Days after FEMA agreed to take a second look at 144,000 flood insurance claims from Sandy victims, policyholders in New Jersey and New York have filed several class-action lawsuits against the largest flood insurers in each state.
The suits announced late last week allege that Selective Insurance in New Jersey, two private insurance companies operating in New York, and the National Flood Insurance Program itself deliberately cheated some storm victims by not accounting for sales tax in their settlement amounts, despite representations to the contrary. In New Jersey, that means affected homeowners were shortchanged $7,000 dollars for every $100,000 they received in payouts.
So far, the cases only involve a few families, but attorneys say they believe the problem is widespread, and that more plaintiffs will sign on as the issue receives more attention. Selective and the other defendants have declined to comment due to pending litigation.
Charles Mooney first noticed the issue after his family’s summer home in Toms River was destroyed by Sandy. His father’s house — just a few blocks away — was similarly damaged in the storm, and both men used Selective as their flood insurer. But Mooney said a close review of the paperwork revealed that his claim was treated differently. Selective eventually agreed to pay him $108,000, much less than he felt he should receive. That’s a separate issue he continues to fight.
But “even if you took their argument that my claim of what they say they owed me for the loss was $108,000, that’s fine,” he said. “I got to go to Home Depot and buy 2x4s and tiles and things for building materials. You pay sales tax. They compensated my father for sales tax, yet they don’t compensate me. It’s completely arbitrary! And if someone did that to keep the total claim value of his book of losses to meet some goal for his quarter or whatever it was, shame on him, because that’s just wrong, if not criminal!”
To Chip Merlin, one of the attorneys representing the Mooneys, the miscalculations appear to be intentional rather than the fault of an accidental oversight.
“They were duped!” he said. “You’d have to be an expert in insurance company estimating software to figure it out. And it’s not just in this case, but we think in thousands of cases. In very clandestine ways, unknown to the policyholders, they’re getting lowballed.”
These latest developments come amid a growing scandal surrounding allegations that insurance companies and engineering firms falsified damage reports to shortchange or deny flood-insurance payments to Sandy victims throughout the region.
Merlin says that if anything improper were done, it would have been easy to hide.
“The field adjuster who goes out there and does an estimate … That’s not the final estimate,” he explained. “Instead, it goes back to the firm that he represents. They alter or change it. It then goes to the [insurance company]. They can alter or change it. And then finally it gets sent back to the policyholder. If we had those problems with the altered engineering reports, why should people expect that they’ve got a truthful estimate with respect to the damage?”
While neither Selective nor any of the other insurance companies being accused in these lawsuits have commented on the charges, the insurance industry has in the past responded that such disputed settlements represent a small fraction of the overall claims to come out of Sandy. Further, they’ve said that since flood insurance — unlike other forms of insurance — is paid using federal taxpayer money, private companies processing the claims would have no financial incentive to decrease payouts.
Mooney said his decision to go the legal route was a last resort, after all other attempts to negotiate with his insurance company had failed.
“I’ve never sued anybody before. It’s not my thing. I don’t like it. It’s negative energy,” he said, stressing that he just wants to move on with his life. “But they’re refusing to come to the table to talk!”
With two teenage girls heading to college within the next few years, he added that he’s growing increasingly worried.
“I’m hoping that I find a way,” he said. “I’m not counting on any proceeds from any lawsuit. I’m hoping for luck with my career or maybe my kids get some scholarships or I get a break somewhere along here. I’ve been saving all my life for that,” he continued. “I have not saved all my life for a loss like this. It’s the biggest financial adversity I’ve ever faced, and the one thing I thought I could count on was the insurance policy I had at least being fair. And I don’t think I’ve been treated fairly.”