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The Economics of the

“Big Shake”

Causes, Contracts and Concerns

Dan Dyce, CPCU RPA

February 13, 2017

What Causes Earthquakes?

2USGS.gov

Pacific

Plate

North American

Plate

Intraplate Earthquake

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• An intraplate earthquake occurs in the interior of a tectonic plate.

• Examples of damaging intraplate earthquakes are the devastating the 1811-1812 earthquakes

in New Madrid, Missouri, and the 1886 earthquake in Charleston, South Carolina.

• Oklahoma is now experiencing this kind of earthquake.

Wikipedia

9-3-2016 5.8 Pawnee Earthquake

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Oklahoma’s largest temblor on record,

according to the U.S. Geological Survey

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"It's an old historical building about 100 years old. It's still standing but some

of the outer layers of sandstone fell said Pawnee Mayor Brad Sewell.6

Florida Has Earthquakes

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• An earthquake occurred near St. Augustine, in

January 1879. Reports of heavy shaking

knocked plaster from walls and articles from

shelves.

• Similar damage was reported at Daytona

Beach, 50 miles south.

USGS.gov

Texas Has Earthquakes

• The 1931 Western Texas earthquake heavily

damaged buildings at Valentine.

• Many chimneys fell.

• Adobe buildings suffered most, and cement

and brick walls were badly cracked.

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California Has Earthquakes

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A Sampling of California's Largest Earthquakes (Since 1800, ranked by magnitude)

7.9 Jan. 9, 1857 Fort Tejon7.9 April 18, 1906 San Francisco

7.8 March 26, 1872 Owens Valley

7.5 July 21, 1952 Kern County

6.9 Oct. 17, 1989 Loma Prieta 636.7 Jan. 17, 1994 Northridge 61

6.6 Feb 9, 1971 San Fernando 65

Is there any state in the USA that has

not experienced an earthquake?

• According to the U.S.G.S. every state in the

U.S. has experienced an earthquake.

• The two states with the fewest earthquakes

• Florida and North Dakota.

• If you are trying to get away from

earthquakes, move to:

• Antarctica. According to the USGS it has fewer

earthquakes than any other continent.10

Earthquake Terms

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Strike-Slip Faults

1906 San Francisco earthquake, M 7.9

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Thrust Faults

1954 Dixie Valley, NV earthquake (M7.2)

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Illustrations credit: Exponent

Shaking Forces: effects of acceleration on vertical objects

Ground Motion & Damage

Shaking Forces:Illustration of racking distortion in walls

Illustration credit: Exponent

Ground Motion & DamageLarge “X” crack in masonry

wall between Windows.

Large “X” crack in masonry

wall between Windows.

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X-cracks are Common with Earthquake

Exterior Earthquakes X Cracks

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How are Earthquakes Measured?

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Richter Scale –

• Measures the amount of energy released• Each whole number step is about 10 times

larger and has 31 times more energy.

Modified Mercalli Scale

• Shows the intensity of shaking at a site

• Intensity refers to the effects experienced by people and buildings at each location

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Richter vs.

Instrumental

Intensity

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M6.7 Northridge EQ (1994)

M6.8 New Madrid EQ (1895)Geology makes a difference!

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Sign up for instant

notification to a

cell phone about

earthquakes.

Free from USGS

Earthquake

Notification

Service Dyce

Clip Art

USGS

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CISN.org

www.cisn.org

https://sslearthquake.usgs.gov/ens/

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https://sslearthquake.usgs.gov/ens/newprofile

myemail@gmail.com

HTML Format

Mycellnumber@att.net

Short Format

Example of Earthquake Notification Profile

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As soon as you hear about an EQ, go look for the ShakeMap

USGS

earthquake.usgs.gov/earthquakes/shakemap/

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A ShakeMap

helps you planyour response.

http://earthquake.usgs.gov/earthquakes/dyfi/

“Did You Feel it” Map May be a Useful Tool

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Santa Rosa is 40 miles from the Napa EQ

USGS

www.cisn.org

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What do these tags mean?

1. Ground Failure:

Shaking causes soil failure that causes damage to the structures supported by the soil.

2. Structural Failure:

The ground is not damaged, but there is sufficient shaking to cause structures to move and deform.

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Earthquakes Cause Damage Two Ways

Dyce photo - 7.1, Christchurch New Zealand, September 4, 2010

Liquefaction is a form of ground failure

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Ground Failure: Liquefaction

Photo Credit: NISEE

Geotechnical Issues Lateral Spreading in New Zealand

Dyce photo

Lateral Spreading in New Zealand

Example of Ground Failure: Rockslides / Landslides

Photo Credit: Exponent

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From Oklahoma Dept. of Insurance

As of 1-1-2015,

the OklahomaDepartment of

Insurance

beganenforcing that

all resident agents,

CSRs, and adjusters with a propertyline of authority will be required to complete

one hour of earthquake CE per renewal cycle.

March 3, 2015 Bulletin

2015-02Oklahoma Commissioner Warns Insurers on

Denial of Earthquake Claims

• Oklahoma Insurance Department said insurance companies should make sure their adjusters are trained on how to handle an earthquake claim.

• Beginning this year, property/casualty insurance agents (and adjusters) are required to take one hour of continuing education on earthquake insurance.

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CALIFORNIA INSURANCE ADJUSTER TRAINING

FOR EVALUATING EARTHQUAKE DAMAGE

(a) California Fair Claims Regulations

(b) Determination of scope of loss

(c) Loss estimation techniques

(d) When to call for an engineer or expert

(e) DOI Earthquake Mediation Program

(f) Assessment of damage to concrete surfaces

(g) Subsequently discovered damage

(h) Programs to assist earthquake victims

CALIFORNIA CODE OF REGULATIONS, TITLE 10. CHAPTER 5, SUBCHAPTER 7.5.1

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Openclipart.org

Adjusting a

Fracking / Earthquake Claim

• Investigate like any other

earthquake claim

• Make insured declare the

date of loss

• Find the ShakeMap for that

date of loss

• If damage matches the intensity of shaking

pay the claim

• “Man Made” exclusion in insurance policy 42

Bing Clip Art

Residential Earthquake Damage is

not Covered by a

Homeowner Fire Policy

• Earthquake coverage is excluded in a

homeowners fire policy

• But earthquake coverage can be added to a

homeowners policy by purchasing an

earthquake coverage endorsement.

43 44

Example of HO Exclusion: We do not Cover…

How Much does Earthquake

Insurance Cost?

• Oklahoma Residential Cost for Earthquake

Insurance

• Cost: $0.06 to $0.30 per $1,000 of the

dwelling limit. (www.ok.gov/oid)

• $200,000 home replacement cost

• Annual premium = $60 to $600

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What Does Residential Earthquake

Insurance Cover?

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5%

Insuring Agreement

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Seismic Event is defined, 3, 7, 15

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EQ New Policy Aftershock Claim

Day 1 Day 15Day 3 Day 7

De

du

ctib

le =

% n

ot

$$

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(ALE, Loss of Use)

(Real property)

(Personal property)

(For earthquake damage)Masonry Veneer Coverage

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Flood Damage not Covered

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Ensuing Loss Exceptions

• While shakes from earthquakes are clearly

excluded under the standard HO policy, the

standard earth movement exclusion contains

an exception for:

– Fire

– Explosion,

– Breakage of glass

– Theft

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Sfgov.org

Losses Excluded

1. Fire or explosion.

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Photo credit USGS

1906 San Francisco

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