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Kansans buy earthquake insurance and claim damage but receive few payouts (+video)

When Steve Hunter, owner of Hunter and Son Construction, first looked at this house, the damage to the foundation was so severe that the load-bearing beams on the porch were not supporting any weight. He propped up the home with metal piers tens of feet below the surface.
When Steve Hunter, owner of Hunter and Son Construction, first looked at this house, the damage to the foundation was so severe that the load-bearing beams on the porch were not supporting any weight. He propped up the home with metal piers tens of feet below the surface. The Wichita Eagle

David Banks was preparing for bed a couple of weeks ago when his youngest daughter, 9, ran into the bedroom because she thought a stranger was breaking in.

Something was intruding into his Wichita home, but it wasn’t a person: Back-to-back 4.7 and 4.8 earthquakes had just struck Oklahoma near the Kansas border.

Banks’ wife took their daughter back to bed, but they continued to feel aftershocks.

The two quakes had convinced Banks that, after two years of Kansas quakes and several more in Oklahoma, it was time to look for earthquake insurance.

But when he looked, Banks said, he found that the deductibles were so high, often between 10 and 20 percent of the value of a home, that he thought it wasn’t worth it.

“If your home is valued at $200,000, you have to pay the first $20,000 before (an insurance company) pays a dime,” Banks said. “So what we’re going to do is wait until we get to some Richter scale fives and sixes to even worry about it at this point.”

If your home is valued at $200,000, you have to pay the first $20,000 before (the insurance company) pays a dime.

David Banks, Wichita homeowner, discussing the earthquake insurance he was offered

Banks is one of many Kansans who have recently looked into or are buying earthquake insurance. Insurance companies collected more than $6.7 million in premiums in Kansas in 2014, more than a 40 percent increase since 2008, and local insurance representatives said the number of inquiries they’re receiving has only been increasing.

But although the insurance companies are collecting more money, few, if any, residents have been able to prove that the damage to their home was due to earthquakes, according to insurance industry representatives and local repair companies. And those homeowners who have proven earthquake damage frequently have not sustained enough damage to cover the large deductibles.

4thOnly three states in the continental U.S. had more earthquakes than Kansas in 2014

26th state ranking of average money spent per Kansas resident on earthquake insurance in 2014

BURDEN OF PROOF

Many claims that come in about earthquake damage turn out to be mistaken, according to several local builders and insurance agents.

The Harper County Herald reported that earthquake damage last year had caused the cost of courthouse repairs to increase from $400,000 to $1.1 million. Even though this was reprinted in several publications, it was not true, according to Cheryl Adelhardt, the county clerk.

The courthouse was paid about $14,000 to repair plaster over cracks and repaint, according to Adelhardt. It was the county insurance company’s first time paying out for earthquake damage, she was told.

Last year St. Patrick’s Catholic Church in Harper County sustained an estimated $6,000 in damage, according to repair estimates received by Bodie Tedder, a church administrator. The church was about to repair its bell tower the week before, so it had photos that proved the damage had happened the week of an earthquake. Although Tedder thought the church was eligible to be reimbursed $1,200 for damage to its tower, she could find no record of having received any money for the church’s claim.

Lori Lawrence, a Wichita homeowner who has been trying to document local earthquake damage for the Sierra Club, said she has not been able to prove that the damage to her home was caused by earthquakes. She noticed two years ago that the back wall of her house had moved, creating a crack from floor to ceiling in her newly renovated bathroom. She paid $14,000 to fix the bathroom and an old clay pipe, but she said cracks in her basement and her garage are still growing.

The structural engineer who examined Lawrence’s house didn’t agree that the damage was from earthquakes. To him it looked like the normal kinds of damage that come from changes in soil moisture. But it’s a nearly 100-year-old house that she said never had cracks before and that she said she carefully tends to, even watering the foundation during droughts to prevent foundation movement.

Lawrence said she argued with the engineer’s assessment that her house damage was caused by drought, not earthquakes, and claimed that he didn’t do a full assessment. He was so used to seeing weather damage in nearby areas, she thought, he didn’t investigate thoroughly.

Even if Lawrence could prove the damage, $14,000 is less than the deductible on her earthquake insurance.

Lawrence is not the only one who has been claiming to have earthquake damage, according to Teresa Neal-Cline, president of Neal’s Construction, which did the repair work on Lawrence’s house. Neal-Cline said an increasing number of people have been claiming damage from earthquakes or asking if damage to their home is a result of them.

She leaves it up to engineers to judge the true cause of the damage. She said more than 90 percent of the company’s work comes from the east side of town, where the usual culprit is clay soil, not earthquakes.

BRIDGES

The Kansas Department of Transportation recently did a survey of hundreds of bridges in Harper County, one of the areas hardest hit by recent earthquakes, and didn’t find any cause for concern, according to Don Whisler, the state bridge inspection engineer for Kansas.

“That was our number one thing to start out last year, look for any potential problems that might have occurred because of an earthquake,” Whisler said. “We look at these really close, and we saw nothing that would indicate we would have any type of damage.”

Whisler is much more concerned about a truck hitting a bridge without the incident being reported than an earthquake. Kansas’ bridges will mostly be fine because, he said, they include a special spiral steel that allows the columns to bend from side to side without breaking. This kind of steel was missing in the Oakland, Calif., bridges that collapsed in a 1989 earthquake.

According to recommendations from the United States Geological Survey, Whisler said his department would start becoming concerned if earthquakes rose above 5.0 magnitude. If it did reach this point and they found damage, the department would apply a fiberglass wrap, which would not be cheap.

Sedgwick County is due to have its bridges inspected later this year. And, for the first time later this month, the department is installing equipment that will measure how fast the earth is shaking in southern Kansas, according to Bob Henthorn, chief geologist for the Kansas Department of Transportation.

John McClure, chief of roads and bridges in Harper County, said that about 15 out of 500 bridges in his county had shown some evidence of cracking, but that there was no way to prove the cause. McClure thinks a more likely culprit than earthquakes is the many semi-trucks that carry oil and gas that he sees crossing bridges and that appear to be over the bridges’ weight capacities.

“We ask the people to stay on certain routes, but we know for a fact that some don’t stay on routes and veer off,” McClure said. “So we have some damage on bridges.”

The state only inspects bridges more than 20 feet long, according to McClure, and Harper County has hundreds of bridges under that length, which he inspects.

Whisler of the department of transportation said he’s more concerned about damage to home foundations than the state’s bridges. Bridges are built with foundations that reach between 40 and 100 feet deep, according to Henthorn, so they’ll withstand much more shaking than a house with a slab foundation.

HOW TO DETECT DAMAGE

Although Steve Hunter said his foundation repair business, Hunter and Son Construction, has been receiving as many as five calls a week, the damage is almost always due to climate rather than earthquakes.

(Oliver Morrison/The Wichita Eagle)

Earthquake damage “does occur, but it’s not like in LA where you can stick your hand through the wall,” Hunter said. “What’s happening are little cracks opening a little wider than they originally were, but those cracks were there to begin with.”

The clay soils mostly found on the east side of Wichita fill up with water quickly, he said. Then when the sun comes out, the water will rise to the surface, leaving gaps underneath the foundation.

(Earthquake damage) does occur, but it’s not like in LA where you can stick your hand through the wall. What’s happening are little cracks opening a little wider than they originally were, but those cracks were there to begin with.

Steve Hunter, owner of Hunter and Sons Construction

“Think of it as a dry sponge that you’ve thrown into water,” Hunter said. “You put a dry sponge in water, you’ll watch that dry sponge grow. That’s what clay does. That moisture will get in the clay and you’ll watch that clay expand. When it contracts, what happens is that moisture leaves the soils and creates a void pocket.”

At that point gravity will cause the foundation to settle into those gaps, which will often leave cracks in foundations and walls.

The cracks from a settling foundation tend to be vertical or look like staircases, he said, but earthquakes tend to move side-to-side and leave horizontal cracks.

Although Hunter said most of the damage to foundations is from weather, earthquakes can exacerbate that damage, especially in older homes. He said he’s seen old brick homes in the Central and Oliver neighborhood that could be getting damage from quakes.

“You literally can see all the way through the house from the outside, the brick is separated it’s so bad,” Hunter said. “So I can see those houses being more prone to earthquake damage than houses built in the ’50s, ’60s and ’70s.”

Earthquakes could accelerate the need for repairs by five or 10 years, but he had yet to see a single earthquake claim pay out any money, he said. He advised homeowners to take “copious notes” and “lots of pictures” and even measure current cracks, so that “once something occurs you can go: ‘Aha! I’ve got the evidence to back that up.’ 

The problem, he said, is “Which came first, the chicken or the egg? And that’s how it’s going to be played out. I would love to know someone who had earthquake insurance, had a problem, it paid out and was fixed. I’d love to see that. In our own history we have not seen that occur whatsoever.”

2% - 25%range of deductibles for earthquake insurance in Kansas (percent of home value)

7%proportion of Kansans who opt for earthquake insurance at American Family Insurance

10% proportion of customers who ask about earthquake damage at Hunter and Son Construction

He said people can become “insurance poor” by buying too many kinds and too much insurance, so Hunter doesn’t recommend that people buy earthquake insurance.

Cracks lower the value of homes by making floors uneven, providing entrances for rodents and making it more expensive to heat and cool homes, Hunter said. He’s developing special earthquake piers to support foundations. In addition to propping up homes, he’s hoping the new piers will be able to absorb shaking from earthquakes at a cost of about $2,000 extra on the average $10,000 repair job.

To help his customers understand how foundation support will help, he gives them a little analogy: “It’s like shaking a can of paint without tightening the lid: paint starts spewing out because the lid is not tight. … If the lid had been on a little tighter you wouldn’t have the issue.”

PAYING OUT

Over the past couple of years American Family Insurance has received about a dozen claims of earthquake damage in Kansas, according to Kami Gray, the branch manager for Kansas, Nebraska, Iowa and the Dakotas.

American Family is the second-largest seller of home insurance in Kansas, according to the Kansas Insurance Commission. Only 7 percent of American Family’s customers buy earthquake insurance, according to Gray, and most of those choose a deductible that pays out only once damage has reached 15 percent of the value of the house.

$10,000average cost of foundation repairs in Wichita by Hunter and Son Construction

$10,500 how much damage would have to occur before an earthquake policy with a 10 percent deductible would start to pay out

Gray said after an earthquake claim she’ll call an adjuster to see if there are signs that the damage is fresh and if there have been recent earthquakes in the area. New cracks will have sharper edges, she said, but old cracks will be duller and may have debris inside them.

If the adjuster thinks it is warranted, the company will then call in an engineer to make an official determination. Though it may be helpful, she said, homeowners are not required to present pictures to make a determination.

For proprietary reasons a spokesperson said the company could not disclose if any of the dozen claims so far actually had earthquake damage, or if the damage was significant enough to cover the deductibles. But Gray did say, “Of those claims there hasn’t been a high number (that paid out).”

We’ve had a lot of earthquakes and, well, we noticed these cracks were here before, but we noticed a bigger change in the movement from the earthquakes.

What Steve Hunter, owner of Hunter and Son Construction, said he was told by a client

When asked whether the company would pay out if existing cracks widened because of earthquakes, Gray said, “Gosh, that’s a really good question. If it’s determined the earthquake caused the damage, there is potential coverage, but we would have to investigate it on a claim-by-claim basis to determine the actual coverage.”

Although several insurers have said more homeowners are signing up for earthquake insurance, the biggest recent increase in money collected by insurance companies came between 2008 and 2009, before Oklahoma and Kansas experienced hundreds of earthquakes.

The data hasn’t yet been released for 2015, but in 2014, premiums paid for earthquake insurance in Kansas actually fell for the first time since 2008, from about $7.6 million to $6.7 million, just as earthquakes began to hit the state.

I didn’t want to lose my house for an earthquake.

Lynn Rogers, Wichita resident

Lynn Rogers, a Wichita school board member, took out insurance on his home two years ago after an earthquake hit Kansas.

He saw some damage to the stucco on his home after the first big quake he felt and thought the $60 premium was worth the security it gave him, despite a deductible of 5 percent of the value of his house.

“I didn’t want to lose my house for an earthquake,” Rogers said.

Oliver Morrison: 316-268-6499, @ORMorrison

Total earthquake insurance premiums collected in Kansas

2008

2009

2010

2011

2012

2013

2014

(Millions)

$4.8

$5.6

$6.3

$6.7

$7.3

$7.6

$6.7

Source: Insurance Information Institute

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