Category: Homeowner Policy

FEMA’s (Under)Adjustment Of Flood Insurance Claims: Lessons Learned From Sandy

On By coveragelawIn Biggert-Waters Flood Insurance Reform Act, FEMA, Flood Insurance, Homeowner Policy, Hurricane Harvey, Hurricane Irma, Hurricane Katrina, Insurance Coverage, Insurance policies, Maximizing Insurance Recoveries, National Flood Insurance Program, UncategorizedLeave a comment

Blogger:  Lee M. Epstein

Many business owners and most homeowners purchase flood insurance  through the National Flood Insurance Program (“NFIP”). Unfortunately, most homeowners affected by Hurricane’s Harvey and Irma and the associated flooding won’t have insurance. For example, only 17% of those suffering flood damage from Harvey were insured. The numbers in Florida are better but nevertheless well-under 50% of those suffering a flood loss will be insured.

Even those with flood insurance may still be up the proverbial creek without a paddle. The Federal Emergency Management Agency (“FEMA”), the agency that manages the NFIP, publishes statistics that reveal systematic underpayments of flood insurance claims.

According to FEMA, in the aftermath of Superstorm Sandy, nearly 144,000 policyholders filed flood insurance claims. When numerous problems, including fraud, were uncovered in connection with the adjustment of those claims, FEMA offered those policyholders an opportunity to have their claims re-reviewed. Over 19,000 Sandy claimants took advantage of that opportunity. To date, FEMA has closed 16,744 of those claims. Approximately 83.7% of those closed claims have resulted in additional payments totaling $227,060,819, or approximately $14,000 for each underpaid Sandy claimant. Thus, FEMA openly acknowledges that it vastly underpaid policyholders. Based on that large sample, if every one of the 144,000 Sandy claimants had sought a re-review, the underpayments would have exceeded $2,000,000,000. That is extraordinary.

But there is more. If a Sandy claimant was not satisfied with the FEMA re-review, they were entitled to a Third-Party Neutral Review by, for example, a retired judge. Approximately 2,277 Sandy claimants have requested a Third-Party Neutral Review. To date, 1,087 Third-Party Neutral Reviews have been completed. Total additional payments of $19,668,316 have been made based on those Third-Party Neutral Reviews or approximately $18,000 per claim. Thus, those Sandy claimants who pursued both a re-review and a Third-Party Neutral Review of their claim received, on average, an additional $32,000 over the amount FEMA originally offered to pay on their claim.

And there is still more. Sandy claimants that pursued Third-Party Neutral Reviews with the assistance of competent legal counsel and other professionals fared even better.

Those currently suffering flood losses throughout the country can learn several valuable lessons from the experience after Sandy.

First, flood insurance policyholders should anticipate and be prepared for FEMA to initially undervalue their claim.

Second, flood insurance policyholders should not hesitate in asking FEMA to reevaluate its initial of adjustment of flood insurance claims.

Third, in order to enhance the recovery on any flood insurance claim, policyholders should seek the advice and counsel of competent professionals.

Fourth and, perhaps, most importantly, don’t give up and don’t give in.

For more information, please contact Lee Epstein, Chair of the Insurance Counseling and Recovery Department at Flaster Greenberg PC. 

PROPERTY LOSS AND BUSINESS INTERRUPTION CHECKLIST FOR COMMERCIAL INSUREDS

On By coveragelawIn Biggert-Waters Flood Insurance Reform Act, Business Interruption, Checklist, FEMA, Flood Insurance, Forensic Accountants, Homeowner Flood Insurance Affordability Act, Homeowner Policy, Hurricane Harvey, Hurricane Katrina, Insurance Coverage, Insurance policies, Maximizing Insurance Recoveries, National Flood Insurance Program, UncategorizedLeave a comment

Blogger:  Lee M. Epstein

Beyond the personal toll extracted by Hurricanes Harvey and Irma, the property and business losses are projected to be among the greatest caused by a natural disaster. As the recovery efforts continue in earnest, the following Checklist is offered to assist those who have suffered a loss and are planning to submit an insurance claim for any property loss and business interruption suffered.

□    Restore service to any property protection systems that have been damaged, such as
     sprinklers and alarms

       □    If property protection cannot be restored, post a watch

□    Notify all insurance companies whose policies may be implicated

       □   Consider whether notice should be given to excess insurance companies or to
           insurance companies whose policies have expired

□    Prepare a preliminary report describing:

      □    The type of loss

      □    The date and time of the loss

      □    The location of the loss

      □    A contact person at the company

      □    The property involved, including: buildings, equipment and stock

□    Determine if:

      □    The property is protected from further damage

      □    Any buildings require temporary enclosures

      □    Any utility lines have been damaged and require repairs

□    Identify and separate damaged and undamaged property

□    Commence salvage operations

□    Determine whether:

      □    Production can be restored at the damaged facilities

      □    Damaged equipment can be repaired

      □    Substitute facilities and equipment are available and necessary

      □    Lost production can be made up through inventory, overtime, or other
           suppliers

□    Formulate a plan with the insurance company’s input for making repairs, 
     securing substitute facilities and equipment and undertaking other loss
     mitigation efforts

□    Set up accounting procedures to track:

      □    Property Damage

            □    Create separate accounts for all loss-related expenses

            □    Implement procedures for collecting and maintaining all loss-related
                 documentation  in accordance with insurance policy terms, including
                 invoices, contracts and manpower hours

            □    Inventory damaged and undamaged goods

      □    Business Interruption

            □    Determine the “period of interruption”

            □    Determine the quantity of lost production as reflected in inventory 
                 records, production records and sales records. Compute what the business
                 would have normally produced, had there been no loss, then see how many                    
                 units were actually produced.  The difference is the gross lost production.
                
            □    Deduct any sales or production that can be continued or made up through
                 the use of existing inventory, the utilization of other plants, the utilization
                 of overtime hours or other loss mitigation efforts.  The difference is the
                 net lost production.

            □    Multiply the net lost production by the marginal value of a single
                 production unit.

            □    Add back the extra costs associated with replenishing inventory and loss
                 mitigation efforts.

□    Prepare and submit claim

      □    Summarize

            □    Date, location and type of loss

            □    Amount claimed

      □    Break down the amount claimed

            □    Property damage

                  □    Real property

                  □    Equipment

                  □    Stock and supplies

                  □    Demolition and debris removal

      □    Business Interruption

            □    Interruption Period

            □    Sales value of lost production

            □    Expenses incurred to reduce the loss

□    Attach supporting documentation for each element of the property damage and
     business interruption

□    Press for written extensions of time to submit claim and to file suit if necessary

□    Seek prompt payment of claim by insurance company

□    If a dispute over a claim arises, determine

      □    Whether appraisal is appropriate or beneficial

      □    Whether litigation will expedite payment of claim

For more information, please contact Lee Epstein, Chair of the Insurance Counseling and Recovery Department at Flaster Greenberg PC. 

Unanimous Supreme Court Upholds Katrina Fraud Verdict In Favor Of Clients

On By coveragelawIn Biggert-Waters Flood Insurance Reform Act, False Claims Act, FEMA, Flood Insurance, Homeowner Flood Insurance Affordability Act, Homeowner Policy, Hurricane Katrina, Insurance Coverage, Insurance policies, Insurers, National Flood Insurance Program, United States Supreme CourtLeave a comment

In a unaniimagesmous decision, the U.S. Supreme Court upheld a jury’s verdict that State Farm committed fraud in the adjustment of insurance claims arising out of Hurricane Katrina. A copy of the Court’s decision can be accessed at https://www.supremecourt.gov/opinions/16pdf/15-513_43j7.pdf. The case involving Weisbrod Matteis & Copley clients, Cori and Kerri Rigsby, represents an important victory for both whistleblowers and insurance policyholders.

The Rigsbys sued State Farm under the False Claims Act (“FCA”), which permits individuals to sue on behalf of the federal government. The Rigsbys were former claim adjusters employed by a contractor retained by State Farm to adjust insurance claims in the aftermath of Hurricane Katrina. They alleged, and eventually proved at trial in a bellweather case, that State Farm fraudulently represented to the government that Katrina-related damage to the exemplar home was caused by flood rather than wind. State Farm sold both federal government-backed flood insurance policies and general homeowners policies. By misclassifying wind damage as flood damage, State Farm was able to shift liability to the federal government and away from State Farm.

State Farm sought to dismiss the case on a procedural technicality by arguing that one of the Rigsbys’ former lawyers had prematurely leaked the lawsuit in violation of the FCA’s “seal” requirements. Pursuant to those “seal” requirements, lawsuits brought under the FCA must be filed under seal for a minimum of sixty days. State Farm argued that the seal was broken when the Rigsbys’ former lawyer disclosed the lawsuit to the news media and others.

In a unanimous decision, the Supreme Court rejected State Farm’s contention that the seal violation required dismissal of the Rigsbys’ lawsuit. The Court recognized that the seal requirement is intended to benefit the government because it prevents those suspected of fraud from being tipped off. As a result, the Court concluded that “it would make little sense to adopt a rigid interpretation of the seal provision that prejudices the government by depriving it of needed assistance from private parties.”

With the Supreme Court’s affirmance, State Farm must now satisfy the jury’s verdict of $758,000, which represents the damages for a single home, as well as an order to pay attorneys’ fees. The Rigsbys are now ready to move forward and prove the scope of State Farm’s fraud already proven fraud, which could involve thousands of homes and billions of dollars. Indeed, the State of Mississippi contends that State Farm also improperly shifted its Hurricane Katrina losses onto Mississippi’s Homeowner Assistance Program, which was set up to pay thousands of policyholders for losses that were not covered by insurance.

For more information, please contact Lee Epstein, Chair of the Insurance Counseling and Recovery Department at Flaster Greenberg PC. 

Looking for Coverage in All the Right Places

On By coveragelawIn Homeowner Policy, Insurance Coverage, Umbrella Policies, Will Contest LawsuitLeave a comment

Insurance is everywhere; it is intertwined with every facet of our working and personal lives. Yet, all too often when a loss occurs or a liability is sustained, we fail to obtain the full protection that insurance promises to provide. Many times this failure is simply the result of not looking in the right place or not looking at all.

In an extreme example, coverage was found under a client’s umbrella homeowner’s policy for the costs of defending a lawsuit involving a will contest. In that case, our client was sued by his brother who claimed that he was wrongly cut out of their mother’s will. After being told he had no insurance for the substantial costs incurred in defending the will contest lawsuit, our client contacted us for a second opinion.  As it turned out, our client’s umbrella homeowner’s policy provided coverage for “personal injury,” defined to include certain intentional torts, including “misrepresentation.” The will contest complaint alleged, in part, that our client had failed to disclose that their mother had cut his brother out of her will. That single allegation was enough to cause the court to conclude that there was the potential for coverage and, thus, a duty on the part of the insurer to reimburse the costs incurred in defending the will contest lawsuit.

Had our client simply accepted the initial opinion of no coverage, he would have forfeited over a half million dollar recovery. By seeking a second opinion and allowing us to look for coverage under the umbrella policy, a potentially crippling loss was averted.

It would be easy to dismiss this insurance success story as novel; it is not. Everyday, individuals and businesses confront similar claims. All too frequently these claims go uninsured, not because of the lack of insurance coverage, but because insureds fail to look in all the right places for that coverage.

Questions? Contact Lee Epstein at Weisbrod Matteis & Copley PLLC.