THE BATTERING OF SUPER STORM SANDY
FLOOD POLICYHOLDERS – HOW THE WYO INSURERS ABUSE THE PROCESS TO MINIMIZE THE
PAYMENT DUE TO THE STORM VICTIMS, WHILE LINING UP THEIR POCKETS WITH MILLIONS
OF DOLLARS
We provide below a write-up prepared
by law firms who represent Super Storm Sandy Victims. Unfortunately, we concur with these
statements. The process is intended to
minimize payments to the victims and not to properly compensate them for their
insured damages.
In addition, these insurers pick "experts" who would say what the insurers want to hear, i.e., that there is damage or that there is minimal damage or that the damage is pre-existing, and so on.
The policyholders then start complaining about the opinions of these "experts", without hiring their own expert, perhaps because they have no money. This is a very sad and dishonest situation that must change.
The goals of the WYO Program are:
In addition, these insurers pick "experts" who would say what the insurers want to hear, i.e., that there is damage or that there is minimal damage or that the damage is pre-existing, and so on.
The policyholders then start complaining about the opinions of these "experts", without hiring their own expert, perhaps because they have no money. This is a very sad and dishonest situation that must change.
What Is The
Write Your Own Program?
The Write Your Own (WYO)
Program began in 1983 and is a cooperative undertaking of the insurance
industry and FEMA. The WYO Program allows participating property and casualty
insurance companies to write and service the Standard
Flood Insurance Policy in their own names. The companies receive an expense
allowance for policies written and claims processed while the Federal
Government retains responsibility for underwriting losses. The WYO Program
operates as part of the NFIP, and is subject to its rules and regulations.The goals of the WYO Program are:
- Increase the NFIP policy base and the geographic distribution of policies;
- Improve service to NFIP policyholders through the infusion of insurance industry knowledge;
- Provide the insurance industry with direct operating experience with flood insurance.
Attorney
professional conduct, courtesy and honest candor were significant and possibly
overlooked aspects in Magistrate Judge Gary Brown’s Raimey v. Wright
National Flood Insurance Company Memorandum & Order. The press has picked up on the case
highlighting the altered engineering report.1 I also
highlighted these aspects of the case in Altered Engineering Reports Must Be Disclosed - Sandy Flood Judge
Requires Transparency and Are Baseless and Outcome Oriented Engineering Opinions the Normal
State of Affairs in Property Insurance Investigation.
The
court was critical of attorneys attacking one another, not appreciating that
obvious misconduct was unacceptable, and for hiding or not reporting wrongful
conduct leading to the non-disclosure of the altered document. The court took considerable analysis
demonstrating the circumstances leading up to how a “peer review” system was a
farce and the costs expended to uncover this truth. There are lessons to be
reflected upon by lawyers and what our ethical roles are when litigating these
cases.
I’ve
known both initial underlying lead counsel for a long time. I have had
favorable and professional dealings with each for a number of years. These two
colleagues are at each other’s throats in this case and many others. It shows
in some of the previous briefs and the court’s retrained remarks about these
irrelevant accusations against each other. At the hearing a few weeks ago,
neither played a role with the evidence and that is why I remark that they were
“initial” lead attorneys.
Here
is a “light” example of Wright’s counsel name-calling the policyholder’s
counsel, and even challenging the court for doing nothing about it:
There
is no more honesty or basis to these allegations, than what this Court has been
receiving from this Plaintiffs’ firm since February. There is no more truth or
validity to this series of allegations, than there was to their representations
that, “we can settle 45 of these in an afternoon,” “my clients’ house has not
been repaired,” “my clients have all lost their repair receipts,” and
continuing on through the latest barrage of representations to the Court
concerning what is actually happening to cause the failure of virtually all of
the mediation sessions. As yet, despite months of unrelenting behavior of
this type, there has not been one consequence to anyone for making
misstatements to this Court. It’s just getting worse. (emphasis added)
This
is like the football player punching back after taking a wrongful shot from an
opponent. My policyholder legal colleague must have gotten under defense
counsel’s skin with very pointed allegations. I attach the Response of the
WYO’s counsel to these allegations for review. The entire rhetoric is quite
colorful.
Lawsuits
are not about the lawyers. The parties and their disputes are what really
matter. Judge Brown noted this concept:
Plaintiffs’
counsel expended extraordinary effort making a number of personal allegations
against…one of defendant’s attorneys herein, and counsel for defendant
responded in kind. Having examined these matters with some care, I find
them wholly irrelevant and largely, if not entirely, without basis.
(emphasis added)
The
relevant attorney conduct that is the role we play as officers of the court and
our obligations towards honesty rather than hiding truth when required to
disclose it. Our entire system of civil justice fails when attorneys
participate by hiding relevant evidence. This conduct and arrogance by counsel
when confronted with the behavior was what obviously disturbed the trial court.
[A]fter
receiving evidence that the engineers report apparently had been altered,
counsel for Wright initially did little to investigate the matter….(observing
that the fragment “seems to be a draft report” and suggesting “it might be that
this was a document that had not yet gone through the normal internal peer
review process”). Next, as noted above, counsel for Wright endeavored to
prematurely circumscribe the hearing, which would have left the Court and plaintiffs
with a distinct misimpression of the practices employed by U.S. Forensic. And
lastly, even after the hearing, Wright attempted to defend the indefensible
practices exposed here. See, e.g., Deft.’s Post-Hearing Mem…. (comparing
U.S. Forensics practices to documented NASA peer review processes); (“[t]here
was nothing nefarious on US Forensic’s part in the revision of the report”);
(comparing Garove’s alteration of the report to a jury trial).
Sometimes,
I wonder if some insurance defense counsel live in an alternative
world where whatever goes is appropriate so long as their client does not get
caught cheating policyholders. This is not the first major catastrophe where
altered reports of damage or cause of damage have been exposed through
litigation and press. Yet, for the common policyholder, the impact is often
devastating as noted by the court:
“The
major effect of the reprehensible practices uncovered here – as well as
counsel’s failure to disclose these practices at an earlier juncture – was to
unnecessarily complicate and delay this action. The context remains important:
according to the City of Long Beach, the losses here totaled approximately
$205,000, while the testimony at trial suggested that the insurer has already
paid out about $80,000….Thus, based on these rough figures, the most that could
be at issue here amounted to approximately $125,000 and, based on the coverage
limits of $250,000, no more than about $170,000 could be at stake.
To a
government-backed insurer, these are trifling figures, and in the world of
federal cases, such figures are unimpressive, particularly when compared to the
exorbitant costs of litigation. On the other hand, to individual homeowners,
these are staggeringly large sums. The violations in this case resulted
in many months of delay for plaintiffs…” (emphasis added)
Our
firm is very unprofitably representing some flood claimants in New Jersey and
New York Federal Courts with less than $25,000 at stake. I have never seen so
many delayed, denied and viciously fought insurance claims through the National
Flood Program. I have been representing policyholders since 1985 and at each
major hurricane since that time. Sandy flood litigation is booming. Many flood
policyholders simply could not find a practical way to hire an attorney or
fight over what would be significant money to them. The WYO’s have won their
underpayment game even if they lose all their litigated cases – because most
people do not want the hassle of dealing with lawyers, depositions, and the
emotional toll they take on folks. In contrast, the WYO’s are emboldened
litigation machines with all litigation costs reimbursed by the national
government. It is a no lose proposition for the WYO insurers. Yet,
policyholders are never made whole even if they win because, unlike the WYO
insurers, the policyholders have to pay all their litigation fees and costs.
In
Sandy litigation, the National Flood Program usually pays for two attorneys at
various depositions and then employs new “expert” estimators and engineers after
the first ones used to originally deny the claim are probably found to be not
strong enough “to win” the case. I usually send one junior associate and beg
experts not to charge too much so something is left over for the policyholder,
should we prevail. It is quite apparent to the Policyholder Bar that winning
and wearing down the less affluent customer is a lot more important to those
running the WYO carriers than making conciliatory settlement overtures that are
meaningful. Raimey is part of that proof.
1 Christine Simmons, Judge
Fears Manipulation of Claims From Sandy, New York Law Journal, Nov. 13,
2014, available at http://www.newyorklawjournal.com/id=1202676256938?; Joe Ryan, Sandy
insurers may have falsely denied LIers' [sic] claims, federal judge says,
Newsday, Nov. 13, 2014, available at http://www.newsday.com/business/sandy-insurers-may-have-falsely-denied-liers-claims-federal-judge-1.9614420