Wednesday, April 30, 2014
HACKENSACK, N.J. - Nearly 1,000 Superstorm Sandy victims have filed federal lawsuits against their flood insurance carriers, saying that they have been unfairly compensated for their losses - a surge in cases so great that court administrators have created a special plan just to deal with the deluge.
And the flow of lawsuits may not be over.
There have been 974 Sandy-related civil cases filed in federal court in New Jersey since late last year, according to the U.S. District Court Clerk’s Office. But the courts anticipate handling a total of 2,000 by next year, said Chief Judge Jerome B. Simandle, who worked to create a plan to resolve cases within a median period of six months.
Some groups say the cases reflect only a small number of the thousands of dissatisfied policyholders who do not feel they have been justly compensated for their losses and provide an indication of the a broader need to reform the National Flood Insurance Program. The large number of cases, though, might simply be an outgrowth of a natural disaster similar to the situation in Louisiana after Hurricane Katrina, others say.
“I feel like I paid my flood insurance and all you get is the right to fight with them,” said John Clancy, who filed suit last year against his carrier, Allstate Insurance Co., after receiving about $36,000 to repair damage caused by several inches of water that entered his Keansburg home in the October 2012 storm. He and his wife, Ruth, were covered for up to $250,000. They said their estimated damage was far greater than the amount they have received.
Loretta Worters, a spokeswoman for the Insurance Information Institute, said, however, that the number of cases filed so far is not indicative of large-scale dissatisfaction.
“Every storm is different, and flooding is caused by different things,” she said. “In Katrina, it was the levees and storm surge, and here it’s the storm surge. The problem is for those people who are suing now, it’s likely that theirs are the more difficult claims to settle and some may be due to the fact that either they weren’t aware what their policy was or they were underinsured or they didn’t have coverage.”
Clancy, who has lived in his Keansburg home 20 years, said he hired an attorney after he tired of battling Allstate for the money to repair his home. The repairs, including installation of new floors, are at a standstill because he can’t afford to elevate the house - a requirement of the Federal Emergency Management Agency - which he must do before continuing with any other work.
“I just can’t keep up,” he said. “I can’t get enough money to get anybody to do anything.”
His attorney, Robert Troutmann, said Clancy’s case is typical of the more than 100 flood-related lawsuits that the Red Bank law firm he works for is handling.
“In many cases, they had a public adjuster or retained an attorney, and they have been trying to negotiate for months, and it gets to point where they realize they’re not getting satisfaction,” he said. “We’ve had plenty of people call in the last couple of weeks who have been doing it on their own, and they’re fed up.”
Staci Berger, president of the Housing and Community Development Network of New Jersey, said the message repeatedly heard at public forums is that homeowners would not have had to seek rebuilding grants if they had received fair amounts from their flood-insurance carriers.
“The important thing is there are about 1,000 policyholders who feel they have not been made whole by the insurance companies,” she said. “That says to me that there is still a big need for people to get the help and resources they’re entitled to.”
George Kasimos, founder of Stop FEMA Now, a grass-roots group that has challenged flood insurance rate increases, said he has received so many complaints about underpaid claims that he was surprised the number of New Jerseyans who have sued was not higher.
“I think that number should be much higher, but I think people are beaten down,” he said. “I also think that a lot of people still don’t know they can file suit in federal court.”
Advocates for New York victims said the situation is similar across the Hudson River.
Benjamin Rajotte, director of the disaster relief clinic at the Jacob D. Fuchsberg Law Center of Touro College, said the clinic, which represents New York residents in eight federal suits against carriers, has found that homeowners have received 50 percent or less of the claims filed with flood insurance companies.
No one should assume that the 1,000 or so cases filed so far in the Eastern District of New York are a true reflection of the people who are dissatisfied with their flood insurance claims, Rajotte said.
“A lot of people have just given up” fighting, he said.
Without the New York Rising Community Reconstruction program, which offers rebuilding grants to Sandy victims, insurance carriers would also be facing many more challenges to underpaid or unpaid claims, he said.
Federal magistrate judges started to notice the rise in the number of suits filed by policyholders against flood insurance carriers about a year after Superstorm Sandy struck, said Simandle, the chief judge for the New Jersey federal court district.
There were so many that he created a committee made up of two district court and six magistrate judges to make recommendations to a board of judges on how to manage them all.
The disputes mostly center on denied claims - like those involving damages deemed to be caused by winds rather than floodwaters - or underpaid claims. In many cases, questions have arisen about home foundation damage - whether a foundation’s damage was caused by floodwaters or long-standing settlement issues.
The cases are filed against some of the nearly 90 private insurance companies that work with FEMA to provide flood insurance to homeowners, renters and business owners. The agency administers the program.
They name various insurance companies as defendants, including Selective Insurance Co. of America, Hartford Insurance Co., Fidelity National Indemnity Insurance and Allstate Insurance Co.
Allstate officials referred comment to FEMA, which could not immediately be reached for comment on Friday. A Hartford spokeswoman said the company could not comment because it involves litigation.
Jeff Moore, vice president for claims at Wright National Flood Insurance Co., formerly Fidelity National Indemnity, said the lawsuits were expected.
“Disagreement about coverage or damage for some policyholders can be part of any insurance event,” Moore said in a statement on Friday, adding that Wright has issued almost $1.1 billion in claim payments as a result of Sandy. “The claims from Sandy will be no different.”
A public meeting about the claims and the best way for the courts to manage them was held in March in Trenton. It was attended by 70 attorneys and members of the public.
“I wanted to hear and the committee wanted to hear any special concerns among members of the public about what they were expecting from federal court,” Simandle said.
The committee also received letters from attorneys who offered suggestions to expedite the cases.
To streamline the litigation, the committee has established a six-month goal from the time of a filing to disposition of the case. The new plan eliminates an automatic initial meeting with a judge, instead waiting until the parties have exchanged information and discovery.
After that meeting the judge could extend the period of discovery, set dates for a settlement conference or trial, or move the case to arbitration.
“The decision of how it’s resolved can be made at an earlier time, and the parties already have the common facts about what the particular case is,” Simandle said.
“What motivated all of this is that these are people’s homes and people’s livelihoods, and as long as disputes remain unresolved, it prolongs the agony of uncertainty they suffered in the hurricane,” the chief judge said. “They are entitled to a resolution, and that is always our goal.”
The committee consulted with the federal court for the Eastern District of New York, which established a similar plan, and the U.S. District Court for the Eastern District of Louisiana, after a rise in cases there.
In Louisiana, in addition to flood insurance carriers, defendants included oil companies that were alleged to have contaminated waterways, and the U.S. Army Corps of Engineers, for allegedly building defective levees that failed to hold back floodwaters.
“I’d say it’s very unusual and like nothing I recall in my 31 years,” Simandle said.