U.S. Senators Kirsten Gillibrand and Charles E. Schumer today called on Federal Emergency Management Agency (FEMA) to ensure that all impacted Superstorm Sandy flood victims are included in the ongoing settlement regarding fraudulent engineering reports issued by insurance adjusters, regardless of whether the policyholder has filed a lawsuit. According to federal court records and recent media reports, including a months-long investigation aired by 60 Minutes, there is evidence that private engineering companies, U.S. Forensic, LLC and HiRise Engineering, P.C., altered engineering reports so as to not fully reflect the true impact and damage caused by Superstorm Sandy to New Yorkers’ homes, which led to the unjust denial or underpayment of flood insurance claims. Evidence shows that these firms purposefully altered the analysis and conclusions of engineers who visited these homes first-hand and then used these altered reports as the basis to deny homeowners of legitimate claims of damage from the storm. These engineering firms are contracted by Write Your Own (WYO) flood insurance companies that are part of FEMA’s National Flood Insurance Program (NFIP), and ultimately, the Senators said that FEMA failed in its oversight of the NFIP program, which has caused even further damage and conflict for New Yorkers already stricken by Superstorm Sandy.
FEMA is currently in the process of settling the approximately 1,200 civil lawsuits pending in the U.S. District Court for the Eastern District of New York that were filed by victims of Sandy against the WYOs and FEMA regarding the claims process of the National Flood Insurance Program. Many of individuals that filed lawsuits were denied or underpaid in their NFIP claim following Superstorm Sandy, likely due to the doctoring of engineering reports. In light of this ongoing settlement, Schumer and Gillibrand today released a letter written to FEMA deputy associate administrator Brad Kieserman, urging that the settlement include provisions to resolve the legitimate claims of any policyholder denied by U.S. Forensic, LLC or HiRise Engineering, P.C., regardless of whether a lawsuit was filed. Also, the Senators’ letter said that the settlement should include provisions to resolve the legitimate claims of any policyholder who had may have had a claim denied by another firm, in addition to HiRise and U.S. Forensic, that is further determined to have used fraudulent practices in their engineering reports and payment of claims. Finally, the Senators said that all flood insurance policyholders impacted by Sandy must have access from FEMA to all engineering and insurance documents used to assess the damage on their home, in order to root out other cases of fraud.
Earlier this week, Senators Gillibrand, Schumer, Menendez and Booker called for new oversight hearings of the flood insurance claims of these homeowners through the National Flood Insurance Program, which is run by FEMA.
“It is reprehensible that FEMA officials were aware of fraud and apparently did nothing about. Instead, FEMA continued to fight victimized homeowners in court and denied them the insurance coverage they had paid for,” said Senator Gillibrand. “Finally, homeowners are getting the money they deserve as the first wave of cases are being settled. But, FEMA has a responsibility to make every homeowner who fell victim to this fraud whole whether they filed a lawsuit or not, and we intend to hold FEMA to that standard.”
“The recent allegations of fraudulent engineering reports and other deceptive practices rampant throughout the FEMA-run National Flood Insurance Program makes your jaw drop. Evidence of engineering firms and insurance providers looking to undercut Sandy victims and underpay them for their Superstorm Sandy damage adds insult to injury, and is truly unacceptable. Thousands have filed lawsuits against FEMA and NFIP flood insurance companies due to denial or gross underpayment of their claims, and other homeowners simply didn’t file lawsuits, due to emotional and financial distress or genuine trust that the system wasn’t stacked against them. FEMA must ensure that all legitimate claims are included in the pending FEMA settlement, regardless of whether a policyholder has filed a lawsuit,” said Senator Schumer.
Schumer and Gillibrand’s letter to FEMA is below:
Dear Mr. Kieserman:
We are deeply disturbed by the serious allegations concerning widespread fraud regarding legitimate flood insurance claims handled by the Write-Your-Own (WYOs) insurance companies and the Federal Emergency Management Agency (FEMA) following Superstorm Sandy. We are aware of your efforts over the past several weeks to resolve the more than 1,200 lawsuits currently pending in U.S. District Court for the Eastern District of New York that were filed by victims of Sandy against the WYOs and FEMA over the claims process of the National Flood Insurance Program (NFIP). These homeowners not only fell victim to the devastating flood waters of Superstorm Sandy, but subsequently have fallen victim to the torrent of bureaucracy, mismanagement, and what now appears to have been fraud latent within the flood insurance program and the agents operating on its behalf. There is no excuse for the failure of FEMA and those individuals responsible for the oversight of the NFIP program to allow for the actions of the WYOs — the engineering and adjuster firms that they hired, and the law firms that have defended the cases against them – to run rampant and unchecked for so long, but we support ongoing settlement efforts and what seems to finally be real momentum toward resolving these cases as part of a broad settlement agreement between policyholders, the WYOs, and FEMA.
We believe that ensuring that policyholders have a just and fair resolution to their flood insurance claims should be a top priority of FEMA’s. FEMA should take every action possible to resolve any claim that may have been subject to fraud, purposeful misrepresentation or controversy as part of an effort to underpay homeowners’ claims. We are particularly outraged by evidence of the fraudulent practices utilized by engineering firms that were hired by the WYOs, who altered and manipulated reports in an effort to minimize and misappropriate the damage from the storm. Evidence shows that these firms purposefully manipulated the analysis of engineers who visited these homes first-hand and then used the conclusions of these reports as the basis to deny homeowners of legitimate claims of damage from the storm.
Concerns were raised directly to Administrator Fugate’s attention in June 2014 and once again in a subcommittee hearing of the Senate Banking, Housing, and Urban Affairs Committee in July 2014. Since that time, we have called on FEMA to investigate allegations of fraud and mismanagement of the NFIP program repeatedly, yet have only seen signs of progress towards addressing and settling outstanding claims in the last several weeks. At long last, however, FEMA seems committed to finally structuring the terms of a settlement that will resolve these outstanding lawsuits. Settlement of these cases should not only provide homeowners with fair and just resolution their legitimate flood insurance claims, but at the same time save taxpayers millions in legal fees that would be otherwise necessary to defend these protracted legal battles over legal technicalities, ambiguous proof of loss standards, and questionable expert conclusions. In fact, in a letter filed in the U.S. District Court for the Eastern District of NY, defendants’ counsel Gerald Nielsen stated: “The current prediction of the cost of FEMA’s legal bill from Hurricane Sandy is that the total defense fees from just this one event are likely to exceed the total defense costs incurred by the NFIP for all flood events for the 20 years that preceded Sandy, including Katrina.”
Further, we write to you today, to request that the pending FEMA settlement apply to certain policyholders beyond those that are currently in litigation. There are thousands of homeowners who unfortunately were left with the unenviable decision of having to accept a denial or partial payment from their private insurance company or file a lawsuit to challenge that decision in court. And even if policyholders were interested in filing these claims in court rigid deadlines, truncated statute of limitations, ambiguous legal standards, and overwhelming legal costs may have hindered them from doing so. Filing a lawsuit, however justified, may have been too onerous for many potentially defrauded homeowners who either lacked the necessary resources, were intimidated by the process, trusted the process was not fraudulent, or were already overwhelmed with the challenge of rebuilding their shattered homes and getting their lives back to normal. This is all to say nothing of the fact that until recently these policyholders were unaware of the fraudulent practices and procedures utilized by certain engineering firms to manipulate the conclusions of their reports. It is for these reasons that we feel confident that the number of policyholders who filed lawsuits does not encompass the total universe of policyholders that deserve to have their claims appropriately resolved by the terms of the broadly negotiated settlement agreement. Consequently, we are urging FEMA to apply the terms and parameters of any settlement agreement to address the claims of certain other policyholders, which have not filed formal lawsuits, so that their claims are fairly and justly resolved, as if they had sought their day in court.
Specifically, we urge FEMA to negotiate terms for policyholders, who have not filed formal lawsuits, in any of the following circumstances:
– The settlement should include provisions to resolve the legitimate claims of any policyholder who may have had a claim denied or partially denied based on an engineering report prepared by U.S. Forensic, LLC or HiRise Engineering, P.C..
– The settlement should include provisions to resolve the legitimate claims of any policyholder who may have had a claim denied or partially denied by a firm that is determined, after further investigation, to have used fraudulent practices in the preparation of the reports relied upon to determine the payments made to these policyholders.
– The settlement should include provisions to ensure that the WYOs, or any of its agents, provide any policyholder, upon request, with all documents, notes, and iterations of a report prepared by a firm and used by the insurance company to determine the payment of the policyholder’s claim or estimate damage. Any policyholder should be able to review a firm’s full file to evaluate whether there were fraudulent changes made to a report or whether there is evidence that a claim was underpaid. If potentially fraudulent changes to a report are identified by the policyholder or if the policyholder is able to cite evidence that they were legitimately underpaid, these policyholders should be able to submit their claims to FEMA for reconsideration and utilize a secondary appeals process established by FEMA under the terms of the settlement agreement.
Based on the evidence that we have seen first-hand, there are legitimate reasons to believe that the WYOs or the firms that contracted with them established a process by which potentially thousands of homeowners’ claims were purposefully underpaid or flat out denied based on reports that were altered to justify that conclusion. We must right this wrong not just for those policyholders that are currently fighting these decisions in court but also for those policyholders that did not file a lawsuit. The legitimate losses of each and everyone one of these individuals deserves to be resolved immediately and thus FEMA has to formalize the process for resolving these claims within the terms of any agreement it negotiates.
We look forward to remaining an active participant in bringing about critical reform to FEMA’s oversight and underlying issues with how the NFIP claims process is managed. We believe that FEMA must make significant programmatic changes and policy reforms to ensure that these problems are avoided in the future, but we believe that first the focus must be on making Sandy victims whole and resolving the claims that have hung over their head for so long.
We are happy to discuss any aspect of this request with you further.
US Senators Schumer and Gillibrand