DENHAM SPRINGS – A New Orleans attorney has accused the National Flood Insurance Program of low-balling victims of The Great Flood of 2016, the same way it did during Hurricanes Katrina and Sandy.
Insurance companies working through NFIP have underpaid the 2016 flood victims an average of $70,000 per claim, said John Houghtaling II.
Houghtaling spoke at a community town hall event sponsored by The Livingston Parish News on July 20. He spoke just over a month before the Sept. 1 deadline for property owners to file proof of loss documentation to FEMA.
“Adjusters who came out to look at property here are working for companies whose only interest is to pay as little as possible,” he said. “You cannot rely on the adjusting reports and what the insurance company is doing.”
Tactics by insurance adjusters in the aftermath of the Great Flood of 2016 -- the third-worst disaster on record -- bear strong resemblance to what Houghtaling fought in the wake of Hurricane Sandy in 2012.
“They do it intentionally because these companies make all this money on a storm loss,” he said.
Insurance companies generally keep 60 percent or more of the insurance premium money from policyholders, he said.
“They make over a billion a year, and they know the program is in the red, so they decide how much of this pot of money they will keep and much they will get to underpay the victims,” Houghtaling said. “You pay the premiums and they keep as much as they can."
Inspectors in the system claim they are part of the federal government, but instead work as subcontractors who make money for the NFIP.
“They’ve designed into their system a way to underpay,” Houghtaling said.
Houghtaling, a partner in Gauthier & Houghtaling, fought cases of underpayment from Hurricane Sandy. His legal victories in New York and New Jersey netted more than $100 million for flood victims and left FEMA to admit that third parties committed fraud to underpay storm victims.
The victory also led FEMA to reopen the program for more than 144,000 storm victims, as documented on the PBS “Frontline” documentary “The Business of Disaster,” as well as “60 Minutes” and CNN’s “Inside Man.”
He also served as special counsel to then-Attorney General Charles Foti in a multi-billion-dollar litigation of policyholder rights after Hurricane Katrina.
Senate hearings stemmed from fraud in payout of insurance settlements during Hurricane Sandy.
“Two of the workers from Sandy during the New York flood were from Louisiana – and they’ve been working the 2016 flood,” Houghtaling said.
U.S. Sen. John Kennedy, R-Louisiana, grilled NFIP Director Roy Wright in a Senate Banking Committee hearing in Washington earlier this year as Congress decides if it will renew the federally-supported flood insurance program, which is more than $25 billion in the hole after debt payments from Katrina and Sandy.
Kennedy asked Wright in the hearing why NFIP continued to seek the services of U.S. Forensic. Wright said he could not terminate the contract because they firm had not been convicted of wrongdoing in a court of law and have not been put through a complete debarment process.
“These were the judge’s words and not mine that these were acts of “reprehensible gamesmanship,” Kennedy responded in the hearing which aired on C-SPAN. “That’s not enough to get you off the list?”
The hearings came in the wake of a New York federal court judge’s ruling that Metairie-based engineering firm U.S. Forensic “secretly rewrote” reports which had originally said Sandy caused major damage on a home and that the storm did not cause the damage. A magistrate judge ruled that U.S. Forensics frequently altered reports on storm damage.
Federal law makes it almost impossible to stop fraudulent handling of flood payments by contractors – or even to prosecute the cases, he said.
“Amazingly, the way the law is written now, they have granted immunity for federal contractors who commit fraud against policyholders,” Houghtaling said. “The law allows them to commit fraud not be punished for it.
“Our government has given them a license to steal,” he said.
The same tactics adjusters used in Sandy and Katrina have surfaced in the Louisiana floods, Houghtaling said.
“What I’m finding is that some people involved in the fraudulent underpaying in Sandy are working on this storm,” he said. “If you had flood insurance in this storm, you probably didn’t get your policy limits, and what we’re finding is that people were wrongfully denied an average of $70,000 per claim.”
The “Frontline” documentary revealed that the private insurance companies that administer NFIP benefits raked in between $240 million and $406 million since 2012. Many homeowners in the Northeast remain out of their dwellings and living in low-rent homes – while still paying mortgages – because underpayment by insurance companies made it cost-prohibitive for them to return to their pre-storm homes.
The underpayment and red tape has forced many homeowners to throw in the towel on any attempt to collect what they consider a fair settlement amount.
The policy of underpayment has come down from the management of the National Flood Insurance Program, and the practice continues to this day, Houghtaling said.
He urges residents to seek inspections from independent examiners who will assess and prove damages, and fight to get the compensation.
People need to know they will have left a considerable amount of money on the table if they miss the deadline, Houghtaling said.
“It’s the day you’re supposed to have every proof of your loss, of how much you should’ve been paid by your insurance company that has not been paid,” he said. “All of that needs to be put together and has to be submitted by that date.”
He also recommended independent inspections by Sept. 1.
“If you had a couple feet of water, you need to have an engineer look at your place,” Houghtaling said. “You need to have an independent expert look at your property and put together a report for you – somebody who knows how to do this.”
Fatigue and emotional distress by flood victims contributes to the meager number of property owners who contest the lowball tactics, Houghtaling said.
“I think some of this is that people feel hopeless and feel no option,” he said. “If they realize there was that much out there they can recover, they would be more willing to take a stand.”
Another reason plays a crucial role is the lack of protests, Houghtaling said.
“A lot of people don’t realize they’ve been underpaid,” he said. “The reason they don’t know is because they’re often lied to about what FEMA pays and how much they’re owed – and I don’t use the word “lie” lightly.”