After receiving a Bestwire News Report that indicated a Homeland Security Inspector concluded that "Write Your Own" Insurance Companies did not overpay flood claims following Hurricane Katrina, I waded through the 48 page report to find out why the Inspector came to that conclusion. As I have said in earlier blog posts, flood adjusters paid and paid and paid some more. They gave every benefit of the doubt to policyholders. In some "slab" cases, they simply reviewed satellite photographs and then paid policy limits. They never went to the loss site.
Of the hundreds of clients we represented following Katrina, not one came to us with an argument regarding National Flood underpaying a loss. We had some underwriting denial cases, but, from everything I reviewed and heard from the street, National Flood was motivated to get the money paid fully and as quickly as possible. This pleased the private insurance industry because it took some financial stress off their policyholders, who were not getting the same treatment from the private insurers.
Katrina destroyed Representative Gene Taylor’s home. He also wondered whether the private insurance companies were paying the maximum they could under their flood adjustments to lower their payments under the all risk or wind policies. I brought a Rimkus engineer to Representative Taylor’s office in Washington so he could hear first hand how reports were altered to reflect greater flood damage than the original report authored by the engineer. After Rimkus attorneys "got to" the engineer, he stopped talking. Representative Taylor called for this investigation. He had every reason to. He is upset with the findings as well. He expressed disappointment with Inspector Skinner’s report because it failed to elicit information from insurers about how they allocated damages when very little physical evidence was present. Taylor noted, "If the 1.5 percent of claims the report found where the NFIP paid for some wind damage is representative of the more than 165,000 claims caused by Katrina, it would mean the NFIP may have paid for wind damage in 2,500 claims for more than $500 million."
The report has some very obvious flaws which suggest the Inspector or the people working for him do not know anything about what they are doing. For instance, here is a quote nobody familiar with Katrina claims will agree with:
"In addition, anti-concurrent clauses in homeowner insurance policies generally provided that wind damage will not be covered when flooding occurs concurrently. These clauses were not a major factor in denial of insurance benefits by insurance carriers."
What? We had hundreds of these cases. One of the major legal debates and routine factual adjustment debates of Katrina concerned the meaning of that clause and how this clause worked during adjustments in the field. Only an incompetent person or one wanting to "whitewash" the past could reach such a nonsensical conclusion. I am stunned and saddened by this finding alone. Not everything is wrong in the report.
But, good propaganda has some truths to help divert and provide credibility to the false findings. Assuming that the insurance industry lobbyists and attorneys did not help write this Federal Report, the only thing left to do is see exactly what these federal investigators actually reviewed and did so that a better analysis can be made. That task will fall upon Ruck DeMinico in my law firm. Ruck is our "Information Manager." He is a lawyer that went back and got a library science degree. In the old days we would refer to him as a law librarian, but he is more of an information "spy" who gives us an edge for our cases. He will get more information through Freedom of Information requests and other avenues to discover exactly what was done by the Inspector. Something is terribly wrong, and I want to know why.