Insurance Transparency Project

I-Fans,

Mowbray, again, on a suit by former adjusters accusing eight insurers, including the big ones, of defrauding the National Flood Insurance Insurance Program by filing reports that said damage actually caused by wind was caused by flood, which the government pays. Under the NFIP’s system, known as Write Your Own, 90% of flood policies are administered by insurers, usually the same company that underwrites the homeowner’s policy.  Obviously, there’s a conflict; the only question is, how is it managed?
The story speaks for itself:

In one striking example, the suit claims that owners of a group of fourplex apartments in eastern New Orleans were compensated for flood damage with taxpayer money even though they experienced no flooding. Each building in the complex was paid only a pittance for severe wind damage on its regular property insurance policies.

American National Property & Casualty Insurance Co., or ANPAC Louisiana Insurance Co., paid the owner of several buildings in the Versailles Gardens subdivision on Alsace Street about $95,000 in flood damages, or about half the value of each property’s individual $200,000 flood policy, even though no floodwaters got inside the buildings.

In each unit, roof shingles and sheathing were badly damaged by wind, most of the windows were blown out, and enough driving rain got inside to ruin both the floors of the apartments and their mechanical systems, according to the suit.

But American National paid $40,000 or less per building from its own coffers for wind damage that Branch estimates should have been more than $250,000 at each location, resulting in the property owner being undercompensated for hurricane repairs.

ANPAC is a unit of American National Insurance Co., based in Galveston, Texas (NASDAQ: ANAT).

This, of course, follows the Mowbray blockbuster that showed Allstate charged up to 300% and higher for the same sheetrock and other materials while adjusting the same houses and how Allstate added $100,000 to a flood contents claim in the Weiss case, including jewelry, furs, etc. that the Weiss family itself had never heard of or filed for.

Remember, the NFIP, swamped with bills filed in WYO carriers for water damage, required a bailout of some $20 billion from Congress.
And this should make readers think twice about blaming homeowners for building in flood zones, etc. This isn’t about that.

And also remember, any fraud on the Flood program would be in addition to $2.7 billion underpayment on wind claims, which the Louisiana Recovery Authority has been making up. That’s money from the Department of Housing and Urban Development and in many (not all) cases should be fully covered by homeowners’ premiums paid over many years.

Keep this data (!) in mind because because the Katrina puzzle is starting to come into view.

And while I’m giving advice to ITP followers, keep your eye on the federal government here. Under the False Claims Act, the claims accusing contractors of defrauding the government are filed under seal for, essentially, 120 days, while the local U.S. attorney or the Department of Justice decides whether to intervene, take over the case on the government’s behalf. So far, Justice has passed but reserves the right to step in later.

The decision was made by David Dugas, U.S. Attorney in Baton Rouge, the Middle District of Louisiana, not Jim Letten, who heads the Eastern District office in New Orleans, where the whistleblower suit was filed. I find this odd:

Jim Letten, U.S. attorney for the Eastern District of Louisiana in New Orleans, said he could not say why Dugas’ office in Baton Rouge, and not the New Orleans office, handled the complaint.

I just note this in passing. (Also note how Mowbray is right on the issue; not many reporters would have caught that detail, maybe War Eagle and a few others.) But the fully documented breaches of trust by the Gonzales Justice Department makes necessary a degree of skepticism.
Meanwhile, FEMA, which runs the Flood Program, is not sending out the most reassuring signals that it is on the case. Again, Mowbray knows which questions to ask and of whom:

Ed Pasterick, senior adviser to the National Flood Insurance program, said he’s skeptical about the potential scope of any wind/water allocation problem.

Thanks to Person Familiar.