Flooding is the most common natural disaster in the United States, and the costliest. American towns and cities have experienced a flooding event once every 2 to 3 days for the past 25 years. Flooding has cost US taxpayers more than $1 trillion since 1980, and more than $850 billion since 2000 alone. Floods are responsible for 2/3 of the losses and costs from all natural disasters.
Because of their frequency and damage, private insurers do not typically offer flood insurance policies. The risk is too great and reward too little for most major private insurance companies, who may be motivated to protect their own bottom lines. Therefore, nearly all flood insurance is underwritten by taxpayer funds via the Federal Emergency Management Agency (FEMA). When insurance companies attempt to claim that covered damage was instead caused by flooding, they redirect the cost of paying out their own policies back onto the taxpayer. This is an all too common example of flood insurance fraud.
If you can report fraud involving flood insurance, speak with a flood insurance fraud lawyer as soon as possible. You may be eligible to become a whistleblower and be granted certain rewards and protections in exchange for your information. Once information about flood insurance fraud has been previously disclosed, however, it becomes ineligible for a reward. Contact the experts at Tycko & Zavareei LLP as soon as possible to ensure that you receive the highest quality legal counsel and support as a protected flood insurance fraud whistleblower.
Private Flood Insurance vs. FEMA
Just one inch of floodwater can cause up to $25,000 in damage, according to FEMA. Because of this, homeowners and property owners in designated high-risk flood areas with mortgages that are backed by government-funded lenders are required to carry flood insurance. What some do not realize, however, is that flood insurance funds do not come from private insurance companies. Flooding is simply too common and severe when it does occur for private insurers to be motivated to offer protection from it. Therefore, flood insurance is a separate add-on that is backed by taxpayer funds through FEMA.
FEMA flood insurance is administered by the National Flood Insurance Program (NFIP). FEMA is responsible for underwriting flood insurance coverage sold under NFIP, as well as for providing coverage directly through NFIP Direct. The NFIP is the United States’ largest single-line insurance program. FEMA-backed flood insurance provides nearly $1.3 trillion in coverage to millions of households who live in any of the 23,000 participating communities. Other flood insurance policies are reinsurance policies offered and administered by private companies, but paid for by federal FEMA funding.
In some tropical storm-prone states like Florida, Louisiana, and Texas, windstorm insurance is also considered an additional separate policy from homeowners insurance. In these cases, one property might be protected by three separate insurance policies, one of which (flood risk) is underwritten by federal government funds.
Examples of Flood Insurance Fraud
While insurance policies may separate damage from high winds, hail, and storms from damage caused by flooding, these events often coincide. Federal flood insurance fraud most commonly occurs when private insurance investigators misreport damage made by wind, rain, or hail as damage caused by flooding. In this case, FEMA funds are used to pay for damage that should actually be paid out from a private insurance company’s coffers. Insurance adjusters may misfile information themselves, or pressure homeowners, property managers, engineers, or repair crews to report that damage was done by flood when it was actually caused by wind or another covered source.
Flood insurance fraud hurts everyone who pays into the system and expects a fair return. It is an example of a private company shifting responsibility wrongfully back onto the taxpayer. When dealing with insurance companies, it is essential to remember that they are private enterprises often motivated to protect their own profits. For this reason, the federal government must underwrite the cost of flood insurance, a necessary good, in the first place. When private insurers shirk payments for damage that they do offer to cover, they are making the cost of owning and protecting a home or property even more expensive for everyone.
How to Report Flood Insurance Fraud
Insurance company employees and other industry insiders are the first line of defense when it comes to identifying flood insurance fraud. Not every flood insurance fraud whistleblower works for an insurance company, however. Some may be independent contractors or companies who are hired to repair damage caused by flooding or storms. Others may be homeowners who receive payments through the NFIP instead of through their own private insurer. Some may be competitors in the field of homeowners insurance, who become suspicious of another company’s steady profits after periods of storms and natural disasters. The bottom line is, anyone who is able to report previously undisclosed information that leads to a recovery of taxpayer funds may be able to file a flood insurance fraud lawsuit. Doing so can net you a flood insurance fraud whistleblower reward of up to 30% of the the settlement if your case is successful.
To report flood insurance fraud, speak to a qui tam attorney. You can report and file your claim anonymously through a flood insurance fraud law firm. Our experts can follow up on your case, liaising with FEMA investigators and taking every step possible to protect your whistleblower reward. We can also defend you in court if you are retaliated against by your employer in any way for disclosing information about their fraud against the taxpayer. Under the False Claims Act, whistleblowers may be eligible to receive up to double back pay, reinstatement, as well as legal fees and expenses in the event that their employer harasses them or discriminates against them because of their status as a protected whistleblower.
Notable Flood Insurance Fraud Whistleblower Cases
The following are some notable flood insurance fraud cases settled in recent years:
- $100 million: In the wake of Hurricane Katrina, State Farm Fire and Casualty Co., a subsidiary of State Farm Insurance, agreed to pay $100 million in restitution to settle allegations that it shifted wind damage claims to FEMA flood insurance. The case began when two whistleblowers, sisters Cori and Kerri Rigsby, who were former adjusters based in south Mississippi, sued under the False Claims Act. Their case revolved around the destruction of one home in North Biloxi, Mississippi. When the home was destroyed by wind during the storm, the insurance company instead charged the National Flood Insurance Program, saying the damage was caused by flooding. State Farm was ordered to pay $750,000 in damages in the initial 2013 settlement, with 30% going to the whistleblowers. A series of appeals reaching all the way up to the U.S. Supreme Court resulted in a unanimous ruling against the insurance giant, and the ordered payment of restitution.
- $2.48 million: The Omaha Property and Casualty Company as well as Electronic Data Systems Incorporated were ordered to pay $2.48 million after a FEMA investigation revealed that they paid for flood insurance losses that were not covered by NFIP policies. The policies were part of Write Your Own Program, a method by which private insurance companies are authorized to sell and administer NFIP policies on behalf of the federal government. Under this reinsurance system, the two insurance companies offered policies not approved by NFIP standards. The case came to light thanks to the actions of Wayne Lutz, a former EDS employee who filed under the qui tam provisions of the False Claims Act.
Contact a Flood Insurance Fraud Lawyer
Flood insurance company fraud costs taxpayers millions of dollars, and deprives them of genuine coverage for their losses. A report from NPR and FRONTLINE finds that private insurance companies who administer FEMA-backed flood insurance policies tend to turn a near 30% profit rate in the aftermath of natural disasters. Homeowners and families rely on flood insurance to protect themselves from damage during a time of crisis. The publicly-funded program should not go to line the pockets of insurance providers who take advantage of taxpayers after a storm.
If you have information about flood insurance fraud, report it today. A flood insurance fraud lawyer can help you file your claim and collect your whistleblower reward. We can help shield you from potential retaliation by an employer, and provide the highest quality legal counsel as you speak up for what is right. To contact the experts at Tycko & Zavareei LLP, fill out a confidential consultation form today.