May 11, 2004
A class action suit claims various insurance companies failed to deliver the promised benefits to thousands of East Coast homeowners after Hurricane Isabel.
Plaintiff homeowners were insured against flood losses by insurance companies participating in the National Flood Insurance Program. But after the storm, these insurers mishandled claims from thousands of Hurricane Isabel victims and ultimately failed to pay proceeds to which the policyholders were entitled, the suit alleges.
Thousands of individuals have been living for months in trailers, temporary shelters and rental apartments while their homes sit uninhabitable because of the bungling and delays, the suit alleges. The suit was filed in United States District Court, Baltimore, on behalf of homeowners in Maryland, North Carolina, Virginia, West Virginia, Delaware, New Jersey and the District of Columbia who experienced damages from flooding during Hurricane Isabel.
Companies targeted by the suit include State Farm, Omaha P&C;, Travelers, USAA, Selective, Indemnity Insurance Of North America and Harleysville.
The lawsuit alleges such wrongful conduct as:
• Flood victims were told that they would not be paid if they did not sign the insurance company's adjuster's proof of loss within 60 days. Many policyholders therefore signed despite believing that adjusters had underestimated the scope of damage and the associated costs of repair on their properties.
• The insurers settled claims using price data and construction estimating software that did not reflect the actual cost of repair and renovation work following a natural disaster. As a result, many Hurricane Isabel victims have been forced to settle their claims at a fraction of the actual cost of repair.
"If a homeowner paid for $200,000 in flood insurance and has been told by a local contractor that it will cost $200,000 to repair his house, we think that the insurer should pay the replacement cost up to policy limits. But that hasn't been happening," said Victoria Nugent, one of the lawyers filing the suit.
The complaint seeks injunctive relief requiring defendants to 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 and servicing the insurance policies.
