Testimony delivered by Ann Dibble, Director of Storm Response Unit, before the New York State Assembly, Standing Committee on Insurance

February 26, 2013

Chairman Cahill, Assembly Members and staff, thank you for the opportunity to testify today about insurance coverage in the event of a disaster. My name is Ann Dibble and I am the Director of the Storm Response Unit at the New York Legal Assistance Group (NYLAG). NYLAG is a nonprofit law office, founded in 1990, that is dedicated to providing free legal services in civil law matters to low-income New Yorkers. Among other vulnerable populations, NYLAG serves immigrants, seniors, the homebound, families facing foreclosure, renters facing eviction, low-income consumers, those in need of government assistance, people with disabilities and low-income members of the LGBT community.

NYLAG has been on the frontline since Superstorm Sandy hit. We quickly established our Storm Response Unit, which currently consists of more than 20 full-time, dedicated professionals who have already served nearly 3,000 storm victims throughout New York City, Long Island and other impacted areas. As such, we have seen firsthand the significant problems that have arisen as the result of delay, indifference and what appears to be deliberate mis-treatment of policyholders by homeowners’ insurance companies and the private companies that administer the National Flood Insurance Program (NFIP). It appears that insurers were caught very unprepared for dealing with a disaster of this magnitude and that they have not addressed the issues surrounding prompt payment of claims. New Yorkers who have dutifully paid their insurance premiums and played by the rules are now frustrated and bewildered that they cannot get the funds to which they are entitled and which are necessary for critical repair and rebuilding. Clients are caught in a maze of confusing and inconsistent information and bureaucratic red tape. This scenario is, unfortunately, very common for our clients: They are denied FEMA grants on the basis that they have private insurance, while their homeowners’ insurance company denies coverage on the ground that the damage was due to flooding, and flood insurance offers a settlement that covers only a small fraction of what’s needed. Among the most frequent complaints NYLAG hears from homeowners are settlement offers that are wildly inadequate based on the actual damage suffered; adjusters and inspectors who won’t come to their homes or do only cursory inspections; and procedural mixups such as insurers not being able to locate documentation that was previously submitted or claimants receiving inconsistent information about processes and procedures. Policyholders are receiving inconsistent information from insurance companies and banks about claims and release of funds, how to rebuild or even whether they will be permitted to repair and re-occupy their homes. Storm victims also face related issues, such as price gouging by contractors and public adjusters and banks that improperly hold insurance proceeds, creating yet more roadblocks to repair and recovery.

New York renters are also impacted by these issues. Many renters remain displaced from their apartments or are living in damaged, deteriorating apartments while their landlords fight with their insurances companies.

NYLAG is assisting a Staten Island homeowner whose house was ruined by Sandy. Bay water flooded into the first floor and boats from a nearby marina crashed into the structure. The home is completely uninhabitable. The couple and their 2 young children want to stay in their neighborhood and initially thought they were well positioned because they have both homeowners and flood insurance. However, they are facing a bureaucratic nightmare. They have been denied almost all FEMA benefits because they have insurance, but have received only a small settlement offer from their homeowners’ insurance company. They cannot get anyone to take responsibility for damage caused by the boats. They have received inconsistent information from the insurance companies and their own engineer about the applicability of new building codes and whether they will even be able to rebuild. Meanwhile, they remain responsible for their mortgage and just received a tax assessment increasing their assessed value by 20%. As if this wasn’t bad enough, the adjuster who was sent by the flood insurance company was belligerent, and personally insulting. As the father has said, they did not ask to be put in this situation – they simply need to understand what they are entitled to so they can make some important decisions and move on with their lives.

NYLAG is also working with a Long Island family whose home suffered damage both from rain that came through their roof and from water that flooded their basement. Again, this family initially believed they would be able to recover quickly because they have both homeowners’ and flood insurance. Instead, almost 4 months after Sandy, they have still been unable to make necessary repairs. Like most storm victims with insurance, they were denied almost all FEMA benefits. However, both their homeowners’ and their flood insurers have denied all liability on technicalities. Meanwhile, while NYLAG and the client fight with the insurance companies, mold is growing from the attic down and the basement up. They have been told it will cost $35,000 just to remediate the mold, but they don’t have the funds to pay. Their teenage son has developed a severe mold allergy and is being made sick by his own home.

As these cases illustrate, these issues have real world consequences, for those individuals directly affected, and for our community as a whole. People are either living in unsafe, uninhabitable homes or remain displaced while repairs go unmade. The stock of rentable apartments is reduced, further compounding our area’s chronic housing shortage. Neighborhoods are less safe and less vibrant. Homeowners who cannot rebuild or repair leave their homes open and unsecure and vulnerable to further damage and deterioration. Mold continues to proliferate, and will until it is properly remediated. Every new snow or rainfall compounds the damage.

NYLAG applauds Chairman Cahill, Governor Cuomo and the Department of Financial Services for their oversight of and public pressure on insurance companies to do right by New Yorkers. We support continued vigorous oversight and enforcement of all policies, rules and regulations that will ensure the fair, timely resolution of all New Yorkers’ claims arising out of Sandy. We also support an increase in bridge funding to disaster victims, to be paid back from any eventual insurance proceeds, which will put money in the hands of homeowners so critical repairs can be made as soon as possible. We further support the home buyback program proposed by Governor Cuomo that will pay pre-storm fair market value to incentivize homeowners to vacate areas prone to floods but remain in their communities.

Thank you for the opportunity to testify today. We would welcome the chance to further discuss or comment on these matters in the future.

Respectfully submitted,

THE NEW YORK LEGAL ASSISTANCE GROUP

Ann E. Dibble, Director, Storm Response Unit

Fern Summer, Staff Attorney, Storm Response Unit