The quickest way to right a wrong is to shine a harsh light on wrongdoers. And wrongdoing on a mass scale is exactly what is exposed in an investigative collaboration by PBS’s Frontline working with National Public Radio.
The hour-long report, “Business of Disaster,” exposes the system-wide fraud of both the Federal Emergency Management Agency (FEMA) and profiteering by private insurance companies who have left thousands of residents homeless three years after Hurricane Sandy.
In October 2012, Sandy pounded the northeast with 115 mph winds, bringing mass destruction to Brooklyn, Staten Island, Manhattan, Queens, New Jersey and Long Island, killing about 233 people and amassing damage from the Caribbean to Canada estimated at $75 billion.
It was the second costliest storm in history after Hurricane Katrina.
FEMA, using taxpayer dollars, oversees the National Flood Insurance Program which underwrites flood insurance administered by private insurers. It had not yet recovered from Katrina when Sandy hit. Still $18 billion in debt, the mantra was to save money in payouts.
The Mostyn Law firm of Houston played a central role in exposing how homeowners were hurt.
Steve Mostyn tells correspondent Laura Sullivan FEMA managers reversed inspector’s reports and reduced payouts to the insured by calling the Sandy damage preexisting.
“I’m talking about a process where a person who never went to the house changed the report,” says Mostyn, who was the lead plaintiff flood liaison counsel hired to represent many of those left homeless after Sandy. ‘And what they say is not structurally damaged by hydrodynamic forces’ and ‘long-term differential movement of the building’.”
In other words, preexisting conditions not covered by flood insurance, says Mostyn. The change is seen in report after report. The same changes, worded the same way.
One experienced inspector says the earth moving exclusion is the worst thing he’s ever seen in 30 years as an inspector.
After having a claim rejected, the inspector told Sullivan, eighty percent of claimants will never come back and ask for more money.
The National Flood Insurance Program was created in the 1960s after a series of devastating Hurricanes hit the U.S. But the Business of Disaster shows that hurricanes are not a financial disaster for everyone, especially the insurance industry.
FEMA pays private insurers a percentage of premiums along with additional fees to handle claims. Insurers’ financial disclosure reveals industry profits have been $240 million to $406 million a year since Sandy. Denying claims just added to the profit.
FEMA was asked seven years ago to impose stricter oversight of the program, but little has been done.
Mostyn calls it a systematic culture of fraud by the insurance industry to cut losses and pocket the profit.
“I think the National Flood Insurance Program has been under attack since Katrina. And I think they thought if they went deeply in debt again there would be a thought to end the National Flood Insurance Program. And for some of these companies, some of these lawyers and some engineers, that’s how they make their living,” said Mostyn.
To add insult to injury, after 1,700 lawsuits were filed against insurance companies, FEMA paid the legal bills of the insurance companies, not policy holders.
Is there any national policy on how to deal with these disasters in the future? The report concludes, no, there is not.
After The Business of Disaster aired, FEMA announced it plans to include more transparency and oversight of the National Flood Insurance Program.
Mostyn Law’s role in seeking justice for Sandy victims is in keeping with its efforts on behalf of other hurricane and storms victims, including Hurricanes Ike, Rita and Dolly in Texas.