No one on earth is now old enough to have experienced the great San Francisco earthquake of 1906, the oldest woman of humanity having been born in 1907. Nevertheless, this great earthquake has marked history, minds and ... insurance.
The Great San Francisco Earthquake
In 1906, almost the entire city of the Golden Gate collapsed, burned or was sacrificed to create firebreaks due to an earthquake estimated at a magnitude of 7.9 (the scale did not yet exist). After several days, the extent of the damage was considerable and half the population had lost their homes.
Even though most insurance contracts already included a ground movement exclusion clause at the time, the fire was insured. But the fire caused by ground movement? Less clear at the time. Some insurers have therefore only partially settled their victims because of this nuance. Others had no choice but to declare bankruptcy in front of the bill, something that could no longer be done today.
Lloyd's of London was a band apart. Basically, a decision was made along the lines of: "We have a responsibility not to leave all these people in this misery. Let's go above and beyond our responsibilities and pay everyone 100%." Behind this human reasoning, there was of course an economic reasoning. This city that was to be reborn would certainly remain loyal to Lloyds and the word would spread in the United States. But it still required empathy, audacity and a human face was not going to hurt this company strongly associated with England ... the same England with which the Americans had fought 125 years earlier for their independence and still maintained old tune. A win-win as they say.
Earthquakes in Quebec
1906 is a long way off. But for the first 6 months of 2023 in Quebec alone, La Belle Province has already trembled 6 times. Of course, these were not as devastating as the many others on the U.S. West Coast or the infamous earthquakes in Haiti (2010) and Japan (2011).
Our Quebec reflex is to believe we are safe for three reasons:
1. Because in our insurance contract there is something that includes the word earthquake
2. Because it's never really happened in the past
3. Because the government will help the victims
Regarding the first point, there is regularly the word earthquake on insurance contracts. But this is only to cover the fire following an earthquake. Not the damage of ground movement.
With regard to the 2nd point, the earth has shaken many times in the past and still trembles here and there. Seismologists generally agree that a major earthquake could occur in Quebec within the next hundred years.
Finally, it is always possible to wait for government assistance, but if the earthquake is major, aid is often very limited and takes time to orchestrate.
The real solution is simple: earthquake insurance is available to everyone.
And the syndicates in all this?
Syndicates of co-ownership are legally obliged to take out insurance for so-called "usual" risks. Even if these so-called "usual" risks are not clearly defined, it can be deduced that the earthquake is not one of them. After all, the last major damage of an earthquake in Quebec dates back to the late 80s. Nevertheless, it would be imprudent to consider that the past is so much a guarantee of the future.
When experts predict earthquakes, when we see the damage that can cause and when we relativize the premium by dividing it to the community, we quickly realize that, even if the premium remains expensive, it becomes essential. And even more so when we consult the limitations and conditions of the government program for condo syndicates...
In the end, it is better to prevent and cover all the risks that may affect your condominium. For advice, a quote or a second opinion, contact us!
Charles-Antoine Carra CPA, CMA
Damage insurance broker
Fort assurances
514 374 9944 x 259
3737 Crémazie Est, bureau 1001, Montréal QC H1Z 2K4
[email protected]
