Malliotakis Testifies on Insurance Coverage in the Event of a Disaster

March 7, 2013

Testimony delivered by Assemblywoman Nicole Malliotakis (R,C,I-East Shore) to Assemblyman Kevin Cahill (D-Kingston), chairman of the Assembly Standing Committee on Insurance, with regard to unfair claims settlement practices. Assemblywoman Malliotakis has recently introduced legislation (A4699) to address this issue.

The aftermath of Tropical Storm Irene in 2011, followed shortly by the devastation caused by Hurricane Sandy in 2012, exemplified the shortcomings of our state’s Insurance Law during times of crisis. While the insurance business is a valuable industry to New York, public policy dictates that certain measures must be employed to ensure reasonable and timely procedures when dealing with customers placed under extreme circumstances.

Since Hurricane Sandy made landfall on October 29, 2013, my office has been attempting to work with the Department of Financial Services to assist numerous constituents in recovering proceeds rightfully due under their insurance policies. With FEMA assistance intended only to get these residents “back on their feet”, the rebuilding plan for many homeowners is predicated upon funds received through flood insurance. In most cases, these people dutifully paid their premiums for 10, 20, or more than 30 years, only to see the insurance carrier fail to uphold its end of the bargain at the time it was needed most.

I now present to the committee a brief synopsis of a sample of complaints made to my office with regard to the treatment of Hurricane Sandy victims by their insurers :

• Insured A, Hartford. The home of the insured was flooded with sewer water after the battery on her sump pump had exhausted itself. The insured held an insurance policy that covered sewer backup. However, the insurer determined that since seawater entered the pipes and combined with sewer water, the damage was classified as flood damage and fell outside of her coverage.
• Insured B, Allstate. An adjuster from the insurer performed a site visit on 12/28/12 to inspect damage to the foundation of the insured’s home. Despite numerous inquiries, the insurer was unable to provide the status of the insured’s claim until informing her on or around 2/15/13 that the claim was denied and the damage was a product of “natural settlement” of the foundation.
• Insured C, Allstate. Insured was denied coverage for his basement bathroom and kitchen because it is not a “walk-out basement”. The basement exits at ground level to the backyard. However, because the property slopes down toward the rear of the property and the “front” of the basement is not at ground level, the insurer will not treat it as a walk-out basement.
• Insured D, Travelers. Insured submitted claim in November 2012 but did not receive a determination until 1/23/13. Her damages have amounted to over $177,000, but Travelers has determined it will only cover $137,000. The determination is currently being appealed.
• Insured E, Travelers. Insured submitted claim in November 2012. She has yet to receive a determination.
• Insured F, Hartford. Insured initiated an appeal of her determination on 12/13/12 but has heard nothing since. She tries to call but insurer cannot give her answer despite voicing her concerns regarding her inability to pay mortgage. Her lender has told her she needs a letter from the insurer indicating that her claim is under appeal, but the insurer will not provide such a letter.
Insured G, American Safety Casualty. Insurer denied claim under homeowners policy because damage was caused by flooding. Insured claims the top portion of her house was severed by wind and blew into an adjacent lot. Insured alleges that the insurer denied her claim without performing an on-site inspection.
• Insured H, Allstate. Upon submission of claim, insured was informed that he must remit $2,482 due to an error on the part of the insurer in collecting premiums.

In light of the forgoing examples, the need for reform of our insurance industry is clear. Our regulatory institutions must respect the rights of private entities and their ability to enter contracts, but something must be done to remedy the plight of insurance customers with little clout in fighting for sorely needed dollars while at their most vulnerable.

I have introduced legislation (A4699) to combat this problem by defining unfair claims settlement practices during a declared state disaster emergency, and create a private right of action for violations thereof. Poor communication, little action, and lack of urgency from insurance carriers are among the most stressful issues my constituents have faced in the aftermath of Hurricane Sandy. It is completely unreasonable for customers who have fulfilled their end of the bargain for years to deal with unreturned phone calls and unjustified denials.

It is important to keep in mind that this is often the first of many battles in acquiring insurance compensation, as some homeowners have experienced difficulty in obtaining an endorsement signature from their lender. Furthermore, many of these same homeowners must continue paying mortgages on properties that currently do not exist, while those who were fortunate to obtain a grace period must pay the forgiven amount up-front once the moratorium expires.

Residents face a long road to recovery and certain insurance carriers have provided nothing but obstacles. It is time they assumed their rightful role as part of the solution, rather than the problem. It is time New York changed its laws to protect the consumer and not the insurance company.

In closing, I would like to thank Speaker Sheldon Silver and Chairman Kevin Cahill for taking the issue of unfair insurance practices seriously and holding these hearings to gather the information necessary to make New York’s laws stronger. I hope we can ensure that no one’s constituents will experience what my constituents have gone through over the past four months.

Thank you.

---

Information personal in nature has been redacted but can be provided to the committee upon request, with permission from the insured.

What's New