You don’t go to the beach without sunscreen, but you have a California business without earthquake insurance? You pay the parking meter, but you don’t have protection for your lost business income if your business gets shut down because an earthquake wipes out all power and water to your business? There is a chance that you don’t get sun burned and a chance that you don’t get a parking ticket. What are the chances of your business not experiencing an earthquake loss?
The likelihood of a 6.7 earthquake occurring in California during the next 30 years is about…100%.
Estimated Likelihood of an Earthquake to Occur in CA in the Next 30 Years:
Magnitude Probability
6.0 100%
6.7 100%
7.0 93%
7.5 48%
7.7 27%
8.0 7%
Source: Uniform California Earthquake Rupture Forecast
What does a 6.7 earthquake look like?
The magnitude 6.7 Northridge earthquake in 1994 caused over $25 billion in damage, $49 billion in economic losses, and “at least 50% of small businesses were still not open nine months after the disaster.” -CA Senate Insurance Committee: 4/24/14
Damage from a rupture of the San Andreas fault is estimated at $1 trillion. And pressure is building. The 800-mile San Andreas fault divides the Pacific and North American Plates. The Pacific Plate is slipping northwest at a rate of 33 to 37 millimeters per year. The San Andreas fault relieves this tension with a rupture about once every 150 years. The last major quake was the 7.9 magnitude Fort Tejon quake—159 years ago. That quake was so powerful that the soil liquefied, causing trees as far away as Stockton to sink into the ground. The southeast section has been building tension for over 300 years since its last rupture.
A recent study shows that the ground around the fault is buckling. The Los Angeles Basin, Orange County San Diego County and the Bakersfield area are sinking 2 to 3 millimeters per year. Meanwhile, Santa Barbara and San Luis Obispo Counties, and a large portion of San Bernardino County, are rising at the same rate. What has not moved? The San Andreas fault.1
“The springs on the San Andreas system have been wound very, very tight. And the Southern San Andreas fault, in particular looks like it’s locked, loaded and ready to go.”2
-Thomas Jordan, Director of Sothern California Earthquake Center 5/4/16
Even though pressure is building on the San Andreas and there is about a 100% chance of a 6.7 earthquake in California in the next 30 years, only 10% of homeowners have earthquake coverage and only 9.3% of commercial properties have earthquake insurance.
Some businesses may believe that they do not need earthquake insurance because they are not located on the San Andreas fault. There are over 2000 faults throughout California, and the Northridge earthquake was not along the San Andreas fault either. Even without direct physical damage from an earthquake, California businesses should also ask how long they can survive without:
Water: With old pipes and the main aqueducts that provide Southern California with its water crossing the San Andreas fault a total of 32 times, a major earthquake on the Southern San Andreas would sever 88% of Southern California’s water supply. No water means no sewer too. “The worst hit areas may not have water in the taps for 6 months.” -USGS, The ShakeOut Scenario. 2008.
Electricity/Communications: Power lines cross the San Andreas fault 141 times. Fiber optic cables cross the fault 90 times. The USGS estimates it will take three to ten days to restore electricity to 75% of businesses “capable of receiving power.” The remaining 25% may wait “one to four months.” -USGS, The ShakeOut Scenario. 2008.
Transportation: The Northridge earthquake collapsed seven freeway bridges. The Santa Monica Freeway damage was restored in three months. Nearly 200 other bridges were damaged. The USGS estimates that in a large San Andreas earthquake, roads and highways will be impassable initially because of debris, damage to bridges, and lack of power for traffic signals. Rail traffic will also cease for one to two weeks.
Depending on the season of the earthquake, transportation could also be hampered by the existence of wildfires. In its 2008 ShakeOut study, the USGS estimated that there would be 1,600 ignitions of which 1,200 [would] be too large to be controlled by one fire engine company.
These earthquake risks that occur away from a business’s premises are real, but often ignored. Contact an insurance professional committed to protecting your business from the risks you may face--including the risk California businesses are most likely to experience.
Endnotes:
Further Reading:
• Photos of the Northridge quake: http://www.theatlantic.com/photo/2014/01/the-northridge-earthquake-20-years-ago-today/100664/