Lawyers Line Up to Help Northridge Quake Victims.

Just weeks after Gov. Gray Davis signed a bill allowing homeowners to re-file claims from the Northridge earthquake, the smell of carrion is in the air.

The law doesn't go into effect until Jan. 1, but already Los Angeles-area attorneys are running newspaper ads -- in some cases, full-page displays -- in a scramble for plaintiffs.

"The moment the law passed and was signed, there was a very well-organized and very well-mobilized contingent ready to go to work," said Candysse Miller, a spokeswoman for the Insurance Information Network of California, an industry trade group. "There are a lot of lawyers out there who think they can make a buck off this, and they're out there trolling for clients."

The attorneys, for their part, say there's no need to shed tears for the insurance industry. The new law wouldn't have been necessary if the industry had honored its commitments to policyholders, they argue.

"There are always opportunities created for lawyers when insurance companies act in bad faith against a whole group of people," said Howard A. Snyder, an attorney who has 17 class-action lawsuits pending against insurers.

SB 1899, recently signed by Gov. Gray Davis, gives thousands of homeowners a one-year window to re-file claims that were rejected for being filed late.

Since he started running ads in area newspapers, Snyder said he has had 600 potential clients step forward. About 200 people attended a public forum he hosted in October, and he expects a like number at a forum scheduled for this month.

Bill Sirola, a spokesman for State Farm Insurance, wondered why, if homeowners are truly up in arms over the way their quake claims have been handled, attorneys have to advertise to find clients.

Sirola insists his company's own surveys found that customers are satisfied with the way their claims were handled, noting that State Farm paid out $3.5 billion to settle 117,000 claims following the quake.

Attorneys happy to advertise

Joseph M. Fredrics, an attorney based in the Mid-Wilshire area, sees nothing untoward about advertising for clients. If attorneys weren't notifying the public about the law, most people would likely never find out about it.

That's because the insurance industry has so far failed to notify policyholders, he said.

"When they recall cars, the automakers have to notify you, but in this case it's totally up to the good will (of the insurers), and they've decided not to tell people," he said.

Since Fredrics began running ads in late October, more than a dozen prospective clients have stepped forward. A seminar he hosted attracted another 20 people.

Ric Hill, a spokesman for 21st Century Insurance Co., said only 143 policyholders have called to inquire about their cases since the law was passed in late. September. That is out of more than 46,000 claims that arose as a result of the quake.

"That's about three-tenths of 1 percent. That would indicate to me people are satisfied with the way their cases were handled," he said.

Snyder and others. contend that insurance companies intentionally low-balled damage estimates after the quake to reduce their payouts.

In some cases, it took homeowners several years after the temblor to discover the full extent of the damage, but when they, approached their insurers, they were told they had missed a one-year deadline for filing claims.

A State Department of Insurance survey found that insurers had mishandled 25 percent to 50 percent of a sampling of several hundred files, in many cases underestimating quake damage.

Former state Insurance Commissioner Charles Quakenbush used the survey results to collect $19 million from the insurers to advance his own political ambitions, a revelation that led to his resignation in July and provided the political impetus for passage of the law.

Establishing proof

Several industry observers agreed that homeowners will have a tough time proving damage, such as cracks in floors or walls were a result of the Northridge quake.

However, the law places insurers on the hook for what could be tens of millions of dollars in additional investigative, court and damage costs.

Hill conceded that the insurance industry almost certainly would fight the new law, arguing in court that it is unconstitutional because it represents an unfair taking of property.

The law sets a dangerous precedent by retroactively changing provisions of a contract entered into freely by policyholders and insurers, he said.

In 21st Century's case, the Woodland Hills company paid out $1.1 billion to settle 46,421 claims.

"We paid out 20 times more (in claims) than we received (in premiums)," said Hill. "It damn near took us out of business, but we did perform on our contracts. To come along now ... How do you unring that bell?"