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Are some executives running the national flood insurance program corrupt? | Property Insurance Law Team Blog



The National Flood Insurance Program has been abused by those responsible for its claims management. Examples of this can be found in previous blog posts, Senator Menendez of New Jersey demands an investigation into manipulated expert reportsand Senators Launch Sandy Task Force in Washington, DC. A November 2021 press release from Senator Menendez called for a reform of the national flood program through new legislation, noting in part:

Monitoring of WYO (Writ Your Own) companies. Creates new supervisory measures for insurance companies and suppliers and gives FEMA greater authority to dismiss contractors who have experience of abuse.

Claims and appeals process reforms based on lessons learned from Sandy. Basically reforms the claims process based on lessons learned from Superstorm Sandy and other disasters, to level the playing field for policyholders during appeals or litigation, prohibits aggressive legal tactics that prevent homeowners from filing legitimate claims, FEMA adheres to strict deadlines so homeowners can and fair payments and ending FEMA̵

7;s reliance on external legal advice from expensive for-profit entities.

I raise this point after encountering a national flood dispute where it appears that national flood administrators changed their claim manual from a lengthy claim practice just to win a few cases in Louisiana.1 A federal judge noted:

The 2021 claims manual removes the part of the 2020 manual that deals with mantles. The comments section regarding the change states:

FEMA removes mantle-specific guidance. SFIP requires immediate physical loss of or from flooding, and there must be evidence of physical alterations to the property for coverage. The adjuster must document damage caused by the flood. . . and include appropriate scope of repair for covered damage. As this approach reflects general guidelines for handling claims from NFIP, FEMA no longer considers that a separate section dealing with casing is justified.

(NFIP Claims Manual Table of Change 29, Doc. 72-1.)

In an earlier ruling, the federal judge relied in part on previous National Flood claim manuals and technical bulletins regarding casing, which National Flood retroactively sought to avoid:

In summary, to read SFIP in pari materia with Claims Manual and [Technical Bulletin] 2 establishes that Class 1 fiberboard is compensable in the event of proof that it has come into contact with flood water. Here, the summary judgment establishes that the plaintiff’s home was flooded with more than two feet of flood water for several days, which removes any doubt that flood water came into contact with her casing. According to SFIP, the plaintiff is thus entitled to compensation for her mantle of fibreboard, provided that she has otherwise met SFIP’s requirements for additional payment.

In fact, the court found:

According to Technical Bulletin 2 / August 2008, entitled Material Requirements for Flood Damage to Buildings Located in Special Risk Areas Under the National Flood Insurance Program, Class 1 and 2 building materials “cannot survive wetting and drying in connection with floods.”

Knowing that National Flood customers relied on National Flood’s own words to prove that more money was owed, National Flood administrators simply changed the manual to deceive their customers from over-indebted money. That is not right.

Congress should conduct an inquiry and reform the National Flood Insurance Program. The boss should “clean houses” to get administrators who demand privacy. It is obviously run in part by those who ensure that policyholders can be canceled due to technical requirements and who will change the rules in the middle of the stream to win at any cost.

Today’s thoughts

The government is so out of control. It’s so bloated and infected by scams and frauds and corruption and abuse of power.
—Ted Nugent
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1 Hatcher v. Allstate Ins. Co.No. 3: 17-cv-898 (MD La. February 4, 2022).


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