Special Coverage

  • Read more on Sandy’s Aftermath

Last month, Coastal Connection reported on a Federal judge's rebuke of insurance company lawyers who he said concealed relevant information not just from a flood insurance claimant, but also from the court (see: Judge Slaps Insurance Company Lawyers in Sandy Flood Case, 11/25/14). Now the heat is building on insurance companies: two class action lawsuits are targeting insurance companies for allegedly improper claims handling; Senators from New York and New Jersey are pushing accountability measures in the National Flood Insurance Program (NFIP); and Federal Emergency Management Agency (FEMA) chief Craig Fugate is telling insurance companies to come clean on how they review and revise claim adjuster reports.

Long Island newspaper Newsday has the lawsuit story (see: "Insurer conspired to underpay LI Sandy victims, class-action suit claims," by Joe Ryan). "The suit [against Wright National Flood Insurance Co., the engineering firm U.S. Forensic LLC and the adjusting company Colonial Claims Corp.] alleges that the private companies, which worked for the government-run National Flood Insurance Program, falsified reports to claim houses were damaged by erosion or structural defects, rather than the storm," reports Newsday. Said Long Island attorney Denis Kelly, who represents homeowners, ""They conspired to deny our clients' claims and to underpay them -- while billing the federal government." The lawsuit is filed under the federal Racketeer Influenced or Corrupt Organizations act (RICO).

A week later, news came of a second class action suit, this time targeting the Hartford Insurance Co. (see: "Second class-action suit alleges conspiracy to deny Sandy claims," by Joe Ryan). Writes Newsday: "The suit, filed Wednesday in federal court in Brooklyn, accuses HiRise Engineering of colluding with adjustors and lawyers to blame damage to the couple's house on pre-existing defects, rather than flooding," writes Newsday. "Consequently, the suit alleges, Hartford Insurance Co. denied much of the couple's flood insurance claim after the October 2012 storm… The two cases, filed by the same Houston lawyer, follow a federal judge's ruling concluding engineers and insurers who processed claims for the federal government's National Flood Insurance Program may have engaged in a 'widespread effort' to underpay settlements."

And FEMA administrator Craig Fugate told a group of New York and New Jersey Senators that he would urge insurance companies to release the original versions of insurance adjuster reports in Hurricane Sandy flood claims, which Federal Magistrate Judge Gary Brown suspects could reveal a widespread back-office practice of downgrading field reports in order to reduce flood claim payouts. Newsday also has that story (see: FEMA chief tells senators he will push for release of Sandy flood insurance documents," by Joe Ryan).

"Fugate's vow to back the move appears to be a change of position for FEMA," Newsday reported. "Last week, the agency, which runs the National Flood Insurance Program, filed an appeal arguing that those documents should not be released." A FEMA spokesman would not say whether FEMA would now withdraw that legal appeal, Newsday said. But New York Senator Kirsten Gillibrand told the paper, "I am confident he is going to give us those documents. And if he doesn't -- there will be serious consequences."