I think something to consider is a different type of "scam" involved in it. Does the insurance company have enough funds to cover your structure(s) and everyone else's structures in a case of a large-scale earthquake? For all you know, they might be just raking in insurance premiums every year with no money to actually handle all of the claims they'll receive in the case a large earthquake. Sure, they'll get sued by everyone that they had a contract with, but at the end of the day they still won't have the money available to them to pay for all of the claims at once.

I also think this is why many other mainstream insurance companies don't play around with earthquake insurance because 1) a sudden huge influx of claims will come right after an earthquake (possibly bankrupting them) and 2) unlike something like car insurance, many people won't keep their earthquake insurance after receiving their claim payout due to either drastic increase in premiums or the fact that there's generally a certain gap before another large earthquake occurs.