Filed Under:Risk, Corporate Risk

7 Months Later, Churches Foot Bill for Va. Earthquake Damage

NU Online News Service, March 28, 2:07 p.m. EDT

The earthquake that shook the mid-Atlantic region seven months ago is taking an expensive toll on houses of worship that went without earthquake insurance.

Just this week, the Baltimore Sun reports that the more than 200-year-old Baltimore Basilica, the nation’s first Catholic cathedral, was found to have more than $5 million in damage. Cracks have appeared in several of the basilica’s domes.

Though the cathedral is deemed structurally sound, work to repair it will affect some of the church’s operations for up to a year.

The Archdiocese of Baltimore, the Sun says, is facing a total of $8 million in repairs to its 44 buildings. Besides the $5 million for the basilica, $2 million is expected to be spent to repair St. Patrick Church in Fells Point, as its steeple fell during the magnitude 5.9 earthquake.

In Washington, D.C., the Washington National Cathedral is looking at a $20 million bill to repair the damage to its spires and interior walls.

When it comes to paying for the repairs, for the basilica at least, The Sun says that due the age and height of the structure, the church included earthquake coverage in its policies, and is hopeful of full recovery.

However, officials at the National Cathedral say they did not have earthquake coverage and have launched a fundraising campaign to make the repairs.

In an e-mail, Richard M. Weinberg, director of communications for the Washington National Cathedral, says, “While we try to consider every eventuality in our stewardship of the Cathedral, it is necessary to make decisions based on the best information you have at the time. Until August, the area had not seen an earthquake of this size since 1897.

“The combination of the improbability of an earthquake coupled with high deductibles and annual premiums made the purchase of earthquake insurance a poor financial decision. We are currently reviewing our coverage to ensure the cathedral is prepared in similar circumstances going forward.”

For insurers, say executives with insurance broker Arthur J. Gallagher’s religious practice division, how churches address earthquakes depends on exposure.

Richard Famigletti, area vice president, in White Plains, N.Y., says insurers have not been overly concerned about the risk in the Northeast. In fact, he says many carriers have either included earthquake as part of the coverage for a small premium or no charge at all.

Since the earthquake, churches are paying attention to the risk. Some policyholders have sought higher limits, but generally, limits remain adequate in the face of the risk and affordable, Famigletti says.

However, in the West, the story is different, says Jim Buckley, area senior vice president in San Francisco. Because of the heightened exposure to the risk, “buyers can’t get enough limits for the value they have.”

Interest has always been strong, and premiums tend to fluctuate depending on the markets. Buyers, he says, buy what they can dependent upon their budgets and price of the product.

Peter A. Persuitti, managing director, religious and nonprofit practice for Gallagher, says “it is striking to me that the National Cathedral did not have adequate limits” calling the amount of money they need to raise “a serious issue” that needs to be looked at more closely and strategically by the board of trustees.

Both Tony Abella Sr., area senior vice president in Miami, and Famigletti, say another issue churches face is replacement costs, and in some cases finding suitable materials.

In the case of the National Cathedral, officials will face the challenge of finding the proper stones to work with to replace the damage edifice and spires, the executives note. Then there is the issue of finding the artisans who can perform the specialized work that went into creating the original ornate designs in the stone.

Abella says that many churches have to deal with replacing expensive, custom made stain glass windows. But reproduction can prove costly and sometimes the decision is made to settle for making repairs and forgoing reproduction.

Persuitti notes that as far as having an impact on the insurance market, the August earthquake event was minor compared to the total loss experienced by the industry in 2011 and it is not driving price increases.

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