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Storm's victims cry foul
File suit against government, insurance companies

June 10, 2005

GREENBELT (AP) — Victims of Tropical Storm Isabel are seeking millions of dollars in compensatory and punitive damages, alleging that insurance companies and top federal officials conspired to low-ball their insurance claims.

Mid-Shore residents from Oxford, Tilghman, Neavitt, Stevensville and Grasonville are listed as plaintiffs in the lawsuit.

“They believe that they have been financially and emotionally raped,” said attorney Martin H. Freeman, after filing the suit Wednesday in U.S. District Court in Greenbelt on behalf of 141 plaintiffs from 71 families. “They also believe ... that the people who have done this to them are invulnerable and are going to get away with this.”

The families claim they have been forced to raid their savings to rebuild, live in cramped government-supplied trailers or subsist in homes contaminated by sewage and mold.

The lawsuit names 57 defendants, including the Federal Emergency Management Agency, NFIP subcontractor Computer Sciences Corp., and various insurance companies and adjusters.

According to the suit, Computer Sciences Corp. trained sales agents in seminars and with written materials to tell customers they would be fully compensated under the National Flood Insurance Program, while at the same time training insurance adjusters to follow incorrect and overly strict guidelines on what warranted payment.

As a result, policyholders were shortchanged hundreds of thousands of dollars in some cases.

The lawsuit also alleges two forms of conspiracy to commit fraud, as well as contract interference and breach of contract.

For four of the five claims, the suit seeks $1 million in compensatory damages plus punitive damages for each plaintiff. It also seeks $250,000 per plaintiff for the breach of contract charge.

A spokesman for FEMA, which is part of Homeland Security, said officials would not comment on pending litigation.

But in testimony before Congress in April, David Maurstad, who runs the National Flood Insurance Program, said that “there is a fundamental misunderstanding” of its intent. Maurstad said the program was “never intended to restore policyholders to pre-flood condition; it was designed to help them recover.”

Critics of the program contend that sales agents marketing flood insurance say homeowners will be fully restored, minus the deductible, to their “pre-flood conditions.” This language also is found in the Flood Insurance Reform Act of 2004.

Maryland Insurance Commissioner Alfred W. Redmer Jr., who testified before a congressional subcommittee reviewing the flood program this spring, said the lawsuit came as no surprise.

“Quite frankly, we’re going to continue to have unhappy citizens, and we’re going to continue to have litigation until the flood program gets fixed,” he said.

Oxford’s Steve Kanstaroom, a pattern recognition and fraud detection expert, is an advocate for people he says have been defrauded by adjusters. He said the lawsuit would not be possible without Redmer’s “tremendous support.”

“I suppose [the lawsuit] means hopefully they can receive the compensation they were entitled to and justice for the wrong-doing that destroyed their lives,” said Kanstaroom, who is not a plaintiff.

As of Wednesday, 85 Maryland families still were living in trailers, according to FEMA. In Oxford, one family still is living in a trailer, but Oxford Town Clerk Lillian Lord said their house is nearly complete. The agency recently sent eviction letters to about seven trailer families that were either not working to find permanent housing or violating provisions of their leases, said spokeswoman Niki Edwards.

The lawsuit comes nearly 21 months after Isabel struck Maryland in September 2003, and five months after a letter was sent to FEMA, CSC and several others involved in the claims process demanding full payment on policies.

Another lawsuit filed on behalf of thousands of victims last year alleging that seven insurance companies systematically shortchanged policyholders is pending in federal court.

Kanstaroom, who runs the Web site www.femainfo.us, said people from 13 states have entered information on the Web site indicating they wish to be part of legal action. He said he expects litigation from several other states will follow this lawsuit.

Staff writer Sarah Ensor Pearce contributed to this article.

Reader Comments

Send your comments!

From: L. Richards

Date: 6/10/2005 12:45:23 PM

when .."David Maurstad, who runs the National Flood Insurance Program, said that “there is a fundamental misunderstanding” of its intent....the program was “never intended to restore policyholders to pre-flood condition; it was designed to help them recover.”.. I knew there was going to be trouble... WHAT good is insurance that is just going to help??? MINIMAL, I'd say... so by this logic, after a flood, the insurance will pay for a wet-vac... but the REST is up to the homeowner???? What about all the rest of the resulting damage??? If they're worried about fraudulent claims, there will probably be a few....they will have to be denied on a case-by-case basis.... MOST everyone else just wants to get the damage re-paired and get on with their lives...The overall problem with Insurance companies is that they only want to RECEIVE payments... they NEVER want to PAY OUT... I'll bet they don't even have an Accounts Payable department!