I read Law360 five days a week for insurance law, class action matters, and California cases. One article, Insurer Says Condo’s Engineer Padded $30M Hurricane Claim,1 caused me to ask our Merlin Law Group Knowledge Manager, Ruck DeMinico, to get me more of the pleadings and reports from the case since it involved an engineering report which was allegedly changed in a wrongful manner to support a policyholder’s position rather than an insurance company’s position.

In, Are Baseless and Outcome Oriented Engineering Opinions the Normal State of Affairs in Property Insurance Investigation?, I admittedly assumed that just the insurance industry was wrongfully changing engineering reports because virtually all of my clients coming to me had no engineering reports, but the insurance industry had reports with alterations:

Let’s not kid ourselves, these practices are not limited just to flood insurance claims. With the insurance industry vendors competing for business, providing insurers with reports that reduce claims severity is a significant reason why ‘peer review’ and other similar ‘standard’ processes exist. Wording of these reports that dovetail with exclusionary policy language seems to be an expertise of these so called ‘peer reviewers.’

The Eastern District of New York has fashioned a very practical manner to expose this by requiring all drafts and revisions to be turned over. Hopefully, this discovery requirement will be commonplace everywhere. It will help stop wrongful denials and underpayments of claims.

But it still concerned me that if I was standing in the shoes of an insurance claims manager or insurance defense attorney, and I would receive an engineering report that just did not make sense, a valid peer review should be able to be called for. I am not naive enough to dismiss that the insurance industry may be faced with local retained engineers having a bias to favor their neighbors and friends suffering from a catastrophe or that they could simply make a miscalculation. So, how does a claims manager go about ethically obtaining a proper peer review and, if proper, a corrected opinion?

In 2016 at the Windstorm Conference, I put together a presentation answering that question and suggesting how insurance companies in good faith could properly question an initial engineering report and do so with a valid peer review. Engineer Bill Bracken—whose firm almost exclusively worked for insurance companies—and insurance company attorney Matt Litsky did a masterful job explaining the ethics and procedures about how to request and conduct a peer review of an engineer’s report. (As a plug for the Windstorm Conference, it will occur next week in Orlando, and any claims professional dealing with windstorm-related claims should be there to learn from presentations just like the one I put together several years ago.)

My point was that the honest and most correct opinion is what mattered. Nobody likes to make mistakes in a report, but it is inevitable that they will occur. Corrections that are not outcome-oriented, not fraudulent, but truthful are important. Corrected reports may raise a question of competency and whether the expert is deserving of being followed and believed. But it is far better than allowing a wrong report or worse, a fraudulently changed, outcome-oriented report to perpetuate injustice.

Turning to the Law360 article, I suggest that everybody read the Motion to Amend and the two engineering reports regarding the damage. An email cited in the motion noted the following from those working with the policyholder:

I had recent conversation with Craig Applebaum at Global Pro he expressed concern that the Falcon Report was inadequate for the needs of the insurance claim he said that we were behind in our filing and asked for the breakdown budget explained to him that Falcon came highly recommended by Dan and that it was made abundantly clear to Falcon on numerous occasions that this report was to be used to bolster the insurance claim for Southpoint. DSSC assumed that because of the seemingly close relationship between Global Pro and Falcon that Falcon was clear on how the report should be written. Craig did express concern that Global Pro was not included in the Falcon inspections though he did not elaborate on in what capacity DSSC or Southpoint Management should have included them or at what point we should have contacted them. We finished the conversation with an understanding the Global Pro was to reach out to Bill Pyznar at Falcon to discuss the issues with the report.

I have no idea what was said after the email and if proper protocols, like those discussed and taught by Bill Bracken, were followed to get a corrected report which is admissible and the corrections explainable in a transparent manner. It is obvious from the pleadings that the insurance company is taking the position that the changed report is not from a legitimate peer review but a fraudulent attempt to obtain insurance money not owed through an outcome-oriented report.

Thought For The Day

I think it’s a good thing that there are bloggers out there watching very closely and holding people accountable. Everyone in the news should be able to hold up to that kind of scrutiny. I’m for as much transparency…as possible.
—Anderson Cooper
1 Carolina Bolado, “Insurer Says Condo’s Engineer Padded $30M Hurricane Claim,” Law360, Jan.17, 2020. Available online at https://www.law360.com/insurance/articles/1235571/insurer-says-condo-s-engineer-padded-30m-hurricane-claim (subscription required).