Superstorm Sandy, biased engineering reports
and Bad Faith Claims Handling: THE PRACTICES OF us forensic, haag
engineering, donan engineering and others who derive substantial revenues from
insurers on the SPOTLIGHT
Posted: 10 Jan 2015 07:39 AM PST
We have been reporting in this blog the legal firestorm that has been raised from the allegedly biased engineering reports prepared by consultants who derive large revenues from insurance companies. Here are some of the earlier blogs:
- JUDGE IN SUPERSTORM SANDY LITIGATION: Alarmingly, one attorney prominently involved in coordinating the defense of the WYO carriers has predicted that the defense of these cases could cost more than $100 million, a figure that likely exceeds the cost of settling all of the cases at full value
- CRAIG FUGATE (FEMA ADMINISTRATOR) URGES PRIVATE INSURERS TO RELEASE THE DRAFT ENGINEERING REPORTS TO INVESTIGATE UNDERPAYMENT OF FLOOD DAMAGE CLAIMS
SUPER STORM SANDY LITIGATION: Fraudulent Super storm Sandy Flood Expert Reports?
NEW
YORK JUDGE ORDERS THE DISCLOSURE OF ALL DRAFTS, REDLINES, ETC REPORTS IN SUPER
STORM SANDY LITIGATION
On
Friday, November 7, 2014, Magistrate Judge Gary R. Brown chastised (to put it
mildly) the U.S. Forensic firm that conducted numerous flood damage assessments
using contractors.
The
judge issued a discovery ruling where he is requiring insurers to turn over
drafts, redlines, etc of engineering reports. It is a must
read.
- HOMEOWNERS ACCUSE Hartford OF
Racketeering FOR ALTERING ENGINEERING REPORTS TO UNDERPAY FLOOD DAMAGE CLAIMS
DURING SS SANDY
http://metroforensics.blogspot.com/2014/12/homeowners-accuse-hartford-of.html
-
NEW YORK JUDGE ORDERS THE DISCLOSURE OF ALL DRAFTS, REDLINES, ETC REPORTS IN RE SUPER STORM SANDY LITIGATION
In his book, “Delay, Deny, Defend,” Rutgers professor
Jay Feinman writes: “An insurance company’s greatest expense is what it
pays out in claims. If it pays out less in claims, it keeps more in profits.
Therefore, the claims department became a profit center rather than the place
that kept the company’s promise.” Professor Feinman goes on to discuss
the unholy alliance between State Farm and an engineering company known as Haag
Engineering, and specifically the allegations that State Farm hired Haag to
help “investigate” claims, “knowing that the firm would produce reports
favorable to the insurer about the cause and extent of the damage, giving State
Farm an excuse to deny or reduce payments.”
In a recent Sandy case, Raimey v. Wright National, a
Federal Magistrate in New York confronted a similar issue, and imposed
evidentiary sanctions on the carrier. Raimey involved a flood insurance
claim, and the carrier hired an outfit called U.S. Forensic to examine a
storm-battered house, which was situated about one block from the beach.
U.S. Forensic produced a report confirming structural damage to the house associated with flooding from Sandy, and stating that “repair of the building is not economically viable.” But the carrier never sent this report to the policyholder. Instead, U.S. Forensic mysteriously produced a second report about a month later, this one reversing course 180 degrees and stating that there was no structural damage associated with flooding, and that any damage to the house was caused by “long-term differential movement of the supporting soils at the site,” and therefore not covered.
U.S. Forensic produced a report confirming structural damage to the house associated with flooding from Sandy, and stating that “repair of the building is not economically viable.” But the carrier never sent this report to the policyholder. Instead, U.S. Forensic mysteriously produced a second report about a month later, this one reversing course 180 degrees and stating that there was no structural damage associated with flooding, and that any damage to the house was caused by “long-term differential movement of the supporting soils at the site,” and therefore not covered.
Guess which report the carrier relied upon?
Coverage litigation followed, and Wright National’s
counsel withheld the first report from discovery. But through what the
Court described as “happenstance,” policyholders’ counsel obtained access to
the first report. At a hearing to address Wright National’s failure
to produce the earlier contradictory report, and the circumstances surrounding
the preparation of the earlier contradictory report, the Court unflatteringly
described the issues as follows:
“The evidence adduced in this matter demonstrates that U.S. Forensic, 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, and remained uncovered during the Court-assisted discovery process...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.” (Emphasis added.)
“The evidence adduced in this matter demonstrates that U.S. Forensic, 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, and remained uncovered during the Court-assisted discovery process...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.” (Emphasis added.)
Yikes.
The Court then entered an order prohibiting Wright from
obtaining a new expert for trial, and restricting Wright’s expert testimony to
that of Henemar, the U.S. Forensic engineer who prepared the original report
(the one subsequently doctored through “peer review”). Given these
restrictions, I imagine that any trial will not go well for the carrier. (In
other words, it’s probably time to make a phone call for authority to settle.)
The Court also allowed sanctions directly against the
carrier’s counsel, writing: “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 [with respect
to the two contradictory reports], 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.”
On appeal, the District Judge affirmed the Magistrate’s
rulings. Here is that blog:
A UNITED STATES
DISTRICT JUDGE HAS AFFIRMED A MAGISTRATE JUDGE'S IMPOSITION OF SANCTIONS FOR
CONDUCT IN THE COURSE OF ADJUSTING AND LITIGATING SANDY CLAIMS
All in all, not a very good day for Wright National –
and the part about sanctions being issued directly against counsel is
unpleasant to think about for all lawyers.
