HOMEOWNERS ACCUSE Hartford OF
Racketeering FOR ALTERING ENGINEERING REPORTS TO UNDERPAY FLOOD DAMAGE CLAIMS
DURING SS SANDY
We
have reported in this blog several times about the allegations of altering
engineering reports by insurers and/or insurers’ engineering contractors to
underpay or deny flood damage claims. We
do concur with these allegations, as the WYO insurers always tend to underpay
the claims, unless the homeowner or policyholder can substantiate every single
item and provide every single receipt.
When the homeowners cannot provide receipts, then all the expenses are
denied. The inspection company US
Forensic has been caught red-handed in altering reports to suit their clients,
i.e., the insurers. Federal judges have
recently issued stern warnings regarding such practices and ordered the
disclosure of all draft of reports. Here
is the recent blog:
NEW
YORK JUDGE ORDERS THE DISCLOSURE OF ALL DRAFTS, REDLINES, ETC REPORTS IN RE
SUPER STORM SANDY LITIGATION
Now,
a class action lawsuit has been filed against one insurer, its engineering
contractor and the lawfirm that have been handling the defense of the flood
damage lawsuit.
A
couple claiming damage from Hurricane Sandy sued a Hartford
Financial Services Group Inc. (HIG) unit, an engineering firm and a law
firm, accusing the group of engaging in racketeering by scheming to use
fraudulent accident reports to deny claims.
Homeowners
Stephen and Sarise Dweck, who had claimed the Hartford Insurance Co. of the
Midwest had breached its flood insurance contract with them, said in a fresh
complaint yesterday in Brooklyn
federal court that the unit's conduct also constituted racketeering because
denial of coverage was based on a version of an engineering report that had
been altered to remove a description of widespread flood damage.
HiRise Engineering PC
altered the report, and Nielsen Carter & Treas LLC, a law firm that represents flood
insurance providers, either directed or participated in the scheme, while
Hartford “knew or should have known” about the fraud and “used the falsified
report as an excuse” to deny benefits, the Dwecks alleged in the new complaint
in their November lawsuit. Others who participated in the claims process are
also named as defendants.
The
Hartford unit is the second insurer that provides coverage on behalf of the
government’s National Flood Insurance Program to be accused of relying on
fraudulently altered engineering reports to reject or underpay claims after the
storm.
Long
Beach
Earlier,
owners of a storm-battered home in Long Beach, New York, filed a racketeering
suit against Wright National Flood Insurance Co. alleging that it, too, denied
claims based on doctored reports.
U.S.
Magistrate Judge Gary R. Brown, who discussed the discrepancy between reports
for the home in a Nov. 7 ruling, said he feared the practice was “widespread”
and ordered that all reports be disclosed to policyholders.
Sandy,
the largest Atlantic hurricane on record, caused about
$60 billion in damage in New
Jersey, New York and Connecticut
when it struck in October 2012. It killed more than 100 people in the U.S. and
triggered the worst flooding in the more than 100-year history of the New York
City subway system.
The
Dwecks are among about 1,000 policyholders whose disputes with insurers over
Sandy claims are pending in federal court in Brooklyn and Central Islip, New York.
Coney
Island
In
a letter this week to the judge, lawyer J. Steve Mostyn described the experience of the
Dwecks after their home in the Manhattan Beach area of Brooklyn near Coney
Island was devastated by the storm. He filed letters by another attorney for
the Dwecks, Mitchell Shpelfogel, and exhibits to support the
argument that a damage report was changed to eliminate flooding as the cause.
After
the Dwecks notified Hartford about the changed report, a third was submitted by
another company that also reported lack of flood damage from the storm,
according to the complaint.
Thomas
Hambrick, a spokesman for Connecticut-based Hartford, said the company denies
the allegations in the suit and expects to seek its dismissal. He said Hartford
asked for a new report by an independent engineer when it was notified of the
problem.
Sandy
“was a devastating storm for many individuals and small businesses, and our
focus as a company is on helping customers recover following a loss,” he said
in a statement.
Other
Defendant
A
HiRise representative in Uniondale, New York, didn’t respond to a message left
at the company’s office. William T. Treas, of Metairie, Louisiana-based Nielsen Carter, who is also named as a defendant,
didn’t immediately return a call seeking comment on the case.
The
Hartford unit and Wright participate in a program run by the Federal
Emergency Management Agency through which private insurers are allowed to
provide flood coverage underwritten by the government. The government, which is
ultimately responsible for paying for damage, also shoulders expenses for
litigating against policyholders, according to the complaint.
Because
of the way incentives are structured under the program, insurers can profit by
incurring additional expenses through claims-handling, the Dwecks alleged. The
law firm and engineering firm benefited from additional business, the couple
said.
‘Took
Advantage’
The
firms “took advantage of the incentives of the reimbursement program to prolong
litigation in order to charge and collect unnecessary claims handling expenses
and attorney’s fees,” the Dwecks said in the complaint.
The
Hartford unit also participated in the scheme in order to curb generous payouts
that might trigger an audit by FEMA, according to the complaint. If audited and
found to have overpaid, the insurer may have face financial penalties,
according to the complaint.
Lawmakers
including U.S. Senators Kirsten Gillibrand and Charles Schumer of New
York and U.S. Senators Robert
Menendez and Cory Booker
of New Jersey have been pushing FEMA to address potential manipulation in flood
insurance claims handling. Gillibrand and Schumer have also asked the U.S.
Government Accountability Office to audit FEMA’s litigation expenses.
A
spokesman for FEMA, Rafael Lemaitre, said in an e-mail that the agency “will be
taking steps to address the Senate delegation’s concerns” and “will do whatever
it can within its authorities to have peer reviews made available to
policyholders,” referring to versions of engineering reports.
Earlier,
the agency asked the New York federal magistrate judge to reconsider his demand
that reports be disclosed, saying it was burdensome and “unjustly applies to
the conduct of one engineering firm to suggest systemic misconduct by all
engineering firms.”
The
case is Dweck v. Hartford Insurance Co. of the Midwest, 1:14-cv-06920, U.S.
District Court, Eastern District of New York (Brooklyn).
