A recently released report from U.S. Representatives Gene Taylor (Miss.) and Charlie Melancon (La.) is calling for independent adjusters to be involved in the investigation and reporting process for claims involving the National Flood Insurance Program. Taylor and Melancon are the respective chairman and vice chairman of the Hurricane Katrina Task Force.
In the 18-page report, entitled "Katrina and Beyond," the current claim process is described as having "an obvious conflict of interest" for insurance company adjusters, who decide whether the government or their employers should pay the claims made to the National Flood Insurance Program (NFIP).
The report explains that NFIP allows insurance companies to sell flood policies and adjust flood claims that are financially backed by federal taxpayer dollars. Because of this, insurance company adjusters could have competing interests when deciding whether claims should be billed to the federal flood insurance program or to the insurance companies that employ them, train them, and advise them on the interpretation of their policies.
According to the report, State Farm, Nationwide, Allstate, and other insurers paid hundreds of thousands of wind claims inland where storm surge was a non-factor, but accuses the companies of denying wind claims near the coastline, where it says winds were stronger and water also was present.
Cori and Kerri Rigsby, who adjusted claims under a contract with State Farm, have revealed that they were instructed to pay NFIP claims as quickly as possible, while refusing to acknowledge any evidence of wind damage, according to the report. The sisters also claim that State Farm and its contractors revised engineering reports and coerced engineering firms to assign all damages to flooding, despite hours of hurricane winds before the storm surge. (Read more by clicking here.)
The issue isn't likely to disappear any time soon. Seven months ago, the House passed an amendment sponsored by Taylor that instructed the Inspector General of the Department of Homeland Security to investigate whether insurance companies defrauded the taxpayers by billing the flood insurance program for claims that should have been paid by the insurers' wind policies. The final Homeland Security Appropriations Act for Fiscal Year 2007 includes similar language, instructing the Inspector General to investigate Katrina claims and report its findings to Congress by April 1, 2007.
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