David Vs. Goliath in Battle for Insurance Dollars After Superstorm Sandy


Big insurance defended its practices against a hailstorm of criticism at a legislative hearing on Tuesday  probing how the industry handled claims related to Superstorm Sandy.

“It is critical that we make sure that insurance companies do a better job of coming through with the assistance they are paid to provide,” said Speaker Sheldon Silver at the six-hour hearing of the State Assembly Committee on Insurance in Lower Manhattan

Over a dozen elected officials filled the front of the room to listen to testimony from consumers, advocates, adjusters, government representatives and members of the insurance industry

The hearing began with testimony from business owners affected by the storm, which cost over $30 billion.  The complaints ranged from slowness in settling claims  to lack of  information and cooperation from banks, insurance companies and FEMA.

For example, Fernando Dallorso, owner of Stella Restaurant said he had 8-11 feet of water at street level and lost everything.  It took 45 days for the adjustor to contact him and another 45 days to get a letter of denial based upon exceptions that he was unaware of in his insurance policy.

“The twelve-page policy that we had—it was only a reference to a 600-page paperwork that we were never aware of and that, everything, it was excluded,” he said.

“Nearly four months after the fact, people are still struggling to rebuild their homes and reopen their businesses,” said Assemblyman Steven Cymbrowitz, a Brooklyn Democrat.

“Many have complained about insurance companies that have been unresponsive and avoided payment of claims due to narrow, technical reasons,” said Community Board One Chairwoman Catherine McVay Hughes, who spoke for small business owners at the South Street Seaport and nearby areas.

She cited one case in which a business had flood insurance, but the insurance company denied the claim because the flood waters caused an explosion in the transformer and explosions are an exception to the flood insurance.

Eve DeGrezia, owner of two businesses whose claims were denied, said she had a similar problem of lack of information from her broker about technicalities. She was unaware that she was only 350 feet from the river,  considered a Zone A area. “I was not offered flood insurance,” she said.

All three business owners testified that they did not know until recently that they could follow-up with a complaint to the New York State Department of Financial Services (DFS), but  were still denied based upon inconsistent language in the insurance guidebook  to their policies.

“That’s where you find the famous fine print,” said Dallorso.

“Sandy was primarily a flood event as opposed to a wind or storm event and we don’t, at DFS, regulate directly the Federal Flood Insurance Program,” said DFS Superintendent Ben Lawsky.

Lawsky said that three insurance companies were under investigation for many violations, but fines range from only $1,000 to $5,000,  amounts  that even the insurance companies admit is little deterrent.

Homeowner Defense Project Director Margaret Becker represented about 200 homes on Staten Island and echoed many of the concerns about lack of payment or underpayment to residents. Her testimony highlighted the discrepancy of rate structures of adjustors from out-of-state who, she contended, used flawed computer models that underprice  costs to repair and rebuild.

Representatives from the adjuster and insurance industries said that the data reflected that they did a good job, considering the magnitude of the storm and the unprecedented flooding caused by the  storm.

“Most people didn’t realize their home insurance didn’t provide for the coverage, or in fact, if they did have flood coverage, it was a very limited form,” said insurance representative, James D. Sutton.  “Consumer education issues need to be attacked mightily.”

Sutton warned against overregulating the insurance industry, arguing that it might cause many companies to go out of business and hurt the consumer.




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