Two federal lawmakers from New Jersey are calling on the state to investigate possible insurance fraud against Hurricane Sandy victims after evidence of tampering with claims reports surfaced in New York.
In a letter sent Thursday, U.S. Sens. Cory Booker and Robert Menendez urged acting Attorney General John Hoffman to launch a formal inquiry into whether engineering companies hired by flood insurance firms to assess damage altered the reports to avoid higher payouts.
“It’s two years plus and counting, and many families still find themselves with the inability to get back into their homes because they’re either being denied insurance claims or being low-balled,” said Menendez.
In November, federal Judge Gary Brown found evidence of collusion against disaster victims in Long Island. The senators referenced that ruling – and the investigation by New York Attorney General Eric Schneiderman that followed – as impetus for New Jersey to begin its own probe.
Menendez said the details of that case were consistent with complaints he’s heard from his own constituents. One storm victim was told by a claims adjuster that he would probably be denied and the insurance company would claim “earth-movement,” Menendez said.
“Sure enough, even though there was no movement before on his home, after Sandy, he was told it was earth movement and not the storm that damaged his home,” Menendez said. “When I get one or two of those [complaints], that may be unique, but when I get many, that raises a red flag, and that’s why we’ve raised that with the attorney general.”
A spokeswoman for the New York attorney general’s office confirmed Friday that a search warrant was executed on HiRise Engineering, a firm on Long Island, but would not comment on how long the investigation has been going on.
In an email, a spokesman for Hoffman said that he had not yet received the senators’ letter but was aware of it, and would look into the issue.
In July, Menendez questioned FEMA administrator Craig Fugate about the program’s unbalanced penalty structure that punishes “Write Your Own” insurance companies for making overpayments, but not for underpayments, along with a number of other issues including policyholders’ access to their own damage reports.
Under the WYO program, the government assumes some responsibility for underwriting losses and insurance companies receive expensive policy allowances, in exchange for being part of the National Flood Insurance Program, which provides extended coverage.
FEMA officials agreed to make policy changes, according to Menendez, which included sending a letter to every WYO insurance company commanding that they turn over any damage reports to policyholders who were contesting their claim.
The problem though, said Menendez, is that why would you contest a claim if you didn’t suspect any wrongdoing?
“What we have seen is, if you didn’t contest your claim, it doesn’t mean that you weren’t hurt,” said Menendez. “That’s why we want a broader review conducted.”