Associated Press

Los Angeles — Allstate Insurance Co. agreed to reopen about 9,000 claims stemming from the 1994 Northridge earthquake to settle lawsuits that accused the insurer of underpaying, attorneys said.

Under the settlement signed Friday, the insurer will notify about 9,000 policyholders that they are eligible for independent inspections of their homes. A court will choose a panel of retired judges that will appoint engineers and insurance adjusters to make the inspections.

Allstate also agreed to pay any additional money it is determined the policyholders are owed for repairs. The company has set aside $ 60 million, although the settlement sets no limit on the total amount Allstate will pay, plaintiffs’ lawyers said.

Allstate did not admit wrongdoing in the agreement.

“This is an outstanding settlement and I’m pleased that Allstate has agreed to it,” Claremont attorney William M. Shernoff said in a statement.

“Not only does it provide for Allstate to pay 100 percent of repair costs, but Allstate is going to pay for all the administrative costs of the claims handling process. It’s a win-win situation for the consumer.”

The Northbrook, Ill. insurance giant came under fire last year in two lawsuits that claimed engineering firms it hired to inspect homes underreported damage from the Northridge quake, thus reducing Allstate‘s claims payouts.

“We know mistakes were made,” said Robert W. Pike, Allstate‘s general counsel. “We didn’t know we made mistakes at the time.”

Homes that automatically qualify for reinspection were previously inspected by Western States Geotechnical Inc. or Shadowbrook Design Group Inc., Shernoff said.

“The other 100 to 200 engineering firms will have to submit an application to the panel of retired judges,” Shernoff said.

Allstate agreed to settle two suits – a class-action suit by policyholders and a consumer protection suit by the Proposition 103 Enforcement Project, a nonprofit group headed by Harvey Rosenfield to enforce California’s 1988 insurance reform initiative.

A state judge must approve the class-action settlement while the other suit was dismissed by the group in Superior Court, Rosenfield said.

Allstate willingly worked out the settlement with his group, Rosenfield said.

“Allstate realizes that it needs to satisfy its policyholders in order to maintain its trust with its customers,” he said Saturday. “Its entire business rests on the trust between policyholders and the company.”

Allstate also is required to hire a consultant to evaluate its handling of catastrophe claims and to provide $ 5 million to create a charitable foundation dedicated to loss prevention.

The 9,000 policyholders represent only a fraction of the 46,000 claims submitted to Allstate after the quake. The company paid out more than $ 1.7 billion.

The resolution of this case may be one of the last echoes of the Jan. 17, 1994 Northridge quake, considered one of the nation’s costliest disasters. The magnitude-6.7 quake was blamed for 72 deaths and $ 25 billion in damage.

It also spurred a flurry of suits against insurers. State Farm Insurance Co. settled a suit filed by 117 homeowners for $ 100 million last year.

That suit accused the insurer of covertly trimming coverage about a decade before the quake.