under — get in, get out, close the file, move
on. There was a lot of pressure to get an ad-
juster out as soon as possible to a loss. There
were limitations with the adjusting force. A
lot of guys got out there and focused on
making a payment to the homeowner.”
She adds that some were experienced
catastrophe adjusters and others were
new to the process. This lack of experi-
ence meant that while adjusters were cer-
tified for the program, they may not have
had the practical skills needed to handle
these types of losses.
“There are a number of pressures on
independent adjusters to under-report
and it’s not nefarious. They have a lot of
empathy and want to help the homeown-
ers. It’s just that empathy gets outweighed
by the rules of the program and the way
the IAs get paid.”
Dave Charles, a public adjuster and
president of Master Claims in New Jer-
sey, says that every adjuster knows where
their bread is buttered. “It’s the same be-
havior that occurs on every storm. This
was the first time they’ve hung the en-
gineers out to dry. The engineers know
they’ll keep getting paid if they deliver the
goods. The only reports altered were the
ones from the honest guys. The rest were
already written by engineers who knew
what the insurers wanted.”
While there were some knowledgeable
adjusters, for many, unfamiliarity with ca-
tastrophes and the challenges of the area
worked against everyone. “They didn’t
know what to look for or how to price
things in Xactimate [an estimating soft-
ware program],” says Bach. An adjuster
from Alabama didn’t know how to price
the losses the way a New York adjuster
would. There are different construction
issues, debris removal costs and a host of
other expenses that must be considered
as part of the estimate.
Melissa Luckman, practitioner in resi-
dence for the Disaster Relief Clinic at the
Touro Law Center in New York agrees.
“We’ve had clients with every issue —
simple things like no overhead and profit
was added in or no sales tax. Some clients
had five to six feet of water and the adjust-
ers just didn’t do a thorough job.”
All of the insurers are having different
issues. “It’s really the adjusters who went
out from the [NFIP] firms where there
are problems. People assumed they were
underpaid, but that was not the case. The
issues were adjuster dependent and not
with the actual companies. A lot of ad-
justers went up to New Jersey and Con-
necticut and didn’t have the proper expe-
rience and no one looked at their work,”
she explains. “Adjusters have a lot of lee-
way. That doesn’t mean it was wrong or
intentional, they just weren’t prepared for
the onslaught of claims and didn’t have
the training to handle catastrophe losses.”
Another issue involved all the different
adjusters working on the files. “Some were
thorough, but the majority were not,”
says Luckman. “I think they were over-
whelmed and didn’t have the experience
for a catastrophic event. They were trying
to get through as many files as possible to
make more money. They were motivated
by getting as many files as possible.”
“Adjusters are paid on a fee schedule,”
explained Charles, who has worked more
than 10,000 flood claims in his career. “A
common excuse given by NFIP was that
adjusters had no incentive to hold down
claims. The refrain was always, “The more
they write on the estimates, the more they
get paid. But by taking the low-hanging
fruit and writing 60 percent of the damage on these claims, you could make more
money because you could work more
claims. It’s called running and gunning.
Every adjuster knows what it is and does
it. They go for the easy stuff and leave the
rest for someone else. The problem was
the system broke down because there
wasn’t an effective way to deal with the
other 40 percent of the claims. Adjusters
were working 14 hours a day, seven days a
week and there wasn’t enough time.”
Engineering report issues
Luckman explained that the clinic provides pro bono legal services for any issue
stemming from Hurricane Sandy. They
have spoken to more than 2,700 households and taken 600 cases for representation. Originally the clinic was involved in
just flood insurance litigation because so
many people were reportedly underpaid.
But now the clinic is seeing more issues
with contractor disputes and mortgage
modifications.
The clinic has seen a fair number of
changed engineering reports, says Luck-
man. “Out of the 144,000 flood insurance
claims, engineering issues were involved
in only about 16,000 of those. If you
change an engineering report that said the
cause of the damage was Sandy to it was
not Sandy, it’s a huge blow to the home-
owner. There are harsher consequences in
terms of what homeowners have to pay
and it maxes out their policies sooner.”
She adds that engineers have told
them, “The report I wrote was correct,
but I never looked back at it. I noticed all
of my reports were changed.” She doesn’t
know if they were changed during the
peer review, by the adjuster, the insurer
or somewhere else in the process. Some
answers may come to light with FEMA
reopening thousands of cases. Luckman
says that FEMA doesn’t know where in
the process the reports were changed and
is trying to identify how it occurred.
Jeff Major with Canopy Claims Man-
agement in New York was going to be an
expert for Ramey before the case settled.
He has reviewed several hundred engi-
neering reports and found similar lan-
guage in the reports from multiple engi-
neers. “In the majority of the engineering
reports that I’ve reviewed on different
houses and multiple scenarios, the find-
ings were exactly the same on the reports.”
He said he spoke to one engineer for
those companies who said he was not
asked to write a report, but was given a
list of four things to look for during an
inspection. He looked at those items and
signed the report given to him. This oc-
curred with multiple companies.
Charles described the earth movement
exclusion in the NFIP policy and said it
gave them a “hammer” to deny claims that
should have been paid. “Subsidence or set-
tlement were the terms used to deny cover-
age,” and he says they were “bogus issues.”
He believes the focus is weighted more
towards profits than the greater good and
doing what is best for the homeowner.
“It’s a perfect storm of badness with no
fear of retribution. Bad faith is a very real
sword for everyone but the NFIP. There
