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The Bias of Insurance Companies and the Engineers They Hire

 

As many of you may have seen, 60 Minutes aired a segment (http://www.cbsnews.com/news/hurricane-sandy-60-minutes-fraud-investigation/) on March 1, 2015 about its investigation of allegations that thousands of homeowners in the northeast were denied their flood insurance claims after Hurricane Sandy because of fraudulent engineers’ reports.

 

The 60 minutes segment highlights an issue that is not often discussed in Florida: insurance “company” fraud.  When we hear the words “insurance fraud,” we usually think of insurance fraud committed by individuals.  For example, sometimes people fake injuries at work to claim workers compensation coverage.  Others intentionally damage their own property in an attempt to collect insurance proceeds.  Insurance fraud is real.  The state of Florida employs more than 200 people who safeguard the public from acts of insurance fraud (http://www.myfloridacfo.com/division/fraud/#.VQmhbI7F-mE).

 

However, the 60 Minutes segment demonstrates that there is substantial evidence that insurance companies themselves commit fraud on their policyholders.  In the report, 60 Minutes presented very convincing evidence that insurance companies falsified engineering reports to say that property damage sustained by policyholders was not covered by their insurance policies.  The reason this report is so important is because property insurers in Florida routinely hire engineering firms, including some of the same engineering firms identified in the 60 Minutes segment, to attempt to support their decision to deny or underpay a property damage claim.

 

When a policyholder sustains damage to its property and submits a claim to its insurance company, the insurance company has a legal obligation to properly investigate the claim.  Thus, oftentimes insurance companies hire an engineer, of its own choosing, to inspect the damage and render an opinion about what caused the damage.  The insurance companies claim that the engineers they hire are independent from the insurance company and that therefore, the engineers’ opinions provide independent support of the insurance companies’ decision regarding claims.  What policyholders don’t know is that the insurance companies hire the same engineers over and over.  These engineering firms are national corporations that are hired almost exclusively by insurance companies, never policyholders.  Thus, there is a great incentive on the part of the engineering firms to prepare reports that are favorable to the insurance companies’ bottom lines.  Furthermore, the more engineering firms prepare favorable reports for insurance companies, the more insurance companies will hire those same engineering firms to prepare reports justifying denial or underpayment of policyholder claims.  The relationship is a win-win for the insurance companies and engineering firms.  However, the losers are the policyholders.

 

In our practice representing policyholders, we see the blatant bias of the insurance companies and the engineers they hire on a daily basis.  For example, insurance company engineers will oftentimes overlook obvious damage as if it didn’t exist.  Other times the insurance company engineers will only look at information and documentation it received from the insurance company instead of reviewing all available information and documentation, including information that the policyholder has as well as information that is in the public record.  We also see where insurance company engineers use the exact same exclusionary language found in the insurance policies in stating what allegedly caused property damage so as to further support the insurance companies’ denial of insurance claims.  As insurance policies exclude more and more types of damage, we see the engineering reports adapt to these policy changes by using the wording in the new exclusionary provisions in the engineering reports.  Moreover, we have seen where engineering firms prepare almost identical reports for totally different property damage claims.  Last, we have seen insurance companies refuse to hire engineers suggested by policyholders because the insurance companies were “not familiar” with the engineers suggested by the policyholders.

 

If your insurance company has hired an engineer of its choosing to investigate your property damage claim and you are skeptical of that engineer’s findings, please consider contacting our office to discuss your claim with an attorney experienced in property loss claims and insurance coverage.  While your situation may not rise to the apparent fraud documented in the 60 Minutes segment, it is possible that the relationship between your insurance company and the engineer it hired has clouded their judgment and impaired their ability to evaluate your claim fairly and without bias.