There is an "inherent conflict of interest" in having private insurance companies determine who is responsible for paying wind-versus-water damages following hurricanes–the insurer or the National Flood Insurance Program, a federal government report suggests.
"The NFIP must balance pressures to quickly pay claims to policyholders with ensuring that it is enforcing the terms of the flood policy," according to the Government Accountability Office report on the insurance industry's handling of wind-versus-water claims, which cited no direct evidence of insurer misconduct.
Disputes over whether Hurricane Katrina losses in 2005 were covered by federal flood insurance, or were wind-related and thus covered by private homeowners policies, prompted numerous lawsuits by angry claimants–including two members of Congress, who called hearings to examine industry practices.
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