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Federal flood carriers to face 800-plus Baton Rouge breach of contracts suits

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Federal flood carriers to face 800-plus Baton Rouge breach of contracts suits

A New Orleans law firm has filed dozens of federal breach of contract suits stemming from the Baton Rouge, La., floods of August 2016 and has pledged to file hundreds more, claiming that National Flood Insurance Program, or NFIP, carriers allegedly failed to provide adequate compensation for losses sustained by their insureds.

More than 90 complaints were filed between Oct. 1 and Oct. 4 in the U.S. District Court for the Middle District of Louisiana against Wright National Flood Insurance Services LLC. At least 19 suits were filed Oct. 4 alone, naming Allstate Corp. unit Allstate Insurance Co. Complaints against Wright Flood, a subsidiary of Brown & Brown Inc., accounted for 86 of all 95 of the civil actions commenced in the first days of the month in that federal court.

Attorneys at Pandit Law Firm LLC represent the plaintiffs in each of the complaints viewed by S&P Global Market Intelligence, and firm founder Rajan Pandit said he ultimately expects to file more than 800 lawsuits against NFIP carriers in the aftermath of the Baton Rouge floods.

Pandit Law Firm pledges on its GetFloodHelp.com website to "take the fight to the insurance companies." The site urges homeowners who have been underpaid by flood insurance in the aftermath of the 2016 flood to call for more information.

The complaints reviewed by S&P Global Market Intelligence appear to contain substantively similar sets of allegations: that the NFIP carrier's adjuster failed to comply with the applicable provisions of standard flood insurance dwelling policies, general standards for claims-handling and/or NFIP claims manuals in their preparation of damage estimates and proof of loss forms.

"The Homeowner was forced to sign and submit a Proof of Loss to Insurer based on the insurance adjuster's inspection of the Property in order to receive an initial damage assessment payment," representative complaints against Allstate and Wright Flood allege. "Ultimately, Homeowner realized that numerous covered items had been omitted or underpaid by Insurer."

The complaints indicate that the homeowners retained independent experts to evaluate the extent of the flood loss, and they in turn "found conclusive evidence that the flood event critically damaged Homeowner's covered property in an amount and scope fare greater than what was found by Insurer's adjuster." The suits allege that the carriers "unfairly and improperly persisted in denying these claims" despite the submission of documentation of the alleged "substantial underpayment."

A Wright Flood spokeswoman did not return a message seeking comment. Allstate did not immediately respond to a request for comment.

NFIP data show that it had paid out $2.43 billion on more than 27,000 claims stemming from severe storms and flooding in Louisiana in August 2016 as of July 31. The amount paid ranks fourth-highest among events from 1978 through July 2017 behind only Hurricane Katrina, Superstorm Sandy and Hurricane Ike, a list certain to eventually include losses associated with Hurricane Harvey.

Pandit said the Federal Emergency Management Agency, following widespread criticism of the handling of Sandy flood insurance claims, had directed participating NFIP Write-Your-Own program carriers to adopt a "survivor-centric" approach in their adjusting processes, but he alleged that "they're just not." Rather than adhering to FEMA directives to provide full transparency in adjusting process and to spend the amount of time at the loss site necessary to properly evaluate a claim, Pandit alleged that the carriers are "inciting litigation" in a "noncollegial" environment through a range of actions.

Wright National Flood Insurance Co., and Allstate ranked as the top two writers of federal flood insurance business in Louisiana in 2016 on a direct basis, according to S&P Global Market Intelligence, claiming combined market share of nearly 51.5% based on direct premiums written. Assurant Inc. and National General Holdings Corp. were the only other groups to have market share in excess of 5% at 9.3% and 5.3%, respectively. Carriers cede their direct federal flood business to the NFIP under the Write-Your-Own program.

NFIP data show that there were nearly 493,000 flood insurance policies in force in Louisiana as of July 31, representing $125.66 billion in insurance in force and $352.9 million in written premiums, each of which ranked third nationally behind Florida and Texas.

Pandit warned that the flood insurance adjusting situation is "even worse" in Texas in Harvey's aftermath. He is not optimistic that things will improve in the near term as the NFIP is likely to face its greatest number of open claims at any point in its history from the combination of three recent landfall-making hurricanes.