While thousands of suits over flood insurance claims related to damages caused by Hurricane Sandy have settled, lawyers involved in the litigation claim that fair compensation is still a long way off. After Hurricane Sandy struck three years ago, the National Flood Insurance Program (“NFIP”) faced widespread criticism based on allegations that policyholders were being shortchanged, court cases were moving slowly, and claims that insurance carriers were submitting falsified damage reports. The Federal Emergency Management Agency (“FEMA”) set forth an aggressive effort to clear court dockets and dispel anger, but lawyers are still unsure whether the remaining suits will be resolved in an equitable manner.
Statistics show that the majority of Sandy-related flood insurance suits have been resolved, and lawyers who handle claims against flood insurance carriers believe the onslaught of litigation is nearing its end. The majority of these cases have been presented before federal courts in New York and New Jersey since flood insurance suits are heard in federal court, and property damage from the storm was largely caused by flooding, rather than wind. Of the 1,774 Sandy-related insurance suits filed in the District of New Jersey, only 453, or 25%, are currently still pending. State court litigation related to Sandy is winding down as well, with 90% of Sandy-related insurance suits filed in New Jersey courts currently resolved.
FEMA has also begun to wrap up its in involvement in flood insurance litigation, and is negotiating directly with parties in flood insurance suits currently pending before the courts, a move that is being lauded by claimants’ attorneys. FEMA also previously announced that it would allow parties to reopen Sandy-related flood insurance claims if they were not satisfied with the outcomes.
Flood insurance carriers were reluctant to settle litigated cases prior to FEMA’s involvement, which resulted in a slow-moving process. But claimants’ lawyers have been pleased with FEMA’s efforts to promptly resolve cases, which included giving “carte blanche” to lawyers handling its claims. As a result, hundreds of cases have settled in the last six months.
However, FEMA recently announced that it would cease participating in negotiations with claimants who filed suit after May 18, 2015. While claimants’ lawyers are optimistic that the flood insurance litigation is coming to an end, some have concerns that FEMA’s shift away from litigation will result in a discrepancy between homeowners who chose not to litigate and those who received settlements of lawsuits. Several attorneys are calling for consistency in amounts awarded in lawsuits and for those in the nonjudicial claims review process. Nevertheless, homeowners who chose to litigate their claims are still facing challenges in receiving money from FEMA, as checks issued by FEMA list policyholders’ mortgage companies, and funds are only released in stages as repair work is completed.
While Sandy-related litigation seems to be finally coming to an end, claimants’ lawyers admit that representing homeowners in these cases has been “emotionally draining,” and believe that the NFIP needs to add more accountability to how insurance carriers handle such claims, as the current system in place penalizes carriers if they overpay.