United States Senator Robert Menendez – the senior senator from New Jersey, today issued a letter seeking a full investigation into the fraudulent altering of reports by carrier friendly experts. Followers of our blog know that this has risen to the forefront of Superstorm Sandy flood litigation. Essentially, carriers and their experts are accused of conspiring to alter reports of engineers to deny coverage under the flood insurance policy.
In Altered Engineering Reports Must Be Disclosed – Sandy Flood Judge Requires Transparency, I noted Raimey v. Wright National Flood Ins., No. 14-CV-461 (E.D.NY Nov. 7, 2014), where Magistrate Judge Gary R. Brown specifically cited findings that insurance company engineering reports are routinely altered under a process dubbed “peer review.” A summary of those findings show that:
An engineering firm has produced an alleged fraudulent report of an engineer’s opinion in a Superstorm Sandy flood lawsuit. Outcome oriented vendor firms providing outcome oriented reports is a big problem for consumers of insurance after a loss occurs. Reports can be altered and language changed which can be disastrous for insurance customers and save millions for insurers. This recent filing demonstrates that this may be ongoing with Superstorm Sandy flood lawsuits:
If an insured fails to provide prompt notice of its property loss, it can often be grounds for denial of coverage. Most policies have a provision that notice be given promptly, immediately, or as soon as practicable. The question then becomes what is “prompt notice”? In PDQ Coolidge Formad, LLC v. Landmark American Insurance Company,1 an insured, PDQ Coolidge Formad, LLC (“PDQ”) owned an apartment complex named Washington Shores in Orlando, Florida. Washington Shores sustained severe roof damage resulting from Tropical Storm Fay on August 20, 2008. Paragraph 3a.(2) of the insured’s Policy provided that in the event of loss or damage, PDQ was required to give Landmark “prompt notice of the loss or damage.” (emphasis added)
Every first-party property insurance contract provides the insured with an obligation to provide notice of the claim. Some require "prompt" notice and others require reasonable notice. Under Florida law, if an insured fails to give reasonable notice of his or her claim, then the insured must overcome a presumption of prejudice. Whether a carrier has been prejudiced by untimely notice is typically for a jury to determine based on the facts of the claim.1 For example, hurricane damage is often noticed for the first time months or even years after the storm. In sinkhole claims, many policyholders do not fully understand that they have coverage for sinkhole activity, not simply a catastrophic event. Upon learning that certain damages to their property may be related to sinkhole activity, they notify their carrier and request a full investigation.
The Windstorm Conference is in full swing. I was introduced to an engineer, Bruce Holmes. He told me that he was very upset with his colleagues and others in the insurance industry. He asked if I could refer others to his website where he has a proposal for change and action.
Insurance claims decisions cannot be made in good faith without full investigation and honest consideration of the resulting information. Some adjusters are not truly listening to their policyholders and considering what their policyholders tell them. Some carriers seem to conduct investigations with cursory expert work or only consider the opinions of the typical insurance expert without giving full consideration to other opinions. Many insurers are not conducting full investigations of Hurricane Ike claims, instead doing just enough looking to find reasons to deny or underpay.
There are still a number of Hurricane Katrina cases we are actively litigating in Mississippi. One of the cases being followed closely by Slabbed is the Qui Tam litigation, brought by the two Rigsby sisters that worked for State Farm following catastrophes. The Rigsbys claim that the federal government paid more in National Flood payments than what was owed because State Farm altered engineering reports and made outcome oriented adjustments, which maximized flood related damaged so that the amounts paid under State Farm’s policies would be minimized.
I really suck at politics. It is why I have not one, but two, lobbyists help me. Jon Moyle and Chris Floyd stick out in Tallahassee because they are two of the few lobbyists who are trying to help consumers. Most lobbyists are the "bad guys" from the consumer’s standpoint, although insurance lobbyists create propaganda to convince consumers and politicians otherwise. I guess insurance company lobbyists are "sneaky bad guys" with a lot of money.
Our office in Houston has been without power for a week. Tina Nicholson, who heads up our Houston office, held out for awhile, but has worked out of Gulfport since Wednesday. Frank Chimento spent most of the week working out of the Houston Omni, which is flooded with adjusters from all over the country. Initial reports have ranged from $8 billion to $18 billion in covered damages. The sense I get is the $18 billion figure may be breached.