Tuesday, December 9, 2014

SUPERSTORM SANDY LITIGATION - NEW YORK JUDGES REFUSE TO REDUCE OR PARE BACK THE DISCOVERY ORDER REGARDING THE PRODUCTION OF DRAFT INSPECTION REPORTS ALLEGEDLY ILLEGALLY ALTERED BY INSURERS AND/OR THEIR CONTRACTORS

 SUPERSTORM SANDY LITIGATION - NEW YORK JUDGES REFUSE TO REDUCE OR PARE BACK THE DISCOVERY ORDER REGARDING THE PRODUCTION OF DRAFT INSPECTION REPORTS ALLEGEDLY ILLEGALLY ALTERED BY INSURERS AND/OR THEIR CONTRACTORS

A panel of magistrate judges on Monday, December 8, 2014 denied attempts by hundreds of insurers and the Federal Emergency Management Agency (FEMA) to pare back an order requiring defendants in all cases in multi-district litigation over Hurricane Sandy to turn over claims-related documents, ruling the order essentially restated existing obligations.

FEMA and the insurers had argued that the order was unwarranted because it was based on the actions of only one engineering firm and unfairly applied to the cases in the MDL.

HERE IS A COPY OF THAT ORDER.  IT IS A MUST READ.  REALLY SHOCKING STUFF.

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Case 1:14-mc-00041-CLP-GRB-RER Document 852 Filed 12/08/14 Page 1 of 11 PageID #: 9992 2


 UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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MEMORANDUM & ORDER RE: RAIMEY RECONSIDERATION
IN RE HURRICANE SANDY CASES AND CLARIFICATION MOTIONS
14 MC 41
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On November 7, 2014, Magistrate Judge Brown issued a Memorandum and Order in Raimey v. Wright National Flood Insurance Co., No. 14-CV-461, one of the more than 1,000 Hurricane Sandy cases presently being managed by the undersigned Committee of Magistrate Judges. No. 14-MC-41, Docket Entry (“DE”) [637]; In re Hurricane Sandy Cases, No. 14-MC-41, -- F.R.D.--, 2014 WL 5801540 (E.D.N.Y. Nov. 7, 2014) (“November 7 Order”). Familiarity with the facts set forth in the November 7 Order is assumed. In the November 7 Order, Judge Brown reaffirmed that defendants in all Hurricane Sandy cases must produce the reports and materials under CMOs 1 and 3. For avoidance of doubt as to the scope of those orders, Paragraph 3 of the November 7 Order directed the defendants to provide the following:
any drafts, redlines, markups, reports, notes, measurements, photographs and written communications related thereto— prepared, collected or taken by any engineer, adjustor or other agent or contractor affiliated with any defendant, relating to the properties and damage at issue in each and every case, whether such documents are in the possession of defendant or any third party.
November 7 Order at 26-7. Defendants were given to December 12, 2014—35 days—to provide those materials.
On November 20, 2014, the Committee issued CMO 12, reiterating the portion of the November 7 Order that affects cases other than Raimey. The Committee further noted “the Raimey Order finds that these materials ‘clearly fall within the ambit of CMO 1 and 3.’ The Committee agrees with this construction of its existing discovery Orders.” CMO 12, DE [672] at n.1. Following the November 7 Order and CMO 12, FEMA and other defendants filed more than 100 motions for reconsideration and clarification of those directives and, in many instances, filed parallel objections to Judge Brown’s determination, which are incorporated by reference into the motions for reconsideration.[1]
This Memorandum and Order rules on all of the arguments raised in the scores of submissions filed by defendants that relate to Paragraph 3 of the November 7 Order; the arguments addressed specifically to Raimey, see No. 14-CV-461, DE [95], [96], [97], will be dealt with in a separate order. As discussed herein, the motions for reconsideration are largely denied, although certain matters are clarified herein. Additionally, based upon evidence submitted by plaintiffs in Raimey purportedly demonstrating additional evidence of improper practices in connection with engineering reports, we grant plaintiffs’ application for an evidentiary hearing on these issues.
I. Raimey Issues Affecting All Cases

Despite the barrage of filings by defendants in these cases, the motions for reconsideration, clarification, and objections raise four primary arguments: (a) defendants other than the defendant in Raimey did not have an opportunity to be heard; (b) the court unfairly extrapolated from evidence by a single engineer to impose new obligations upon all defendants; (c) the order imposed on defendants should also be applied to plaintiffs; and (d) the burden on defendants is too great. See, e.g., FEMA Brief, DE [679]-1.
As an initial matter, several of these arguments rest on mistaken assumptions or a misreading of this Committee’s prior orders. One such mistake is the notion that, in directing the production of draft reports, “the November 7 Order greatly increases the automatic disclosure obligations of FEMA and other defendants.” FEMA Brief, DE [679]-1 at 4. However, this assertion, uniformly adopted by WYO defendants in virtually all of these filings, is flatly untrue.[2] CMO 1, issued in February 2014, provides the following:
Documents routinely prepared in the ordinary course of business, including but not limited to adjusters' reports and other expert analyses, including draft reports, are not privileged and should be produced.
CMO 1, DE [243] at 10 (emphasis added). As Judge Brown noted in the November 7 Order:
since February 2014, defendant has been under unequivocal and repeated Court direction to produce all expert reports, photographs and ‘written communications that contain any description or analysis of the scope of loss or any defenses under the policy.’ Yet, Hernemar’s December 9 report, the redline document that transformed that report into the January 7 report, as well as a bevy of email communications surrounding the creation, transmission and modification of these documents – all of which clearly fall within the ambit of CMO 1 and 3 – have never been produced.
November 7 Order at 16; id. at 18 (discussing “production of draft reports – and, to be clear, CMO 3 unequivocally so directs”). It is notable that in the course of preparing and filing hundreds of applications—all at taxpayer expense—attorneys for the WYO defendants seemingly failed to read the first Case Management Order in this case, which explicitly required the production of, among other things, draft reports. See CMO 1 at 10. This straightforward provision undermines several of the arguments raised and, largely renders the motions meritless. With that as background, we turn to the arguments individually.
A. Opportunity to Be Heard

Defendants claim that the November 7 Order “overlooks all other defendants’ due process rights,” as the Order “greatly increases the [discovery] obligations . . . without giving all defendants, not just the defendant in the Raimey case, the opportunity to be heard on this issue.” FEMA Brief at 4-5; see also DE [681] (contending that non-WYO carriers “were not afforded an opportunity to be heard”). This argument fails for several reasons.
First, as noted above, the discovery obligations reiterated in the November 7 Order and CMO 12 existed prior to and independent of the evidentiary hearing in Raimey. Thus, all parties had input into, and an opportunity to be heard with respect to the issue of draft reports in connection with the issuance of CMO 1 in February. Further, the period to object to this provision—and no party lodged any such objection—expired long ago.
Among the issues explored in Raimey is the failure of defendant Wright to gather and produce the requisite materials. Moreover, given the shadowy, undocumented nature of the “peer review” process revealed in the evidentiary hearing, it became clear that defendants required direction to ensure that such oversights—which in the Raimey case seemingly caused significant injustice—had not occurred in other cases as well. Thus, the restatement of these requirements in the November 7 Order and CMO 12 was fully appropriate, and not in derogation of the rights of any party.
Second, even assuming, arguendo, that the discovery obligations discussed in the November 7 Order and CMO 12 did not pre-date the Raimey dispute, the notion that FEMA and the other WYO carriers were not “represented” is simply fallacious. As the WYO carriers frequently remind this Court, Wright, like the other WYO carriers, “appears herein in its ‘fiduciary’ capacity as the ‘fiscal agent of the United States.’” Wright Brief, DE [718] at 2 (citing 44 C.F.R. §62.23(f); 42 U.S.C. §4071(a)(1); Palmieri v. Allstate Ins. Co., 445 F.3d 179 (2d Cir. 2006); Gowland v. Aetna Cas. & Surety Co., 143 F.3d 951, 953 (5th Cir. 1998)). In that role, counsel is required to coordinate a joint defense with FEMA on behalf of that agency. See Federal Emergency Management Agency, National Flood Insurance Program Guide for Write Your Own Counsel, No. 14-CV-461, DE [100]-7 at 10 (“WYO Company counsel has an affirmative obligation to keep FIA and FEMA OGC informed about material aspects of a NFIP-related lawsuit”). And, according to Wright’s counsel, this went beyond the theoretical in this instance. Specifically, attorneys for Wright represent to this Court that the defenses raised in Raimey were made only after consultation with counsel for FEMA, the agency charged with administrative responsibility for the NFIP, and with the explicit concurrence of FEMA’s counsel. Federal regulations directly on point require WYO carrier defense counsel to coordinate with FEMA’s counsel concerning NFIP litigation. That is exactly what happened here. The Order erroneously gave no deference to the agency position . . .
Wright Brief, No. 14-CV-461, DE [95] at 4-5; see also DE [96] (Wright’s motion for reconsideration incorporating arguments from DE [95] Wright’s notice of objections). This directly undercuts the claim that “FEMA did not have an opportunity to be heard and weigh in on the issues addressed at the evidentiary hearing in the Raimey case.”[3] FEMA Brief, DE [679] at 2.
Finally, to the extent any party was denied an opportunity to be heard—which does not appear to be the case—consideration of those parties’ submissions on the instant motions for reconsideration provides a mechanism to correct any absence of an opportunity to be heard. See, e.g., Bassé Frères Alimentation Orientale (2013) Inc. v. Frunut Global Commodities L.L.C., No. 14 CIV. 0818 ALC JCF, 2014 WL 6467001, at *2 (S.D.N.Y. Nov. 18, 2014) (granting reconsideration and adhering to prior decision where plaintiff “contend[ed] that it did not “have a full and fair opportunity to make a comprehensive submission on the discovery issues which were addressed in the Order”); Lopez v. City of New York, No. 11-CV-2607 CBA RER, 2012 WL 2250713, at *1 (E.D.N.Y. June 15, 2012) (granting reconsideration and keeping the previous order in effect where “defendants initially did not have the opportunity to submit written opposition to the Plaintiffs' motion”); cf. Pandozy v. Tobey, 335 F. App’x 89, 92 (2d Cir. 2009) (plaintiff “had a full opportunity to respond to the possibility of sanctions in his objections to the magistrate judge's report”). The Committee has reviewed all of the submissions—which include both legal argument and certain factual material—and finds that, but for the minor exceptions noted herein, the findings and conclusions of the November 7 Order were correct and appropriate, and that no facts or controlling law was “overlooked.” See Local Civ. R. 6.3 (memorandum accompanying motion for reconsideration must contain “matters or controlling decisions which counsel believes the Court has overlooked”).
B. Bases for the Application of the Raimey Decision to Other Hurricane Sandy Cases

In a slight variation of the first argument, defendants assert that Judge Brown erred by applying the determination in the November 7 Order to defendants in cases other than Raimey. Specifically, FEMA claims “Paragraph 3 of the November 7th Order overlooks the diversity of fact and circumstances among individual Hurricane Sandy flood litigation cases.” FEMA Brief at 5. Indeed, FEMA contends that the “Court’s order extrapolates evidence uncovered in the Raimey case to all cases (wind and flood) and imputes the conduct of U.S. Forensic and the testimony of one engineer, George Hernemar, to all engineering firms and to all independent adjustors.” Id.
This argument similarly fails chiefly because, as discussed in detail above, the obligation to provide draft reports from engineers and adjustors arose from CMO 1, and hence preceded the dispute in Raimey.  Additionally, FEMA’s statement of the facts in Raimey—which has been uniformly adopted by defendants—mischaracterizes the evidence.  The decision in Raimey was not based on the testimony of a single engineer or occurrence.  Rather, the November 7 Order found that the so-called “peer review” process “was limited neither to this one engineer, nor specifically to U.S. Forensic.” November 7 Order at 13 (citing sworn testimony by two engineers about hundreds of engineering reports that had been subject to “peer review” and that such practices were standard “across the field of engineering”).
C. Mutuality

In their submission, the non-WYO carriers set forth the following:
If the Sandy committee views the disclosure requirements detailed in paragraph three of the Raimey Order as simply an amplification of what was required by CMO No. 1, then we respectfully request that the disclosure obligations set forth in paragraph 3 be made applicable to both plaintiffs and well as the defendants. Engineers are commonly retained by plaintiffs and defendants alike in insurance coverage litigation. Engineers for plaintiffs and defendants commonly write draft reports and make revisions. Likewise, both plaintiffs and defendants may have adjusters or other agents and relevant materials, photographs, and draft written communications, also referenced in paragraph 3 of the Order. The Federal Rules of Civil Procedure and the Eastern District of New York's Local Rules set forth rules for discovery that apply equally to all parties. The even-handedness of the Federal Rules would be undermined by imposing disclosure obligations solely upon defendants, as paragraph 3 of the Order does. There is no basis to apply the amplification solely upon defendants and not plaintiffs.
DE [681] at 2. This cogent, well-reasoned argument is entirely correct.[4] While the language of the November 7 Order is aimed at defendants—as it was formulated in response to demonstrable discovery failures on the part of a defendant—the requirements set forth in CMO 1 and reiterated in the November 7 Order apply equally to plaintiffs. While the December 12 deadline does not apply to plaintiffs specifically, if plaintiffs have failed to provide drafts or otherwise comply with requirements contained in the CMOs, those failures should be addressed forthwith.
D. Burden
Lastly, defendants argue that the burden of complying with the November 7 Order, and by extension, the requirements of CMO 1, warrants rescission of these requirements or extension of the time requirements. Specifically, FEMA contends that “[g]iven that FEMA, and the participating WYO carriers, do not have direct access to draft, redlined, and marked-up versions of engineering reports generated during the adjustment process, taking efforts to obtain these materials would come at a great . . . cost to the public fisc.” DE [679]-1 at 8. It is difficult to compare the “burden” on FEMA and the insurance carrier defendants in producing a set of documents to the burdens faced by plaintiffs—storm victims who may have been unjustly denied recovery for damage to or destruction of their homes. Moreover, defendants’ purported need for more time rings hollow in light of the fact that these materials should have been produced many months ago.
Notwithstanding the foregoing, at the November 25 conference, the Committee made provision to assist defendants who may have problems obtaining these documents from third party firms. At the conference, the Committee directed that, to the extent that any defendant could not obtain the subject material by December 12, such defendants are authorized to issue a subpoena to the third-party firms to secure the materials. Those subpoenas should have a return date of fourteen days from the date of issuance, such that the materials should be produced before the end of this month. Upon receipt, the materials should be provided in their entirety to the plaintiffs.

II. Plaintiffs’ Request for an Evidentiary Hearing
In response to the motions to reconsider particular to the Raimey case, plaintiffs’ counsel in Raimey submitted a number of documents purportedly demonstrating practices similar to those established in the Raimey case. See No. 14-CV-41 DE [830]; 14-CV-641 DE [100]. Based upon the material submitted, counsel has sought an evidentiary hearing on these matters. Plaintiffs’ Liaison Counsel has also submitted similar materials in opposition to the motions to reconsider. See DE [841]. Because the implications of such a hearing extend beyond the Raimey case, we address this request in this Order.
Counsel alerted the Committee to four apparent instances of improper practices with respect to damage reports relied upon by insurance carriers, several of which affect pending cases. For example, in Shlyonsky v. Travelers Insurance Co., 13-CV-05393(RJD)(JMA), and Dweck v. Hartford Insurance Co. of the Midwest, 14 CV 6920 (ERK) (JMA), plaintiffs submitted documents which appear to show that another engineering firm, HiRise Engineering, rewrote the reports of the licensed inspecting engineer; in both cases the original reports which documented extensive storm damage were altered to reflect an absence of such damage or suggest pre-existing damage. DE [830], [840], [841]. The submissions seem to suggest that the inspecting engineer’s signature was apparently cut and pasted onto the modified reports. Id.[5]
Similarly, plaintiffs have submitted engineering reports prepared in connection with two additional homes, one owned by Joseph and Patricia Giovinco, and the other owned by Sang Hahn. See Giovinco et al v. Fidelity National Property & Casualty Insurance Co., 14-CV-3937 (ADS)(SIL). In both cases, Michael Garove—the same engineer who conducted the “peer review” in Raimey, allegedly authored the U.S. Forensic engineering reports upon which the carriers relied in denying coverage. 14-CV-461, DE [100]. Plaintiffs have provided evidence that Garove never inspected either of the subject homes. Rather, plaintiffs contend, and have provided supporting documentation that engineers not licensed in New York conducted the inspections. Id. Both insureds appealed the determination that there was no flood damage, but FEMA rejected their appeals. Id.
These allegations, if true, raise a number of important issues that must be resolved. By way of example, some of the other plaintiffs may be entitled to Rule 37 relief like that afforded in Raimey. However, before conducting another partial hearing, it seems prudent to await production and review of the draft reports to be produced shortly, and conduct a hearing relating to all affected cases. As such, the Committee will hold an evidentiary hearing on these matters on January 28, 2015 at 10:00 a.m. in the Ceremonial Courtroom of the United States Courthouse, 225 Cadman Plaza East, Brooklyn, N.Y., to evaluate all claims of altered or otherwise improper practices relating to damages reports. The prospect of this hearing, however, should not delay any of the scheduled mediations or other deadlines, and the parties should proceed accordingly.
CONCLUSION
Based on the foregoing, with the exceptions noted herein, the motions for reconsideration and clarification of the November 7 Order and CMO 12 are DENIED. As such, defendants are directed to comply with the provision to supply the materials described in the November 7 Order— to the extent such material has not already been supplied—by December 12. If these materials cannot be obtained by request, defendants are authorized to issue subpoenas for that purpose, consistent with the provisions set forth herein.
Moreover, as discussed above, the Committee will hold a hearing in the Ceremonial Courtroom of the Brooklyn Courthouse on Wednesday, January 28, 2015 at 10:00 am to explore the issues set forth in Section II of this opinion. At least ten days before, Liaison Counsel shall submit briefs detailing proposed matters to be considered at the hearing, including a list of witnesses and copies of all exhibits to be offered.
SO ORDERED.


Dated: Brooklyn, New York
December 8, 2014
/S/ CHERYL L. POLLAK Cheryl L. Pollak
United States Magistrate Judge
/S/ GARY R. BROWN Gary R. Brown
United States Magistrate Judge
/S/ RAMON E. REYES, JR. Ramon E. Reyes, Jr.
United States Magistrate Judge


[1] The filed motions for reconsideration include the following: No. 14-MC-41, DE [679], [685], [690], [692], [695], [698] (styled as “Letter”), [699], [700], [702], [703], [704], [706], [707], [709] (styled as “Letter”), [710], [711], [712], [713] (styled as “Letter”), [716], [717], [720], [721], [723], [729], [731], [733], [740], [743], [747], [748], [751], [752], [753], [755], [756], [758], [760], [761], [763], [764], [765], [768], [769], [770], [778], [780], [782], [784], [785], [786], [787], [788], [789], [790], [792], [793], [796], [797], [798], [799], [800], [811]; No. 13-CV-5997, DE [85]; No. 14-CV-123, DE [81]; No. 14-CV-166, DE [77]; No. 14-CV-168, DE [76]; No. 14-CV-169, DE [75]; No. 14-CV-170, DE [76]; No. 14-CV-171, DE [77]. The parties have also filed the following notices of objections: No. 14-MC-41, DE [680], [682], [683], [686], [687], [688], [689], [691], [693], [694], [696], [697], [701], [705], [708], [714], [715], [719], [722], [724-728], [730], [732], [734], [735], [736], [737], [738], [739], [741], [742], [744], [745], [746], [749], [754], [757], [759], [762], [766], [767], [771], [772], [773], [774], [775], [776], [777], [779], [781], [783], [791], [795], [812]; No. 13-CV-5411, DE [84]; No. 13-CV-7282, DE [93]; No. 14-CV-1001, DE [66]; No. 14-CV-4857, DE [27]; No. 14-CV-6345, DE [14]; No. 14-CV-6338, DE [12]. Additional filings include the following: No. 14-MC-41, DE [681] (notice of objections for all “wind” carriers), [684] (appeal of magistrate’s decision), [718] (notice of objections specific to Raimey v. Wright National Flood Insurance Company, No. 14-CV-461), [750] (motion for reconsideration incorporating notice of objections in DE [718]).

[2] To the extent that the November 7 Order references any “additional” obligations, see, e.g., November 7 Order at 25 (stating “additional discovery”), the Order is hereby clarified to indicate only that previously existing discovery obligations were being reiterated.
[3] In these applications, counsel objects to the application of the November 7 Order to “parties who had no knowledge or notice of the events and proceedings in Raimey.” DE [718] at 7. Of course, some of the most significant issues discussed in the November 7 Order arose from the conduct of Wright’s counsel at the evidentiary hearing. It bears noting that the very same attorneys who appeared before the Court at the evidentiary hearing filed many of the motions for reconsideration. See, e.g., No. 14-MC-41, Docket Entry (“DE”) [685], [689], [690], [692], [695], [696], [700], [701], [702], [703], [706], [708], [711], [712], [715], [716], [720], [721], [722], [723], [726], [727], [728], [729], [731], [734], [741], [750], [756], [757], [759], [811], [812].
[4] It is also worth noting that, unlike the barrage of motions and applications submitted by FEMA and the WYO carriers, the submission on behalf of the non-WYO carriers efficiently set forth their position in a thoughtful, two-page letter.
[5] In fact, the materials submitted include a sworn affidavit from the inspecting engineer attesting to the fact that “Hi Rise lifted my signature and seal from the True Report and affixed said seal and signature to the False Report” and that the final report relied upon by the insurer “is a forgery.” DE [840]-5.


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NEW YORK JUDGE ORDERS THE DISCLOSURE OF ALL DRAFTS, REDLINES, ETC REPORTS IN RE SUPER STORM SANDY LITIGATION


UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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MEMORANDUM &
ORDER
IN RE HURRICANE SANDY CASES
14 MC 41
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DEBORAH RAIMEY and LARRY RAISFELD,        14 CV 461 (JFB)(SIL)(GRB)

Plaintiffs,

-against-

WRIGHT NATIONAL FLOOD INSURANCE
CO.

Defendant.
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APPEARANCES: For the Plaintiff:
Mostyn Law
3810 West Alabama Street
Houston, Texas 77027
By: Steve Mostyn, Esq.
Rene M. Sigman, Esq.

For the Defendant:
Nielsen, Carter & Treas, LLC
3838 N. Causeway Blvd., Suite 2850
Metairie, LA 70002
By: Gerald J. Nielsen, Esq.
Kristina J. Fonte, Esq.


Denis G. Kelly & Associates, P.C.
74 West Park Avenue
Long Beach, New York 11561
By: Denis G. Kelly, Esq.

McMahon Martine & Gallagher LLP
90 Broad Street
New York, New York 10004
By: Anthony Martine, Esq.
Patrick W. Brophy, Esq.
Timothy D. Gallagher, Esq.


Gauthier, Houghtaling & Williams, LLP
3500 N Hullen St
Metairie, LA 70002
By: Frederick W. Bradley, Esq.
James M. Williams, Esq.

For Non-Party U.S. Forensic:
The Demmons Law Firm
3300 West Esplanade Avenue
Suite 601
Metairie, Louisiana 70002
By: Larry Demmons, Esq.


GARY R. BROWN, United States Magistrate Judge:
Two years ago, the crushing force of Hurricane Sandy devastated large areas of this judicial district. While much has been done to facilitate recovery, assistance has not been consistent or timely, leaving some homeowners behind – even those who properly paid for flood insurance. That some homeowners have faced insufferable delays has not been lost on the public[1] or our political system.[2] This Court has invested significant resources in an effort to facilitate efficient resolution of the more than 1,000 cases arising from Hurricane Sandy.[3]
See Case Management Order (“CMO”) 1 at 1-2 (discussing efforts of Committee); Order dated October 15, 2014, 14-CV-41, DE [563] (describing EDNY Hurricane Sandy mediator training program).
Against this backdrop arises the instant dispute, which has exposed reprehensible gamesmanship by a professional engineering company that unjustly frustrated efforts by two homeowners to get fair consideration of their claims. Worse yet, evidence suggests that these unprincipled practices may be widespread.
Specifically, the evidence adduced in this matter demonstrates that U.S. Forensic, an engineering firm retained by defendant Wright National Flood Insurance Company (“Wright”) to examine a storm-battered house in Long Beach, New York, unfairly thwarted reasoned consideration of plaintiffs’ claim through the issuance of a baseless report. The engineer sent by U.S. Forensic opined in a written report that the home at issue had been damaged beyond repair by Hurricane Sandy. A second engineer, who did little more than review the photographs taken by the inspecting engineer, secretly rewrote the report, reversing its conclusion to indicate that the house had not been damaged by the storm, and attributing – without sufficient evidence – defects
in the home to long-term deterioration. This process, euphemistically dubbed a “peer review” by U.S. Forensic, was concealed by design from the homeowners, remained uncovered during the Court-assisted discovery process and came to light through near happenstance. In a misguided attempt to defend these flawed practices, defendant has elicited evidence that this “peer review” process may have affected hundreds of Hurricane Sandy flood insurance claims – and possibly more.
In this decision, the undersigned addresses the evidence presented, makes relevant findings and directs certain relief to ameliorate the highly-improper practices brought to light in this case.
Procedural History
Following the failure of mediation to resolve this matter, plaintiffs’ counsel filed a “Motion to Set Discovery Schedule and Set for Trial,” informing the Court, for the first time, that it had evidence of a U.S. Forensic engineering report that provided a conclusion contrary to the report upon which Wright based its denial of much of plaintiffs’ flood insurance claim. DE [57]. In response, Wright, among other things, denied all knowledge of the seemingly altered report, blamed plaintiffs for failing to provide evidence of the earlier report prior to mediation, sought to select a different expert as “this engineer and U.S. Forensics [sic] are now allegedly tainted,” and demanded that plaintiffs provide all information concerning the discrepancies in the engineering reports to the new engineer.[4]  DE [59] at 13. Upon review of the parties’ submissions, on October 1, 2014, the undersigned issued the following Order:

In light of the nature of the allegations set forth in plaintiffs' submission and defendant's response thereto, a hearing shall be conducted before the undersigned . . . At that hearing, plaintiffs shall be prepared to present testimony and documentary
evidence concerning the allegations relating to U.S. Forensic Report No. 12.22.1304 and the various incarnations of that report referenced in the parties' submissions. Counsel for the parties will ensure that Mr. George Hernemar will be present in person to testify about the preparation and submission of the report and related matters. Counsel for defendants will also produce any other necessary witnesses to explain, as appropriate, any differences between the purported original report and the report ultimately produced in discovery.
Electronic Order dated October 1, 2014. On October 16, 2014, an evidentiary hearing was held, at which the parties produced three witnesses. At the conclusion of the hearing, plaintiffs’ counsel indicated that, in addition to the relief previously sought, the Court should consider addressing discovery violations that resulted from the failure to provide the draft engineering reports in this case. Tr. 168. Following the hearing, both sides were permitted to submit post-hearing briefs and supporting materials.
The Evidence Adduced at the Hearing
Plaintiffs were the owners of a property located at 24 Michigan Street, Long Beach, NY, which is located about one block from the beach. The owners, who own and reside in an adjacent home, bought the house at 24 Michigan Street with plans to ultimately expand their own home, but rented the house to help pay the mortgage. Tr. 22. After Hurricane Sandy struck, one of the homeowners observed significant damage to the house that did not exist prior to the storm, including extensive damage to the floors, which had shifted in the storm. Tr. 14-15. Following the storm, the back door would no longer open, such that the homeowner had to break it down to gain access to the house. Tr. 16.
On or about November 17, 2012, David Maxime, an independent adjustor, examined the home. Based largely on the report of the adjustor, defendant paid the plaintiffs slightly more than $60,000 (in several installments) for cosmetic, non-structural damage. Tr. 21. Maxime also prepared a document entitled “Engineer Request for Fidelity,”[5] in which he makes the following observations:
During a recent flood inspection, I noticed the flooring in the dwelling was uneven from the front to the rear. The floor seemed to have a "rolling action" as you walked over it. A visual inspection of the flooring at several of the walls, appeared to have dropped about a [sic] inch or two in some cases. There was a 5 inch difference between the ceiling height at the corner of the bedroom and the center line of the bedroom. The exterior of the building had about 3ft of sand adjacent to the building. An inspection of the building crawl space showed several framing members out of line. A visual inspection of the front of the roof showed unevenness along the roof line. At the current time, the building appears to be unsafe to live in.
Pl.’s Ex. 2 (emphasis added). Presumably in response to this request, U.S. Forensic sent George Hernemar, a licensed engineer to conduct an inspection of the premises on December 4, 2012. Pl’s. Ex. 3 & 5.
Trained in Sweden, Hernemar obtained employment as a contractor with U.S. Forensic, a nationwide engineering firm, after answering an ad on Craigslist for a New York licensed engineer. Tr. 44-45, 88. He testified that he conducted approximately fifty home inspections for U.S. Forensic to assess damage inflicted by Hurricane Sandy. Tr. 44-45. U.S. Forensic had been engaged by Fidelity to report on the damage to the 24 Michigan Street property.
Following his inspection, Hernemar wrote and transmitted a report[6] dated December 9, 2012 (“December 9 report”) containing his findings to U.S. Forensic. The report, which contains numerous pages of text and photographs, offers the following “Results and Conclusions”:
1) The physical evidence observed at the property indicated that the subject building was structural [sic] damaged by hydrodynamic forces associated with the flood event of October 29, 2012. The hydrodynamic forces appear to have caused the foundation walls around the south-west corner of the building to collapse.

2) The extent of the overall damages of the building, its needed scope of repair combined with the age of the building and its simple structure, leads us to conclude that a repair of the building is not economically viable.

Pl’s Ex. 5 (emphasis added). However, plaintiffs never received this report from their insurance carrier. Rather, they received a report dated January 7, 2013 (“January 7 report”) which contains completely divergent “Results and Conclusions”:
1) The physical evidence observed at the property indicated that the subject building was not structurally damaged by hydrodynamic forces, hydrostatic forces, scour or erosion of the supporting soils, or buoyancy forces of the floodwaters associated with the subject flood event.

2) The physical evidence observed at the subject property indicated that the uneven roof slopes, leaning exterior walls and the uneven floor surfaces within the interior of the building, were the result of long term differential movement of the building and foundation that was caused by long-term differential movement of the supporting soils at the site and long-term deflection of the building framing.

Pl’s Ex. 3 (emphasis added). Based upon this report, defendant refused to pay for any structural damage to the home.
At the hearing, Hernemar and a second witness explained that the radical changes in his report resulted from a “peer review process,” though the description of that process varied greatly. Hernemar testified that he “wrote both of these reports” and insisted that no one made any alterations or changes to the reports. Tr. 57; cf. Tr. 58 (“All those reports you have presented to me, I’m the author of them.”) Rather, he testified, he had “an open discussion” on the telephone with U.S. Forensic engineer, who pointed out that “the draft was based on assumptions.” Tr. 59, 71. As a result, Hernemar “issue[d] a report changing [his] opinions.” Tr. 78. And though his testimony was, at times, confused, he testified unequivocally that “I rewrote my report.” Tr. 90; cf. Tr. 106 (Hernemar “made changes to the draft report”); 119 (“I did the changes”).
After Hernemar testified, counsel for defendant attempted to end the hearing, foreclosing further inquiry on this subject:
MR. MARTINE: Judge, I think the purpose of this hearing was to determine whether we should have some discovery; in essence, whether or not something untoward was going on between US Forensic and perhaps Mr. Hernemar.
THE COURT: Are you under the impression that the result of the hearing so far gives us a clear answer to that?
MR. MARTINE: Yes, Judge . . .
THE COURT: You brought a witness who is going to talk about the peer review process. Right?
MR. MARTINE: I don't think I need to call him, Judge.
Tr. 119-120. Both counsel for plaintiff and the Court disagreed. Id. After a lunch recess, counsel for defendant tried again:
MR. MARTINE: Judge, my feeling is that, based on the testimony this morning and based on the reason for this hearing, the hearing is resolved. The witness clearly testified that those were his opinions adopted by him following a peer review process; that he wasn't required, he wasn't compelled, he wasn't really told to do anything. He adopted the opinions.
Tr. 121. Importantly, counsel for defendant acknowledged that he was aware of the information to which Michael Garove, the “peer review” engineer, would testify:
And I can tell you what Mr. Garove will testify, and this is a representation to the court, is that, yes, he was the peer reviewer for the original report, the rough report of December, that his peer review, basically his peer review, he made suggestions and that the two engineers consult about the suggestions and that Mr. Hernemar could adopt or deny every single suggestion made and then the report is finalized.
And that is the extent of the testimony concerning the peer review, Judge.
Tr. 123-4. Notwithstanding counsel’s representation, counsel for plaintiff requested that Garove be permitted to testify, which application was granted. Tr. 124-26.
Michael Garove testified that he is an engineer licensed in Louisiana and New York, having obtained the latter license in 2011, who has worked for U.S. Forensic for approximately four and a half years. Tr. 128. He did not, at any time, inspect the 24 Michigan Street home or any portion of the property, and was unsure whether he had inspected any of the surrounding homes. Tr. 129. He was, however, assigned to review the December 9 report authored by Mr. Hernemar. Tr. 137. He received an email assigning him review of that report, “most likely from Gary Bell,” Managing Partner of U.S. Forensic. Tr. 137-8. Garove provided the following description of U.S. Forensic’s “peer review” process:
The peer review process, when we receive the initial document it is a draft form . . . Meaning, it is not a final version.
And within Microsoft Word, which is a software program that we all should be familiar with, there is a tab in there, a process by which you can initiate a tracking of any type of markups, changes, comments, whatever you would like to do in that report . . .
So . . . the peer review process involves reviewing the contents of the report, both technically, grammatically, you know, the entire content of the report, as well as reviewing any other drawings, photographs, or any other information that the inspecting engineer would produce or provide to us. From that information . . . we basically evaluate as a peer, as an engineer, the validity of what is being stated . . . and then make a final determination about whether or not the conclusions that are included within the report are accurate or in line with, you know, engineering knowledge.

[O]nce that's done, this copy of this report, which has everything that you do as a peer reviewer, is then tracked and documented, so it is not hidden, is submitted back to the office and/or the engineer, inspecting engineer, for their review to determine whether or not they feel as though any changes, comments, markups or anything are correct or in line with their opinion.
And then at that point there is an opportunity, even again within that same software program, to either individually accept or deny any changes that you make or alterations . . . .
Tr. 138-40.
Thus, rather than the “open discussion” described by Hernemar, Garove described a process by which the report authored by the inspecting engineer was rewritten by an engineer who had not inspected the property and whose identity remained concealed from the homeowner, the insurer and, ultimately, the Court. Garove acknowledged that he revised the December 9 report, sent what became the final report to Hernemar and, remarkably, stated that the two had no further discussion or contact in the matter. Tr. 145-47. Instead, it appears that Hernemar “adopt[ed Garove’s] conclusions completely.” Tr. 147, 152.
Garove endeavored to minimize the changes he made in this report, testifying that “in this case a lot of stuff just got moved around, it got restructured, because the grammar was not correct or it wasn't in the proper place in the document.” Tr. 139-40. In truth, Garove reversed the conclusion of the inspecting engineer, and removed many pertinent observations which were inconsistent with Garove’s conclusions. And, despite repeatedly asserting that he had never read the January 7 report, in response to a question by the Court, Garove conceded that he, in fact, wrote the January 7 report. Tr. 156.[7]
In his declaration, Garove has the temerity to assert the following:
Visual observations from an inspecting engineer during a site visit are not necessarily as informative as a review of photographs of the property after the site visit because review of quality photographs by an experienced peer-reviewer can yield more accurate analysis and results than direct visual observation of conditions by an inspecting engineer with less experience and understanding of the subject.
DE [71]-1 at ¶ 26. The thought is, then, that Garove, sitting in a remote location and never seeing the subject property, can do a better job than a licensed engineer sent to the scene. This assertion begs the question of why U.S. Forensic would not simply send a photographer to homes to be inspected, and produce purportedly superior reports at lower cost by having a remote engineer review the resulting photographs. It also raises the issue of why Garove did not sign the subject report, since he is the one who actually performed the analysis.
Garove’s assertions are undermined by the substance of the report, which provides the reader, in uncertain terms, with assurances that this report is based upon a physical inspection of the property by, and relying upon the expertise of, Hernemar, the inspecting engineer. The January 7 report lists Hernemar as the “Engineer of Record,” while making no mention of Garove, any other contributor, or any peer review process. Pl.’s Ex. 3. The report’s conclusions are expressly premised upon “[t]he physical evidence observed at the property,” and states that “our work to complete this assignment was performed by George Hernemar, P.E.” Id. at 1-2. A substantial portion of the report is devoted to “Site Observations,” and makes repeated references to such observations. See, e.g., id. at 3 (“No . . . evidence of recent shifting . . .was observed beneath the building”); 4 (“We observed no evidence or indication . . .”); 5 (“but no evidence or any recent shifting . . . was observed.”). Taken together, these statements concerning the methodology employed and the information relied upon render the report misleading.
Moreover, the changes wrought by Garove on Hernemar’s work journeyed beyond misleading into the realm of misrepresentation. In the December 9 report, Hernemar noted that a deposit of sand prevented him from examining the foundation to determine whether it had collapsed, and would have to be removed before a “definite determination” could be reached. Pl.’s Ex. 5 at 4; Tr. 61 (“the foundation was covered with sand, so there was no way to tell definitively what happened to [the] foundation”). As counsel for Wright elicited in cross-examination of Hernemar, limited access to the crawlspace similarly circumscribed the inspection. Tr. 107 (The foundation “was covered in sand. The whole foundation. Plus, there was no access to the crawlspace.”). Hernemar’s conclusion that the foundation of the house had collapsed was, in part, an extrapolation from his examination of a neighboring house – the foundation of which was visible – and which, he believed, had been subject to similar hydrostatic forces during the storm. Tr. 82-83.
Garove tacitly acknowledges this limitation in his Declaration: “As I initially believed, it was later confirmed that the foundation walls beneath the building had not collapsed.” DE [71]-1 at ¶ 63. Yet, notwithstanding the fact that the foundation walls could not be seen or photographed, Garove modified the report not only to remove this limitation, but to repeatedly and conclusively state that “no evidence” was observed of damage to the foundation components.[8] In other words, the limitations of Hernemar’s observations and his subsequent extrapolation may have justified amending the report to make it inconclusive. Instead, under the guise of “peer review,” Garove transformed the report to indicate a conclusive absence of storm damage. A similar issue arises with respect to Garove’s “observations” relating to the crawlspace. Hernemar testified that he had extremely limited access to the crawlspace and the three supplied photographs of the crawlspace area depict a very narrow view. Nevertheless, Garove introduced specific observations about the crawlspace into the report that appear entirely unsupported by Hernemar’s report and the accompanying photographs. See DE [77]-1 at 7.

In addition to changes, Garove included the following “comment” addressed to Hernemar in the redline draft:
George:
Please note the changes/comments within the report. Please noted [sic] that we don't theorize about damages. We observe, inspect and report damages to the building. In this case, we did not observed [sic.] any damage from hydrostatic, hydrodynamic, buoyancy forces or scour or erosion of support soils that caused damage to the subject building or foundation.
Please finalize this report and send to Donna for issue.
Michael P. Garove, P.E.
Partner[9]
DE [77]-1 at 1 (emphasis added). Unsurprisingly, Hernemar accepted all of Garove’s changes and had the document issued as instructed. Notwithstanding the vehement assertions of Wright’s counsel, Hernemar’s acquiesce to this baseless reversal of the report’s conclusion and alteration of the observations does little to validate this unprincipled process.[10]
Troublingly, the “peer review” process extended beyond this one example. In this very case, as noted elsewhere, Hernemar described a peer review of his supplemental report that resulted, again, in a change to his ultimate conclusion concerning foundation damage upon reinspection. Tr. 109; 111-112. Furthermore, Hernemar stated that – in his rough estimation – he completed fifty Hurricane Sandy inspections for U.S. Forensic, and that in four or five instances, extensive changes were wrought as a result of so-called peer review. Tr. 89. This process was limited neither to this one engineer, nor specifically to U.S. Forensic. See Tr. 58 (describing process as “normal”); 110 (process was “standard”); 129 (“peer review process is actually a very standardized process across the field of engineering”); DE [71]-1 at ¶¶ 13-16 (describing hundreds of peer reviews of reports by different engineers).
On December 31, 2012 – after Hernemar’s initial inspection but prior to the release of the January 7 report – an inspector from the City of Long Beach examined the structure. As a result of that inspection, the City provided plaintiffs with a “substantial damage letter” dated January 3, 2013, which indicates that the house “received damages of [63.4%] of the value of the pre-damaged structure as a result of the flooding that occurred on October 29, 2012.” Pl.’s Ex. 1; Tr. 6-7. Based on that finding, the City advised plaintiffs that the house “must either be removed . . . or have the lowest floor . . . elevated to at or above the 100-year flood elevation.” Pl’s Ex. 1. In supporting documents, the inspector calculated a replacement cost of $269,850 and an “actual cash value”[11] of $204,546.30 for the house.
Upon receipt of the January 7 report – which ran counter to all of the other information received by the plaintiffs – the homeowners began contacting Wright, seeking a second inspection by a different engineer. Tr. 16. After plaintiff made several dozen telephone calls to the Company, Wright relented, apparently asking U.S. Forensic to again inspect the property. Tr. 16. On January 25, 2013, U.S. Forensic sent Hernemar to conduct a reinspection. Tr. 17-18. It was during this visit that plaintiffs viewed and photographed the cover and conclusion pages of Hernemar’s December 9 report, thereby bringing to light the issues discussed in this opinion. Tr. 17.[12] Removal of the sand and better access to the crawlspace permitted Hernemar to more thoroughly inspect the foundation. Tr. 109. As a result of that examination, Hernemar uncovered a small amount of foundation damage to the house,[13] for which Wright compensated the homeowners a total sum of approximately $11,000. Id.; Tr. 21. Thus, the total paid by Wright on the file amounted to less than $80,000.
Given this relatively small insurance recovery and the damage to the home which rendered it uninhabitable, plaintiffs could no longer rent the house. Without the rental income, plaintiffs could not afford to continue paying the mortgage and property taxes, so they sold the 24 Michigan Street house for the value of the property. The house has since been razed. Tr. 22.

Discussion
A. Defendant’s Discovery Obligations

In an effort to streamline resolution of these claims, and reduce the costs and burdens on the parties, after thorough consultation with counsel for all parties, the Committee of magistrate judges appointed to manage Hurricane Sandy cases effected an expedited discovery process. In the course of nearly a dozen Case Management Orders (“CMOs”) and through hundreds of conferences, the Committee has implemented this process, modifying and adding provisions based upon experience gained over the past months.

In CMO#1, issued on February 21, 2014, the Committee directed defendants to produce:
any documentation relating to an assessment of the claimed loss, including all loss reports and damage assessments, adjuster's reports, engineering reports, contractor's reports, photographs taken of the damage or claimed losses, and any other evaluations of the claim [and] all expert reports and/or written communications that contain any description or analysis of the scope of loss or any defenses under the policy.
CMO 1 at 9. On April 7, 2014, in CMO 3, the Committee reiterated this direction:
Liaison Counsel forwarded a question from defense counsel to the Committee as to whether expert reports are subject to production pursuant to the automatic discovery process. It is hereby ordered that, to the extent that any such report was prepared prior to the issuance of this Order, such report must be produced immediately to opposing counsel. CMO#1 expressly provides that defendants are to provide “all expert reports and/or written communications that contain any description or analysis of the scope of loss or any defenses under the policy.” CMO#1 at 21. To be clear, any expert reports that have been prepared are required to be produced under this provision, regardless of whether a party anticipates, at this time, presenting the testimony of such expert. At the same time, CMO#1 should not be read as imposing an affirmative duty to create such a report, but if it exists, it should be produced.
CMO 3 at 9-10. The Committee addressed any potential claims of privilege, noting:
Rule 26(b)(4)(D) provides that “[o]rdinarily, a party may not . . . discover facts known or opinions held by an expert who has been retained or specially employed by another party in anticipation of litigation or to prepare for trial and who is not expected to be called as a witness at trial.” However, this privilege “may only be invoked when an expert has been retained or specially employed because of the prospect of litigation, and not in the normal course of business.” QBE Ins. Corp. v. Interstate Fire & Safety Equip. Co., Inc., 2011 WL 692982 (D. Conn. 2011)(rejecting application of rule to notes by claims adjustor of conversations with experts); Fine v. Bellefonte Underwriters Ins. Co., 91 F.R.D. 420, 423 (S.D.N.Y. 1981)(reports producible unless “generation of the reports were in furtherance of a sufficiently identifiable resolve to litigate, rather than a more or less routine investigation of a possibly resistable claim on a first party insurer”); Tayler v. Travelers Ins. Co., 183 F.R.D. 67, 70 (N.D.N.Y. 1998) (“where there is a disagreement between the property owner and the insurance carrier as to the amount of the fire loss, the property owner/insured/plaintiff is entitled to discovery of the carrier/defendant's file and depose adjusters”) (collecting cases).
CMO 3 at n.5. Thus, since February 2014, defendant has been under unequivocal and repeated Court direction to produce all expert reports, photographs and “written communications that contain any description or analysis of the scope of loss or any defenses under the policy.” Yet, Hernemar’s December 9 report, the redline document that transformed that report into the January 7 report, as well as a bevy of email communications[14] surrounding the creation, transmission and modification of these documents – all of which clearly fall within the ambit of CMO 1 and 3 – have never been produced.

Counsel for Wright raise two defenses for the defendant’s failure to comply with these Court orders. The first is a belated contention that the so-called “draft” reports are protectable work product under Federal Rule of Civil Procedure (“Rule”) 26(b)(4)(B). See DE [71] at 13-14. Because counsel failed to raise this issue earlier, either through an application for a protective order or the provision of a privilege log, it is clearly an afterthought. Of course, the Committee essentially addressed this argument in CMO 3 by holding the privilege relating to non-testifying experts inapplicable to reports and written communications relating to these cases. See CMO 3 at n.5; cf. Weber v. Paduano, No. 02 Civ. 3392 (GEL), 2003 WL 161340, at *7 (S.D.N.Y. Jan. 22, 2003) (“investigations into the causes and effects of an accident, undertaken soon after the event itself, are generally considered part of an insurance company's ordinary course of business”).
The privilege argument flatly fails on the merits, as the protections relied upon by defendant under Rule 26(b) apply only to drafts “that are prepared in anticipation of litigation or for trial.” Fed. R. Civ. P. 26 (b)(3)(A). The authorities cited by defendant uniformly echo this limitation. See, e.g., In re Application of Republic of Ecuador, 280 F.R.D. 506, 511 (N.D. Cal. 2012), aff'd sub nom., Republic of Ecuador v. Mackay, 742 F.3d 860 (9th Cir. 2014) (“expert reports were prepared for trial and in anticipation of litigation”). Counsel’s efforts to label these documents as draft expert reports – particularly on the facts here – cannot protect them from disclosure. As one district judge has held:
To be sure, courts must be careful in cases involving insurance and surety disputes not to hold that documents are protected from discovery simply because of a party's ritualistic incantation that all documents created by insurers are made in preparation for litigation. Because all insurance investigations are likely performed with an eye towards the prospect of future litigation, it is particularly important that the party opposing production demonstrate by specific and competent evidence that the documents were created in anticipation of litigation.
Safeco Ins. Co. of Am. v. M.E.S., Inc., No. 09-CV-3312 ARR VMS, 2013 WL 1680684, at *5 (E.D.N.Y. Apr. 17, 2013). Based upon the evidentiary hearing, I find that not only did Wright fail to demonstrate any legitimate need to protect the documents at issue, but that plaintiffs have overwhelmingly demonstrated a need for disclosure. In light of the unorthodox methodology employed to generate reports that resulted in a denial of plaintiffs’ insurance claim, permitting defendant to withhold these documents would constitute a serious injustice.
Where a Court orders production of draft reports – and, to be clear, CMO 3 unequivocally so directs – the Rule provides that it must “protect against disclosure of the mental impressions, conclusions, opinions, or legal theories of a party's attorney or other representative concerning the litigation.” Fed. R. Civ. P. 26(b)(3)(B). Counsel for Wright describe the preparation of these drafts as follows:
All revisions to draft reports were made a year before a lawsuit was filed, exclusively by and among the US Forensic field engineer George Hernemar, P.E. and the US Forensic peer review engineer Michael Garove, P.E. Only after the lawsuit was filed a year later was Nielsen, Carter & Treas, LLC retained.
DE [71] at 1. In light of this description of the preparation of these documents, it difficult to understand how counsel can assert work product in good faith. Because counsel did not even appear in the matter until a year after their creation, the documents at issue simply cannot contain any mental impression of counsel, and were clearly not prepared for the purposes of litigation. Thus, the Court need not conduct further review of draft reports or associated emails or other written communications before their production.
The second defense raised by counsel arises from the undisputed fact that U.S. Forensic only provided the two so-called final reports to Wright, which, in turn, disclosed those reports to plaintiffs.[15] However, counsel has a duty to conduct a “reasonable inquiry” to ensure that discovery responses are “complete and correct”. See Fed. R. Civ. P. 26(g)(1). Rule 34 provides that parties “produce . . . items in the responding party’s possession, custody, or control.” Importantly, “‘[c]ontrol’ is broadly construed, and thus a party may be obligated to produce documents requested under Rule 34 where the producing party does not actually possess the documents but has the legal right or practical ability to obtain them from another source on demand.” Arkwright Mut. Ins. Co. v. Nat'l Union Fire Ins. Co. of Pittsburgh, Pa., 90 Civ. 7811 (AGS), 1994 WL 510043 at *3 (S.D.N.Y. Sept. 16, 1994); see also Bank of New York v. Meridien BIAO Bank Tanzania Ltd., 171 F.R.D. 135, 146 (S.D.N.Y. 1997)(same).
As a result, “[p]roduction may be ordered when a party has the legal right to obtain papers, even though he has no copy.” Zervos v. S. S. Sam Houston, 79 F.R.D. 593, 595-96 (S.D.N.Y. 1978). Many cases have held that to properly comply with document demands, a party may be required to produce documents held by a third party where the relationship amounts to control. See, e.g., Cooper Indus., Inc. v. British Aerospace, Inc., 102 F.R.D. 918, 919-20 (S.D.N.Y. 1984) (defendant, a wholly owned subsidiary of its parent British affiliate, controls documents owned by the parent company where “it is inconceivable that defendant would not have access to these documents and the ability to obtain them for its usual business”); Herbst v. Able, 63 F.R.D. 135, 138 (S.D.N.Y. 1972) (corporation’s former and current employees were “persons within its control”); M.L.C., Inc. v. N. Am. Philips Corp., 109 F.R.D. 134, 138 (S.D.N.Y. 1986) (“control” over agreements held by corporate subsidiary).
There has been no claim here, nor does one seem likely, that defendant lacked the legal right and/or practical ability to obtain these documents from U.S. Forensic. Indeed, the evidence produced at the hearing suggests precisely the opposite – the nature of the business relationship between Wright and U.S. Forensic included the repeated provision of documents and personnel by the engineering firm at the request of the insurer. Common sense dictates a similar conclusion.
In fact, the argument by defendant’s counsel seems to be limited to the fact that “[i]n the Defendant’s claims file, which was fully and timely produced, was an original report, and then a supplemental report.” DE [59] at 2. Thus, counsel’s contention is that by producing its own file, Wright satisfied its discovery obligations and counsel discharged its duty to perform a “reasonable inquiry” merely by asking Wright for that file. Under the circumstances, this level of investigation did not satisfy counsel’s obligations. As this Court repeatedly directed the parties to produce all reports and written communications, an investigation that failed to include an inquiry with the engineering firm is clearly insufficient under the circumstances. This is particularly true where, as here, as defendant’s counsel well knew, plaintiffs were not permitted to seek discovery directly from U.S. Forensic, as such disclosure was not authorized under the CMOs, and there was a reasonable chance that U.S. Forensic would prove to be defendant’s expert at trial.
In fact, one particular aspect of discovery in this matter undermines defense counsel’s claim that provision of the two reports in Wright’s claims file effectively discharged its obligations under this Court’s discovery orders. Among the items ordered produced in CMO 1 were “all . . . photographs taken of the damage or claimed losses.” CMO 1 at 9. Hernemar testified that while he attached approximately twenty photographs of the property which were included as part of his December 9 (and ultimately January 7) reports, he took more than fifty photographs which were supplied to U.S. Forensic. The January 7 report, which became part of Wright’s claims file and was produced, notes that:
Representative photographs are in the attachments. The photographs taken but not included in the report are available upon request.
Pl.’s Ex. 3 at 5. Thus, in order to comply with this Court’s directive that all photographs be provided, defendant would necessarily have had to contact U.S. Forensic to obtain the additional but unsupplied photographs expressly identified in the report. Thus, counsel’s limitation of its discovery inquiry to Wright’s claims file was a clear violation of its discovery obligations.
Counsel for Wright repeatedly and vociferously argue that plaintiffs’ counsel failed in its obligations under the CMOs by failing to provide Wright – prior to the mediation – with a copy of the fragment of the December 9 report that their clients had obtained by photographing the title and conclusion pages with a cell phone in January 2013. To an extent, defendant is correct, and plaintiffs’ failure somewhat mitigates the harm caused by defendant. Plaintiffs’ counsel is hereby admonished that future violations of this kind could result in sanctions.
At the same time, after receiving evidence that the engineers report apparently had been altered, counsel for Wright initially did little to investigate the matter. See Deft.’s Mem. in Opp., DE [59] at 2 (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. Tr. 119-124. And lastly, even after the hearing, Wright attempted to defend the indefensible practices exposed here. See, e.g., Deft.’s Post-Hearing Mem., DE [71] at 5 (comparing U.S. Forensics practices to documented NASA peer review processes); 7 (“[t]here was nothing nefarious on US Forensic’s part in the revision of the report”); 8 (comparing Garove’s alteration of the report to a jury trial).
Based on the above, I find that counsel for Wright violated its obligations to comply with this Court’s discovery orders,[16] thereby unreasonably prolonging this litigation, imposing unnecessary costs upon plaintiffs and further contributing to the unwarranted delays in resolving this claim.
B. Appropriate Remedies in this Case

Section 636(b)(1)(A) of Title 28, United States Code empowers magistrate judges to hear and determine any pretrial matter pending before the Court (with the exception of eight specifically enumerated types of motion which are not relevant here). Because sanctions pursuant to Rule 37 fall within the scope of pretrial matters, magistrate judges are well within their authority to impose such sanctions. Thomas E. Hoar, Inc. v. Sara Lee Corp., 900 F.2d 522, 525 (2d Cir. 1990)(holding that “[m]onetary sanctions pursuant to Rule 37 for noncompliance with discovery orders usually are committed to the discretion of the magistrate, reviewable by the district court under the clearly erroneous or contrary to law standard”). “It is well settled that district courts enjoy wide discretion in sanctioning litigants appearing before them.” Novak v. Wolpoff & Abramson, LLP, 536 F.3d 175, 177 (2d Cir. 2008); see also S. New England Tel. Co. v. Global NAPS Inc., 624 F.3d 123, 143 (2d Cir. 2010) (reviewing district court’s imposition of sanctions for failure to comply with court ordered discovery for abuse of discretion). The Second Circuit has noted:
Even in the absence of a discovery order, a court may impose sanctions on a party for misconduct in discovery under its inherent power to manage its own affairs. DLC Management Corp. v. Town of Hyde Park, 163 F.3d 124, 135–36 (2d Cir.1998). See generally Chambers v. NASCO, Inc., 501 U.S. 32, 43, 111 S. Ct. 2123, 115 L. Ed. 2d 27 (1991) (“It has long been understood that ‘[c]ertain implied powers must necessarily result to our Courts of justice from the nature of their institution,’ powers ‘which cannot be dispensed within a Court, because they are necessary to the exercise of all others.’”) (quoting United States v. Hudson, 7 Cranch 32, 34, 3 L.Ed. 259 (1812)).

Residential Funding Corp. v. DeGeorge Fin. Corp., 306 F.3d 99, 107 (2d Cir. 2002).
Rule 37(b) sets forth a non-exclusive list of sanctions that the court, in its discretion, may levy on a party who “fails to obey an order or permit discovery . . . .” Fed. R. Civ. P. 37(b)(2). As relevant to the instant action, the listed sanctions include “prohibiting the disobedient party from supporting or opposing designated claims or defenses, or from introducing designated matters in evidence;” “striking the pleadings in whole or in part;” as well as “treating as contempt of court the failure to obey any order.” Fed. R. Civ. P. 37(b)(2)(A)(ii)-(iii), (b)(2)(A)(v), (b)(2)(A)(vii). Again, the Second Circuit’s holding in Residential Funding proves instructive:
Rule 37(b)(2) of the Federal Rules of Civil Procedure provides, in relevant part, that if a party fails to obey a discovery order, the court “may make such orders in regard to the failure as are just,” including, but not limited to, “[a]n order that ... designated facts shall be taken as established for the purposes of the action in accordance with the claim of the party obtaining the order.”
306 F.3d at 106. The evidentiary limitations provided in Rule 37(b)(2)(A)(i)-(ii) offer a means to craft an appropriate remedy in this case.
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. Pl’s Ex. 1. 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, and, unnecessarily, a full day evidentiary hearing and numerous briefs to fully explore these issues.
That ends now. Under Rule 37(b), in the Raimey case, I hereby prohibit defendant Wright from supporting its defenses or opposing plaintiffs’ claims with any expert testimony other than that of Hernemar, and they may not produce, rely upon or create any expert reports other than those already produced. Defendant’s application to obtain yet another expert to examine plaintiffs’ claim (and its directive to plaintiff to help prepare that expert) is hereby denied. While a more significant sanction – such as striking the answer or even contempt – might be warranted on these facts, I find that this sanction constitutes a just order, which is intended to expedite this matter and avoid further unneeded complications in this case.
Having imposed that sanction, one additional matter needs to be determined. As the Second Circuit has observed:
Rule 37(b) also provides that, in lieu of or in addition to any other appropriate order,
the court shall require the party failing to obey the order or the attorney advising that party or both to pay the reasonable expenses, including attorney's fees, caused by the failure, unless the court finds that the failure was substantially justified or that other circumstances make an award of expenses unjust. Fed.R.Civ.P. 37(b)
Residential Funding Corp., 306 F.3d at 106-7. Further, the Second Circuit has held “[w]hen an attorney’s misconduct or failing does not involve an attempt to place the other side at an unfair disadvantage, any sanction should ordinarily be directed against the attorney rather than the party, absent strong justification.” World Wide Polymers, Inc., 694 F.3d at 160. Because counsel for plaintiff withheld information relating to the apparent discrepancy in reports until the mediation, no monetary sanction is appropriate for the period leading up to the mediation. However, given discovery failures by defendant’s counsel, the unreasonable response by defendant to the allegations, and counsel’s shocking attempt to curtail inquiry during the hearing, it is reasonable to charge the costs associated with the hearing to defendant’s counsel. Plaintiffs’ counsel, therefore, may make application for reimbursement from defendant’s counsel for all reasonable costs associated with the motion, the hearing and all related briefing, including attorneys’ fees, travel costs and transcription costs, within thirty days of the date of this Order.[17]

C. Plaintiffs’ Discovery Motion and the Measures Needed to Ensure Fairness in Other Hurricane Sandy Cases

As a result of the startling findings contained herein, plaintiffs in this case, as well as all other Hurricane Sandy cases, must be provided with additional discovery to determine whether there are other expert reports, drafts, photographs and email communications that have not been disclosed to date. In their post-hearing brief, plaintiffs set forth a broad discovery plan, seeking eight depositions and twelve broad categories of documents. For the reasons set forth above, the costs of implementing such a plan may well outweigh the amounts at issue in these cases. The Committee assigned to manage these cases has endeavored “to speed resolution of these matters while also reducing costs for the parties and the burdens on the Court,” CMO 1 at 2, and ultimately “to facilitate the efficient resolution of the cases.” CMO 3 at 1. The Committee’s approach has been consistent with the Court’s mandate under Rule 1 to construe the rules “to secure the just, speedy, and inexpensive determination of every action and proceeding.” Thus, to implement a plan by which the litigation costs would likely consume potential recovery would not serve the interests of any party. Moreover, this massive undertaking would result in delays and complications, which will further frustrate prompt resolution of these claims.
At the same time, the issues that have surfaced require some accommodation. Therefore, as an initial response, I am directing that – within thirty days of the date of this Order – all defendants in any Hurricane Sandy case provide plaintiffs with copies of all reports described in CMO#1 – plus any drafts, redlines, markups, reports, notes, measurements, photographs and written communications related thereto – prepared, collected or taken by any engineer, adjustor or other agent or contractor affiliated with any defendant, relating to the properties and damage at issue in each and every case, whether such documents are in the possession of defendant or any third party. Such production should provide counsel with sufficient information to proceed to mediation and/or settlement and, where necessary, trials in these cases. Furthermore, upon receipt of such information, counsel for plaintiffs may make application for further discovery as appropriate and consistent with the principles set forth in this decision. Obviously, it would behoove defendants in all cases to be as forthcoming as possible at this juncture.

CONCLUSION
Based on the foregoing, it is hereby ORDERED that:
1. In the Raimey case, pursuant to Rule 37, defendant Wright is prohibited from supporting its defenses or opposing plaintiffs’ claims with any expert testimony other than that of George Hernemar, and they may not produce, rely upon or create any expert reports other than those already produced.
2. Within thirty days of the date of this Order, plaintiffs’ counsel in Raimey may make application to the Court for reimbursement from defendant’s counsel for all reasonable costs associated with this motion, the hearing and all related briefing, including attorneys’ fees, travel costs and transcription costs, consistent with the rulings set forth herein; and
3. Within thirty days of this Order, defendants in all Hurricane Sandy cases shall provide plaintiffs with copies of all reports described in CMO 1 not previously produced – plus any drafts, redlines, markups, reports, notes, measurements, photographs and written communications related thereto – prepared, collected or taken by any engineer, adjustor or other agent or contractor affiliated with any defendant, relating to the properties and damage at issue in each and every case, whether such documents are in the possession of defendant or any third party.
SO ORDERED.
Dated: Central Islip, New York
November 7, 2014
/s/ GARY R. BROWN
Gary R. Brown
United States Magistrate Judge


________________________________________________________


Are Baseless and Outcome Oriented Engineering Opinions the Normal State of Affairs in Property Insurance Investigation?
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:
[T]he evidence adduced in this matter demonstrates that…an engineering firm retained by defendant Wright National Flood Insurance Company…to examine a storm-battered house in Long Beach, New York, unfairly thwarted reasoned consideration of plaintiffs’ claim through the issuance of a baseless report. The engineer sent by U.S. Forensic opined in a written report that the home at issue had been damaged beyond repair by Hurricane Sandy. A second engineer, who did little more than review the photographs taken by the inspecting engineer, secretly rewrote the report, reversing its conclusion to indicate that the house had not been damaged by the storm, and attributing – without sufficient evidence – defects in the home to long-term deterioration. This process, euphemistically dubbed a “peer review” by U.S. Forensic, was concealed by design from the homeowners, remained uncovered during the Court-assisted discovery process and came to light through near happenstance. In a misguided attempt to defend these flawed practices, defendant has elicited evidence that this “peer review” process may have affected hundreds of Hurricane Sandy flood insurance claims – and possibly more.



Troublingly, the “peer review” process extended beyond this one example. In this very case, as noted elsewhere, Hernemar described a peer review of his supplemental report that resulted, again, in a change to his ultimate conclusion concerning foundation damage upon reinspection. Tr. 109; 111-112. Furthermore, Hernemar stated that – in his rough estimation – he completed fifty Hurricane Sandy inspections for U.S. Forensic, and that in four or five instances, extensive changes were wrought as a result of so-called peer review. Tr. 89. This process was limited neither to this one engineer, nor specifically to U.S. Forensic. See Tr. 58 (describing process as “normal”); 110 (process was “standard”); 129 (“peer review process is actually a very standardized process across the field of engineering”); DE [71]-1 at ¶¶ 13-16 (describing hundreds of peer reviews of reports by different engineers).
Unlike any storm in the past decade, Superstorm Sandy flood insurance claims are disputed and litigated. This exposed practice is one reason.

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.

What should also happen is that the administrators of the National Flood Program should audit these practices. Any attorney’s fees and costs caused by such practices should be reimbursed to the Federal Treasury since the National Flood Program has been paying for these costs. Indeed, one should question why the Write Your Own (WYO) carriers were not overseeing these engineers properly to ensure that the customers were not being cheated out of benefits. The WYO carriers get paid to oversee the claims investigation, and it should not have taken a lawsuit to figure out that this wrongful practice is “standard.”

New Jersey Senator Robert Menendez and his staff did a wonderful job exposing many problems of the National Flood Program in recent Congressional hearings. I am certain they will follow up with this “peer review” process and call for a remedy.

In Senator Going to Bat for Flood Victims, we noted that New York Senator Kirsten Gillibrand wrote to FEMA Administrator Craig Fugate to help policyholders to get paid. Looks like Fugate has some evidence that customers of the National Flood Program and even his agency are getting ripped off because everybody deserves honest opinions of loss.


Senator Going to Bat for Flood Victims
Imagine you have a structurally sound home on October 28, 2012. The next day, Hurricane Sandy hits and floods your home. When you return, you find your floors are buckled and severe foundation damage. Now imagine your flood insurance adjuster tells you either that the damage was preexisting or that flood insurance does not cover damage from soil shifting regardless of whether or not the soil shifting was caused by flood. Believe it or not, this is a situation in which many of our clients have found themselves.
Fortunately, they have an ally in New York Senator Kirsten Gillibrand. Senator Gillibrand recently wrote a letter to the administrator of FEMA regarding such claims.

The text of her letter is below.
Dear Administrator Fugate,
I am writing to express my complete dismay at recent reports that potentially thousands of homeowners in New York and New Jersey are being denied claims by FEMA for damage to the foundations of their homes as a result of flooding caused by Superstorm Sandy. I understand that these denials are based on a provision in FEMA’s standard flood insurance policy, which is found in the U.S. Code of Federal Regulations (44 CFR, Part 61, Appendix A), that states that FEMA does not insure for loss of property caused directly by earth movement even if the earth movement is caused by flood.
It is unacceptable for the Federal government to use such loopholes to deny responsible homeowners the benefits that they have paid for through their insurance premiums. To deny these claims pulls the rug out from underneath homeowners who are relying on their flood insurance policies to repair and rebuild their homes, now nearly eight months after Sandy hit our shores.
While I understand that flood insurance policies cannot cover every single loss that was incurred as a result of Superstorm Sandy, damages that were a result of storm surge and encroaching flood waters should not be excluded from flood insurance policies. To address this issue, I request that you immediately review the regulatory requirements for FEMA’s standard flood insurance policy and reconsider the denials that have been issued to homeowners based on the “earth movement” exclusion. I also request that you keep my office informed of the status of this request, and the actions that FEMA plans to take to address these concerns.
Thank you for your attention to this urgent request.
I hope FEMA responds favorably to this request. I will continue to monitor this issue and post updates as more information becomes available.
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Comments (2) Read through and enter the discussion with the form at the end
Mark Pitrone - July 15, 2013 8:50 PM
I will be pleasantly surprised if FEMA decides to pay off flood claims to honest homeowners, but will not be surprised at all if FEMA decides to tell them "too bad, so sad". I applaud the Senator from NY, but I am also afraid that her letter will be read by blind eyes.
Len Marshall - September 4, 2013 2:24 PM
The same thing can be said about homeowners policies in general.
Take the money and run. Sell the client on the complete coverage package that they think they are getting sold, and I mean sold. They don't find out that their coverage is bad until they submit a claim. Why do you think the insurance companies spend more money on advertising and on Washington and all the statehouses, then any other group? The policies that they sell and the federal programs that we all fund, are in many cases worse than useless. It's theft by deception and fraud under the color of law. Thousands of pages of regulations and useless consumer protection laws and the customer still doesn't get the coverage and protection that they thought they paid for.
As a public adjuster, I work for the customer/client and attempt to get a just settlement for them from their Insurance Carriers and FEMA. It's one battle at a time against the flood (no pun intended) of claims out there. Best estimate is that less than 5% of all claims are processed with the help of a public adjuster, meaning that 95% of all consumer claims are left to the whims of those same Carriers, who do not have the consumers best interests in mind. Better to spend Billions collectively on advertising than to settle a claim fairly.
As much as I hate more laws and regulations, we need new Insurance industry laws on a Federal basis. Either you are insured as the policy states and as we are sold into believing, or you are not. One page of blanket coverage followed by 100 pages of exclusions and if/then scenarios should be outlawed. We have plain law regulations that actually do regulate this type of problem, but nobody can decipher the law and dare put it into effect.
Public adjusters and lawyers can only do so much by fighting for the consumers/clients that have suffered losses.
Thank the Senator for her help and see if we can get the other 534 Senators and Representatives to help as well.



[1] “It’s been nearly two years since the region got walloped by superstorm Sandy. Yet, incredibly, even now, Sandy still packs a nasty punch every day for many of those who have homes near the shore. Because of a series of grinding, glacial bureaucracies, they still cannot afford the simple act of just going home.” Matt Davies, Sandy Lingers Two Years Later, NEWSDAY, Oct. 17, 2014, http://www.newsday.com/opinion/cartoon-sandy-lingers-two-years-later-1.9519217.
[2] “[W]e should not be just litigating as a delaying tactic to not pay claims.” Testimony of FEMA Administrator Craig Fugate at Senate Banking Committee hearing on Flood Insurance Claims Process, Jul. 30, 2014, No. 14-MC-00041, Docket Entry (“DE”) [497]-3.
[3] See Case Management Order (“CMO”) 1 at 1-2 (discussing efforts of Committee); Order dated October 15, 2014, 14-CV-41, DE [563] (describing EDNY Hurricane Sandy mediator training program).

[4] In its response, counsel for Wright correctly characterize the allegations raised by plaintiffs as “indeed serious,” properly noting that such charges “go to the very core of any court’s ability to perform its function.” DE [59] at 1. But rather than approaching these charges with the measured or conciliatory response one might anticipate, counsel, in the text of its memorandum filed with the Court, actually threaten the plaintiffs with a substantive denial of their claim should they fail to cooperate with Wright’s demand to provide information about this matter to its yet-to-be-designated engineer. Id. at 13.
[5] No explanation was provided as to Fidelity’s role in this matter. However, according to public records, Wright, the defendant, acquired Fidelity’s flood insurance business, and as a result “Fidelity National Indemnity Insurance Company . . . operate[s] as a wholly-owned subsidiary of WRM America.” WRM America to Acquire Fidelity National Financial’s Flood Insurance Business, WRIGHT SPECIALTY INSURANCE, Jul. 13, 2011, http://www.wrightspecialty.com/newsletters-press-releases/44-wrm-america-to-acquire-fidelity-national-financial-s-flood-insurance-business.html.

[6] Counsel for defendant argues that the December 9 report, which was not stamped and sealed by Hernemar, was not a “report.” See, e.g., Tr. 45, 85. However, this argument is undermined by, among other things, Mr. Hernemar’s sworn testimony. Tr. 101(“Every report I see as final. Everything I submit to US Forensic is a final report”). He did, at the same time, vacillate on this point. Tr. 72 (“the first report is not final in that sense. It is a draft you send. And if US Forensic has no issue with that report, then I get the confirmation that my report was good. And if I get the call from US Forensic, their engineer, and want to discuss the report with me, then I know if they have some other points they want me to consider maybe. We have a discussion. And that happened in this case”).

[7] During the hearing, counsel for defendant, repeatedly attempted to block inquiry by plaintiff into the bases for Garove’s opinions. Tr. 144-45 (“I'm going to object only because it appears that the examination is now getting into what this gentleman's opinion might be, which is subject to a different type of hearing”); Tr. 149 (“If counsel wants to obtain the opinion of this witness as to why he reached those conclusions, this is not what this hearing is all about”). Then, notably, defendant’s counsel proceeded to elicit some of Garove’s engineering opinions on cross-examination, and, in its post-hearing submission, defendant submitted an 11-page, single-spaced declaration from Garove, in which he further attempts to support his expert conclusions that were injected, without attribution, into Hernemar’s report. See Tr. 158-161; DE [71]-1.


[8] Garove’s assertions that “no evidence” was observed also would be true – and equally unavailing – had the inspector been blindfolded during the inspection.
[9] Curiously, at the hearing, Garove did not testify that he was a partner at the firm, merely that he was “employed” by U.S. Forensic. Tr. 128.

[10] Counsel has made a number of arguments about Hernemar’s credibility. As even a reading of the cold record will reveal, Hernemar’s testimony may be charitably characterized as confused.

[11] The letter advised that this figure could be used in lieu of a market value under applicable FEMA rules. See Pl.’s Ex. 1; FEMA Publication 213 (“. . .the structure's Actual Cash Value” may be “used as a substitute for market value based on the preference of the community”).
[12] Hernemar and plaintiff Kaible presented divergent accounts of how this came to pass. Kaible testified that Hernemar – after denying that he had authored the January 7 report – permitted Kaible to review the December 9 draft. Tr. 17. Hernemar denied this, suggesting that Kaible must have improperly gained access to the draft report. Tr. 114. Notwithstanding defendant’s arguments to the contrary, I find the issue largely immaterial. However, based upon the testimony and my evaluation of the witnesses, I fully credit the plaintiff’s account.

[13] In yet another twist, Hernemar reports that he did not at first believe that he had uncovered foundation damage, but a “peer review” of his supplemental report by U.S. Forensic convinced him otherwise. Tr. 109; 111-112. However, since Garove testified that he did not review the supplemental report, the details of this remain hazy. Tr. 111-112.

[14] The record is replete with references to email communications between and among the participants that clearly relate to these matters, including Hernemar, Garove, Gary Bell and others.
[15] Another “defense” repeatedly asserted by counsel for Wright is that the insurer would have no incentive to lowball or improperly refuse to pay claims because Write Your Own policy (“WYO”) carriers are compensated as a percentage of payout, and thus have an incentive to pay. Some – including one plaintiffs’ attorney in this case – believe otherwise. See Merlin, Chip, National Flood Claims Do Not Get Paid Properly Because the Only Incentive is to Underpay, PROPERTY INSURANCE COVERAGE LAW BLOG, http://www.propertyinsurancecoveragelaw.com/2014/07/articles/consumer-protection/national-flood-claims-do-not-get-paid-properly-because-the-only-incentive-is-to-underpay/. In any event, at least on this this record, defendant’s motives regarding the payment of claims are entirely irrelevant to the actions of the engineering company discussed herein.

[16] Plaintiffs’ counsel expended extraordinary effort making a number of personal allegations against Mr. Nielsen, 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.

[17] For the reasons set forth herein, the Court will not authorize the imposition of fees and costs relating to the ad hominem attacks against Mr. Nielsen. Should plaintiffs’ counsel pursue an application for fees, such amounts should be identified and excluded.