have business interruption (insurance). They don't have all-risk. They have general liability which they got to satisfy a lease agreement," Rodriguez said.

James Hahn, chairman of Koram Insurance Center Inc., the largest insurance brokerage in Koreatown, said clients have filed 100 claims ranging from several thousand dollars to $2 million.

"A lot of our clients did not have full coverages," Hahn said. For instance, he cited one business owner who had $100,000 in actual content damage and was only insured for $70,000.

Insurance companies will probably pay off most property damage claims quickly, because insurers have been thrown into a "fishbowl" of public scrutiny, predicted Geoff Thomas, a partner with the law firm of Paul Hastings Janofsky & Walker, which represents about a dozen retail chains which suffered millions of dollars of property damage.

Thomas noted that although many businesses will be paid for property damage, "an equally large loss which may not be covered is business interruption."

Allstate Insurance Group expects to pay out $11.8 on 185 claims, said spokeswoman Karen Williams. Those figures only include structure damage, not content damage, she said.

The Woodland Hills-based Transamerica Insurance Group last week had 74 claims reported with estimated losses totaling $12.1 million, said Tom Aichele, claims system manager. Most policies were written for small businesses which were leasing space and the policies covered content damage and business interruption costs, he said.

Of those claims 70 were in the Los Angeles area and four were in other cities in the country, including San Francisco, in which there was civil unrest. The average claim amounted to $164,000, he said.

The thousands of businesses which were shut down during the riots, but did not suffer property damage, will not recover any losses since most business interruption policies are triggered by property damage.

Workers' compensation and auto insurers were not immune from claims arising from riot damage.

Woodland Hills-based Twentieth Century Insurance Group, one of the state's largest auto insurers, has received 50 to 60 reports of automobiles damaged by the riots, said spokesman Ric Hill. Some cars were total losses, but most of the reported damage involves things like broken glass and dents to body panels, he said.

Reginald Denny, the truck driver who was savagely beaten on the first night of the riot, will have his medical expenses paid by Argonaut Insurance Group. That company wrote the workers' comp policy for his employer, Transit Mix Concrete, said Ron Goldberg, regional vice president for Menlo Park-based Argonaut.

"He was on the job (when he was beaten), he's covered," Goldberg said. "Whatever medical treatments are required to get him back to his original place are covered."