Four Months After Sandy, Flood Insurance Claim Woes Continue
If there is one true culprit for problems persisting in the wake and aftermath of Superstorm Sandy, by all accounts it has been the work, service and response of flood insurance companies. More than four months after Sandy struck Southern Ocean County, hundreds – if not thousands – still search for answers, as they remain displaced from homes that await flood insurance company payouts for repairs or demolition and reconstruction.
Jeffrey Lewis, 31, of Little Egg Harbor Township is one of those people. A single father of two, Lewis has been residing in the attic of his parents’ home in the Ocean Acres section of Stafford Township while he awaits insurance company money to rebuild his Little Egg Harbor home.
Like many other accounts heard by The SandPaper from Southern Ocean County residents, Lewis claims the damage estimate given for his home on Atlantis Boulevard and the payout he is expecting are much lower than what he needs to tear down and rebuild the home.
Lewis claims he had 52 inches of water flood his house during Sandy. Without contents insurance – a flood insurance option he did not explore – he lost all belongings in his one-story home other than what was in raised cabinets, or pictures hanging on the wall. As a U.S. veteran of Operation Iraqi Freedom and Afghan Freedom, Lewis said many possessions came from traveling around the world.
“I thought that flood insurance covers everything. Nobody explained it to me,” said Lewis, who said that upon moving into the home, he was told by his insurance agent to simply take a given flood insurance company. “They say, ‘This is what it will be a month. You don’t really have a choice.’”
He claims that company, American Banking of Florida, has cut off all contact with him. He said American Banking’s initial adjuster told him that his house would need to be torn down due to cracks in the concrete slab foundation and because part of the house was ready to collapse. However, he was instructed “not to do anything,” as it would be at least a month before a case file for his home could even be written up.
Lewis said the eventual damage report did not include things such as insulation or wiring before it was sent to his insurance company, which then came back with an offer of $76,000, far below what Lewis knew he would need to tear down his home and build a new one on the property.
Following an appeal of the initial offer sent by American Banking, Lewis said a Federal Emergency Management Agency engineer was sent by his insurance company to inspect his home. The engineer deemed the house livable despite the lack of electricity and heat.
“The guy didn’t even show up with a tape measure or a pen and paper. He had a camera, took a few pictures of stuff, and didn’t write anything down.”
Lewis claims he called his flood insurance company every day for two months, being told off by supervisors. He reduced the calls to once a week before giving up entirely on trying to reach the company.
“I’ve heard lots of people have problems with that company,” he said.
Eventually Lewis hired his own public adjuster, who sent an estimate to American Banking that it would cost between $270,000 and $280,000 to restore his home to what it was before the storm.
In response to this, Lewis claims his public adjuster was told that structural damage stemmed from the aftershocks of an East Coast earthquake that were felt in 2011.
“It’s disgusting,” said Lewis, adding that despite his insurance company communicating with the public adjuster he hired, the company claims it can only go with the estimate of the FEMA engineer it sent.
At press time, the voice mailbox of the American Banking of Florida agent handling Lewis’ policy was full, and a “media person” at the company’s Georgia office did not respond to a call from The SandPaper.
Meanwhile, Lewis would at least like the company’s initial offer of $76,000 so he could start some work on the house he hopes to consider his home again.
Federal regulation requires all flood insurance company payouts to be signed by the consumer’s mortgage company. This is to ensure the monies will be used for home repair and lessen insurance fraud.
The problem is that in the middle of this, on Jan. 1, 2013, Lewis claims his mortgage holder, Bank of America, sold his mortgage to a company called Nation Star without informing him it was doing so. This would require his flood insurance company to write a new check to Nation Star. With a complete lack of communication, Lewis said that process continues to be held up.
“The day I called Nation Star about my mortgage being sold, they said, ‘You’re the fifth one that asked about that today.’”
Questions posed to a Bank of America representative by The SandPaper were not answered by press time.
On the experience with his flood insurance company, Lewis concluded, “It’s just sad that you pay every single month and if you’re late, they penalize you. But when you really need them, they’re not there. Meanwhile, your entire life you watch get thrown into a Dumpster.
“I know there’s a lot of people, and it’s overwhelming – but it’s rough.
“It’s horrible, horrible stress,” he continued. “You can’t eat, you can’t sleep, and you’re worried about everything every day. They should have answers already, and nobody has answers. It’s just ‘what’s the insurance company going to do next?’ That’s where the heartache comes from – you don’t know if you’re going to have a home next year or not.”
He estimates that since Sandy, he has already spent $20,000 out of his own pocket.
“I know a lot of people that are in worse situations than I am. It’s just nobody knows about it. Half of Little Egg Harbor is in this situation,” said Lewis. He described another single father, a neighbor of his, in a very similar situation, only the neighbor has spent the winter living in a recreational vehicle parked on the front lawn of his property.
“He’s almost given up. I see how depressed he’s gotten. He’s a mechanic that lost all of his tools, and that’s the way he made his money. He’s got it a lot worse.”
There is one bright spot for Lewis, however.
“My homeowners (insurance company) was great,” said Lewis. “Within a few weeks they had money out to me and extra for things they didn’t have to pay for, like a roof for the kids’ tree fort.” Lewis also received a new car following his auto insurance claim.
The N.J. Department of Banking and Insurance confirms that Sandy-related problems are more with flood insurance companies than with homeowner or other types of insurance policies. Many in New Jersey have the misconception that calling the department, or a hotline given out at one of Gov. Christie’s Town Hall forums, will somehow lead to solutions with flood insurance companies.
“We’ve been limited in what we can do,” said department spokesman Marshal McKnight, who added it is best for consumers to call the National Flood Insurance Program directly. All the N.J. Department of Banking and Insurance has been able to do concerning flood insurance issues is collect the complaints and forward them to the NFIP.
The NFIP is the federal program, administered by the Federal Emergency Management Agency, through which all flood insurance is provided in the United States. Federal regulation says state departments have no jurisdiction over flood insurance claims. The NFIP hotline is 1-800-427-4661.
Questions posed by The SandPaper to Carter Langston, a FEMA news desk manager for the NFIP, regarding oversight of the issues illustrated by Lewis and others in Southern Ocean County went largely unanswered, as discussing individual policyholders or their claims would make FEMA in violation of U.S. privacy laws, he said.
Congress created the NFIP in 1968 in response to the flood insurance industry being less than lucrative for the handful of companies that existed before that time. It was not uncommon for one to be driven out of business by a single flood.
The Write Your Own program began in 1983 and is a cooperative undertaking of the insurance industry and FEMA. The WYO program operates as part of the NFIP and allows participating insurance companies to write and service the Standard Flood Insurance Policy in their own names. The companies receive an expense allowance for policies written and claims processed while the federal government retains responsibility for underwriting losses; in other words, it gets to collect a portion of the flood insurance premiums without all the risk. The program’s goals include to “improve service to NFIP policyholders through the infusion of insurance industry knowledge.”
In 2005, following Gulf of Mexico Hurricanes Katrina, Rita and Wilma, Congress authorized the NFIP to borrow $20 billion from the U.S. Treasury. When Superstorm Sandy hit the East Coast, the NFIP still owed more than $17 billion of that debt. Once it finishes paying claims from Sandy, it is estimated the NFIP will owe nearly $30 billion to the Treasury.
The N.J. Department of Banking and Insurance requires insurance companies for all other policies – homeowner, commercial, auto, etc. – to respond within five business days when a consumer files a request for assistance regarding claims related to Superstorm Sandy. Those insurance companies currently have 15 business days to respond to the department, and are limited to one extension of five business days. As of Feb. 15, about 91 percent of all homeowners and auto claims regarding Sandy were closed. In addition, a mediation program was begun on Feb. 25 to continue to speed up any pending claims and lessen costly litigations in the future.
“The companies have done a fairly good job regarding what’s within our jurisdiction,” McKnight said. “We’ve had a 100 percent compliance with those participating in our mediation program.”
McKnight explained the federal regulation calling for mortgage companies to sign off on flood insurance payouts is justified. “It’s to make sure the house does get rebuilt and a contractor hired doesn’t walk away with money without rebuilding the house. When we hear about the mortgage company delaying, we contact those companies.”
Though he has heard of issues about mortgage companies releasing payments, McKnight said they are far eclipsed by the leading issues dealing with general delays and unsatisfactory service by the insurance companies.