Because of a California law that requires companies offering homeowners insurance to also offer earthquake insurance, the state has been forced to deal with disasters of fire and earthquake together.

On Oct. 16, Gov. Wilson signed a bill creating a California Earthquake Authority to head off a growing trend among insurers statewide to quit writing new homeowners policies. By then, a number of West Marin residents were already having to cope with the problem.

He upgraded the wiring, installed a fire-retardant roof, seismically reinforced the house with foundation bolts, and cleared a firebreak around the house. The plumbing had been upgraded by a previous owner.

Unknown to the resident Peter (he has asked his last name not be published online) until recently, his homeowners insurance company and others were also making preparations to protect themselves.

Rather than firebreaks and foundation bolts, the tools of the insurance industry were blanket cancellations of existing homeowners policies and refusals to issue new policies where risks were considered high.

Peter was serious enough about preparing for natural disasters that he became a publicist for disaster councils throughout West Marin, but the first night of the Inverness Ridge fire, he too was among those forced to evacuate his home on Portola Avenue.

Peter didn't sleep much during a night in the Red Cross shelter at West Marin School. On his mind were Civil War-era family photos and other belongings he had left in his house.

Although his night in the shelter was "traumatic," Peter returned to his house the next morning to find it intact.

The insurer dropped him under a new doctrine that categorized homes build before 1945 as being especially vulnerable to disasters. Peter's home was built in the 1920s.

Luckily for Peter, the improvements he had made to his home helped him find another insurer although his homeowners insurance premiums jumped to $2,100 a year from $1,400 with the earthquake portion of the cost increasing to $950 from $560, he said.

The "pre-1945" doctrine that caused problems for Peter has now put more than 80 percent the Bay Area's homeowners at risk of losing their insurance, Berkeley architect Mary Comerio warned last February during an earthquake preparedness symposium sponsored by the Earthquake Engineering Research Institute.

Realtors in West Marin have told The Light that many other local residents have also lost their homeowners insurance although - unlike Peter - most are afraid to discuss their experiences for fear of scaring off new insurers.

"I am personally aware of [insurers'] plans to non-renew over one million policies next year if the status quo remains unchanged," the insurance commissioner noted.

This "status quo," to which Quackenbush referred, is a state law requiring insurers to offer earthquake coverage with all homeowners policies. From the insurance industry's point of view, the law put insurers in as much risk as their clients.

After the 1994 Northridge earthquake, insurers realized that California's mandatory earthquake coverage overextended their ability to pay the catastrophic damage claims that could follow the next major earthquake.

Here in Marin County, Fireman's Fund insurance company last spring dumped at least 170 policies - mostly for houses on the forested slopes of Mount Tamalpais above Mill Valley, according to published reports.

The cancellations were ominous, and scarcely a week before the Inverness Ridge fire broke out, Bolinas Realtor BG Bates predicted that Inverness Ridge homeowners would be next on the insurers' hit list.

The prediction is already beginning to come true. A week after the Inverness Ridge fire destroyed 45 homes and damaged 11 others at a probable cost to insurers of $40 million, at least three Paradise Ranch Estates homeowners were notified their homeowners policies will not be renewed.

"I've never made a claim on anything before," said Hoffman, who admitted, however, that if he were an insurer, he wouldn't have insured the subdivision's forested properties.

"The access is bad and most of the houses shouldn't have had [building] permits," Hoffman said.

Although Hoffman had been a member of his neighborhood disaster planning council, he dropped out several years ago, choosing to focus his efforts on making his three houses fire-safe. He installed sprinkler systems, cleared a firebreak around the homes, and installed fire retardant roofs.

"We could do more on our own," he said, and "we will do more now." In the meantime, Hoffman has written Cal Farm, asking for an official explanation of why his houses in an untouched area of Paradise Ranch Estates should lose their insurance.

The broker, who asked to remain anonymous, compared the relationship between insurers and agents to parents and children.

"Daddy got upset when he found out his children were lying to him," the broker said. "Daddy said, 'Geez, I'm insuring homes in the trees. That's always been a no-no.'"

As enormous claims poured in, the insurance industry became increasingly nervous, and within a month, several large insurers stopped writing all new homeowner policies.

Northridge alone did not cause the insurance panic, but its $12 billion price tag was the last straw for an industry that in five years suffered a series multi-billion dollar losses. Please see related story.

After Northridge, insurers began an aggressive campaign to pass on disaster costs to homeowners, as well as state and local government. Within five months, the California Department of Insurance began receiving applications for rate hikes, Mike Edwards of the California Department of Insurance told The Light.

Last month, the Marin Association of Realtors noted only 22 smaller insurance companies are still underwriting new homeowner policies in California.

Realtor Glenn Roberts, who represents numerous sellers in the San Geronimo Valley, said the tight insurance market has not yet affected property values here yet, but that could happen if prospective homebuyers find problems in trying to get insurance.

Insurers are particularly wary of homes on hillsides, homes on piers instead of foundations, homes on pilings along the shore of Tomales Bay, homes constructed with unreinforced masonry, and homes in thickly wooded areas, several Realtors said.

A house with more than one problem may be uninsurable under conventional policies.

Homes that can get coverage only under the FAIR plan are often difficult to sell, Realtors agree.

One reason people selling homes in West Marin have not been so hard hit by the insurance crisis as some sellers elsewhere is that buyers here tend to be fairly affluent.

Many local buyers don't need to take out mortgages, noted Realtor Linda Choperena of Dillon Beach. Many homes purchased here are the buyers' second or third property, so the buyers already have a homeowners policy that can be expanded to cover new purchases.

As a result, the insurance crisis may limit an already expensive housing market to even fewer - and wealthier - buyers.

From the insurance industry's point of view, the trend is virtually inevitable unless the state repeals the law that requires companies selling homeowner insurance to also offer earthquake insurance.

Because the law discourages insurance companies from offering homeowners policies, the law is also making it more difficult to buy fire insurance. As Realtor Burnett noted, fire coverage - along with liability and other coverage - is usually part of homeowners insurance.