A class action lawsuit has been filed in United States District Court in Baltimore against seven insurance companies alleging that they mishandled the claims of thousands of policyholders who suffered damages to their houses in September 2003′s Hurricane Isabel.
"The treatment of Hurricane Isabel victims by the companies that provided flood insurance is shameful," said Andrew N. Friedman, of Cohen Milstein Hausfeld & Toll in Washington, D.C., who is representing the plaintiffs. "What makes the insurance companies' conduct so offensive is that their egregious treatment of the flood victims was not merely limited to isolated events, but rather represented a uniform and systemic attempt to improperly deny or significantly reduce the size of the payout of flood claims."
The insurers named as defendants in the complaint are State Farm Insurance, Omaha Property and Casualty, Travelers Property Casualty, USAA General Indemnity, Selective Insurance Co. of the Southeast, Indemnity Insurance Co. of North America, and Harleysville Mutual Insurance Co. All were participants in the National Flood Insurance Program.
The complaint seeks injunctive relief requiring that the defendant insurers review and recalculate all claims using material and labor pricing data that accurately reflect the cost of repairing and replacing flood-damaged housing in the affected communities; restitution of all flood insurance premiums paid by the flood victims for policies in force during September 2003; and disgorgement by defendants of all profits and compensation paid to defendants for issuing the insurance policies.
Homeowners throughout Maryland, North Carolina, Virginia, West Virginia, Delaware, New Jersey, and Washington, D.C., complained that delays and failures in the handling of their claims left them living for months in trailers, temporary shelters, and rental apartments while their homes remained uninhabitable.
The lawsuit charges that flood victims were told that they would not be paid if they failed to sign adjusters' proofs of loss within 60 days. As a result, the complaint alleges, many policyholders signed the proofs of loss, even though they believed that the adjusters had underestimated the scope of damage, as well as the associated costs of repair.
In addition, the plaintiffs argue that the insurers settled claims using price data and construction estimating software that did not reflect the actual cost of repair and renovation work resulting from damage related to natural disasters. As a result, many Hurricane Isabel victims have been forced to settle their claims at a fraction of the actual cost of repair, according to the complaint.
Prompted by the inordinate number of complaints following Hurricane Isabel, the National Flood Insurance Program recently held a series of open houses for anyone who had filed claims. The events were intended to allow policyholders to meet one-on-one with claim specialists from NFIP, and program officials suggested that those attending bring copies of their estimates for repair work.
The NFIP also has announced that it will be reviewing all flood claims to ensure that settlements were equitable. Policyholders can request reviews of claims by calling 800-427-4661 or by mail. Every policyholder who filed a claim with the NFIP from Hurricane Isabel will be getting a letter from the NFIP with instructions on how to file by mail.
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