(Bloomberg) -- New York’s attorney general has opened a criminalprobe into accusations by Hurricane Sandy victims that insurancecompanies rejected claims for flood damage to their propertiesbased on falsified engineering reports, a person familiar with thematter said.

New York homeowners have filed at least three lawsuits infederal court accusing the insurers which contract with thegovernment’s National Flood Insurance Program of scheming withengineering firms, and others involved in handling claims to denyor reduce damage payouts based on fraudulently manipulated reports.The state’s attorney general, Eric Schneiderman, has begun aninvestigation into whether any crimes were committed, said theperson, who declined to be named because the information isn’tpublic.

Sandy, the largest Atlantic hurricane on record, caused about$60 billion in damage in New Jersey, New York and Connecticut whenit struck in October 2012. It killed more than 100 people in theU.S. and triggered the worst flooding in the more than 100-yearhistory of the New York City subway system.

A federal magistrate judge in Central Islip, New York, toldinsurance companies, including Wright National Flood Insurance Co.,and units of Travelers Cos. and Hartford Financial Services GroupInc., to disclose draft reports to hundreds of policyholderslitigating over their claims related to the storm.

U.S. Magistrate Judge Gary R. Brown said in his November rulinghe found signs of “unprincipled practices” in the handling ofengineering reports for a Long Beach, New York, homeowner. He saidhe feared the practice was “widespread.”

Flood Insurance

The insurers participated in a program through which theyprovided flood insurance underwritten by the federal government.Homeowners said the insurers took part in the scheme to avoidfederal audits and possible financial penalties for making payoutsthat were overly generous. The companies also sought to inflateclaims-handling expenses that would be borne by the government,according to the complaints.

In response to pressure from New York and New Jersey lawmakers,Federal Emergency Management Agency Administrator W. Craig Fugateon Dec. 5 urged private companies participating in the floodinsurance program to turn over the draft reports for Sandy claimsin litigation in New York and other states. FEMA oversees thegovernment’s flood insurance program.

Thomas Hambrick, a spokesman for Connecticut-based Hartford, andPatrick Linehan, a Travelers spokesman, didn’t immediately respondto e-mails seeking comment on the probe. Kelly Nugent, aspokeswoman for Wright, also didn’t immediately respond to ane-mail seeking comment.

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