THE BATTERING OF SUPER STORM SANDY FLOOD POLICYHOLDERS – HOW THE WYO INSURERS ABUSE THE PROCESS TO MINIMIZE THE PAYMENT DUE TO THE STORM VICTIMS, WHILE LINING UP THEIR POCKETS WITH MILLIONS OF DOLLARS

We provide below a write-up prepared by law firms who represent Super Storm Sandy Victims. Unfortunately, we concur with these statements. The process is intended to minimize payments to the victims and not to properly compensate them for their insured damages.

In addition, these insurers pick "experts" who would say what the insurers want to hear, i.e., that there is damage or that there is minimal damage or that the damage is pre-existing, and so on.

The policyholders then start complaining about the opinions of these "experts", without hiring their own expert, perhaps because they have no money. This is a very sad and dishonest situation that must change.

What Is The Write Your Own Program?

The Write Your Own (WYO) Program began in 1983 and is a cooperative undertaking of the insurance industry and FEMA. The WYO Program allows participating property and casualty insurance companies to write and service the Standard Flood Insurance Policy in their own names. The companies receive an expense allowance for policies written and claims processed while the Federal Government retains responsibility for underwriting losses. The WYO Program operates as part of the NFIP, and is subject to its rules and regulations.

The goals of the WYO Program are:

Increase the NFIP policy base and the geographic distribution of policies;
Improve service to NFIP policyholders through the infusion of insurance industry knowledge;
Provide the insurance industry with direct operating experience with flood insurance.

Attorney Professionalism, Honest Candor and the Battering of Sandy Flood Policyholders

Attorney professional conduct, courtesy and honest candor were significant and possibly overlooked aspects in Magistrate Judge Gary Brown’s Raimey v. Wright National Flood Insurance Company Memorandum & Order. The press has picked up on the case highlighting the altered engineering report.¹ I also highlighted these aspects of the case in Altered Engineering Reports Must Be Disclosed - Sandy Flood Judge Requires Transparency and Are Baseless and Outcome Oriented Engineering Opinions the Normal State of Affairs in Property Insurance Investigation.

The court was critical of attorneys attacking one another, not appreciating that obvious misconduct was unacceptable, and for hiding or not reporting wrongful conduct leading to the non-disclosure of the altered document. The court took considerable analysis demonstrating the circumstances leading up to how a “peer review” system was a farce and the costs expended to uncover this truth. There are lessons to be reflected upon by lawyers and what our ethical roles are when litigating these cases.

I’ve known both initial underlying lead counsel for a long time. I have had favorable and professional dealings with each for a number of years. These two colleagues are at each other’s throats in this case and many others. It shows in some of the previous briefs and the court’s retrained remarks about these irrelevant accusations against each other. At the hearing a few weeks ago, neither played a role with the evidence and that is why I remark that they were “initial” lead attorneys.

Here is a “light” example of Wright’s counsel name-calling the policyholder’s counsel, and even challenging the court for doing nothing about it:

There is no more honesty or basis to these allegations, than what this Court has been receiving from this Plaintiffs’ firm since February. There is no more truth or validity to this series of allegations, than there was to their representations that, “we can settle 45 of these in an afternoon,” “my clients’ house has not been repaired,” “my clients have all lost their repair receipts,” and continuing on through the latest barrage of representations to the Court concerning what is actually happening to cause the failure of virtually all of the mediation sessions. As yet, despite months of unrelenting behavior of this type, there has not been one consequence to anyone for making misstatements to this Court. It’s just getting worse. (emphasis added)

This is like the football player punching back after taking a wrongful shot from an opponent. My policyholder legal colleague must have gotten under defense counsel’s skin with very pointed allegations. I attach the Response of the WYO’s counsel to these allegations for review. The entire rhetoric is quite colorful.

Lawsuits are not about the lawyers. The parties and their disputes are what really matter. Judge Brown noted this concept:

Plaintiffs’ counsel expended extraordinary effort making a number of personal allegations against…one of defendant’s attorneys herein, and counsel for defendant responded in kind. Having examined these matters with some care, I find them wholly irrelevant and largely, if not entirely, without basis. (emphasis added)

The relevant attorney conduct that is the role we play as officers of the court and our obligations towards honesty rather than hiding truth when required to disclose it. Our entire system of civil justice fails when attorneys participate by hiding relevant evidence. This conduct and arrogance by counsel when confronted with the behavior was what obviously disturbed the trial court.

[A]fter receiving evidence that the engineers report apparently had been altered, counsel for Wright initially did little to investigate the matter….(observing that the fragment “seems to be a draft report” and suggesting “it might be that this was a document that had not yet gone through the normal internal peer review process”). Next, as noted above, counsel for Wright endeavored to prematurely circumscribe the hearing, which would have left the Court and plaintiffs with a distinct misimpression of the practices employed by U.S. Forensic. And lastly, even after the hearing, Wright attempted to defend the indefensible practices exposed here. See, e.g., Deft.’s Post-Hearing Mem…. (comparing U.S. Forensics practices to documented NASA peer review processes); (“[t]here was nothing nefarious on US Forensic’s part in the revision of the report”); (comparing Garove’s alteration of the report to a jury trial).

Sometimes, I wonder if some insurance defense counsel live in an alternative world where whatever goes is appropriate so long as their client does not get caught cheating policyholders. This is not the first major catastrophe where altered reports of damage or cause of damage have been exposed through litigation and press. Yet, for the common policyholder, the impact is often devastating as noted by the court:

“The major effect of the reprehensible practices uncovered here – as well as counsel’s failure to disclose these practices at an earlier juncture – was to unnecessarily complicate and delay this action. The context remains important: according to the City of Long Beach, the losses here totaled approximately $205,000, while the testimony at trial suggested that the insurer has already paid out about $80,000….Thus, based on these rough figures, the most that could be at issue here amounted to approximately $125,000 and, based on the coverage limits of $250,000, no more than about $170,000 could be at stake.

To a government-backed insurer, these are trifling figures, and in the world of federal cases, such figures are unimpressive, particularly when compared to the exorbitant costs of litigation. On the other hand, to individual homeowners, these are staggeringly large sums. The violations in this case resulted in many months of delay for plaintiffs…” (emphasis added)

Our firm is very unprofitably representing some flood claimants in New Jersey and New York Federal Courts with less than $25,000 at stake. I have never seen so many delayed, denied and viciously fought insurance claims through the National Flood Program. I have been representing policyholders since 1985 and at each major hurricane since that time. Sandy flood litigation is booming. Many flood policyholders simply could not find a practical way to hire an attorney or fight over what would be significant money to them. The WYO’s have won their underpayment game even if they lose all their litigated cases – because most people do not want the hassle of dealing with lawyers, depositions, and the emotional toll they take on folks. In contrast, the WYO’s are emboldened litigation machines with all litigation costs reimbursed by the national government. It is a no lose proposition for the WYO insurers. Yet, policyholders are never made whole even if they win because, unlike the WYO insurers, the policyholders have to pay all their litigation fees and costs.

In Sandy litigation, the National Flood Program usually pays for two attorneys at various depositions and then employs new “expert” estimators and engineers after the first ones used to originally deny the claim are probably found to be not strong enough “to win” the case. I usually send one junior associate and beg experts not to charge too much so something is left over for the policyholder, should we prevail. It is quite apparent to the Policyholder Bar that winning and wearing down the less affluent customer is a lot more important to those running the WYO carriers than making conciliatory settlement overtures that are meaningful. Raimey is part of that proof.

¹ Christine Simmons, Judge Fears Manipulation of Claims From Sandy, New York Law Journal, Nov. 13, 2014, available athttp://www.newyorklawjournal.com/id=1202676256938?; Joe Ryan, Sandy insurers may have falsely denied LIers' [sic] claims, federal judge says, Newsday, Nov. 13, 2014, available at http://www.newsday.com/business/sandy-insurers-may-have-falsely-denied-liers-claims-federal-judge-1.9614420