Filed Under:Markets, Commercial Lines

Discovery of New West Coast Fault Lines Could Impact Rates; Development

New earthquake fault lines have been discovered on the West Coast, including in Los Angeles and Spokane, Wash., but it is yet unclear how this may affect home development or insurance rates in the at-risk areas.

In California, state geologists revealed two maps of active faults running through several Los Angeles neighborhoods. One is of the Hollywood Fault, a 10-mile long fracture the Wall Street Journal reports may produce a 7.0 magnitude quake strong enough to rupture the earth.

It splinters right below the site of Millennium Hollywood, a proposed $664 million residential and commercial development in halted development (the 1972 Alquist-Prolio Act prohibits building above active earthquake faults). Luke Zamperini, the city’s chief building and safety inspector, said all planned projects in the neighborhood would have to be re-evaluated under a fault-rupture study. 

“It’s not uncommon for new fault lines to be discovered,” says Chris Hackett, director of personal-lines policies for the Property Casualty Insurers Association of America (PCIAA). “The 1994 Northridge Earthquake occurred on a fault line that was previously unknown to scientists.

“Claims activity pertains more to a specific building or location, including construction type and replacement costs of the house, as well as contents coverage or additional living expenses (ALE).” 

Earthquake insurance is typically excluded under standard homeowners policies; most buyers in high-risk states in the Pacific Northwest purchase it as endorsement, and in California, from the California Earthquake Authority (CEA).

The CEA works with 20 participating earthquake-ready insurers, covering 75% of the approximately 10% of Californians who have earthquake insurance. 

“The discovery of fault lines would affect rates greatly if it caused a location to be considered a higher-risk area,” says Gina Plessas, customer service representative for the CEA. “They wouldn’t go up everywhere, but more details would depend on the rate filings of the California Department of Insurance.”

Swiss Re data ranks Los Angeles and San Francisco as two of the global cities most in danger from a seismic event. Adjusted to inflation, the 296-mile long scar of the 1906 San Francisco earthquake would cost up to $60 billion if it occurred today, according to Fireman’s Fund.

Further north, an airborne magnetic overview by the United States Geological Survey (USGS) showed potential danger near Spokane, Wash. Caused by the known Cheney fault zone and a second, previously unrecognized zone of faults and fractures, and combined with the Latah Creek fault, the USGS calls this hotspot a “complex alignment of magnetic anomalies.”

One fault crosses Spokane in a northeast direction, passing through a zone where 105 magnitude 4.0-or-below earthquakes occurred in 2001. The USGS plans to investigate further for the cause of the quakes. 

“There are many geologic reasons for linear magnetic anomalies, and the presence of unrecognized faults is just one possibility,” says the USGS. 

Last year, two Los Angeles City Councilmembers called for a statewide ballot that provides funding to cities to retrofit old buildings with “soft” ground floors, or those made with concrete.

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