Joint Hearing on the National Flood Insurance Program
A joint hearing with the Financial Services Subcommittee on Oversight and Investigations and the Homeland Security Subcommittee on Management, Investigations and Oversight is currently being held, “National Flood Insurance Program: Issues Exposed by the 2005 Hurricanes.”
Watch the hearing live via committee webcast or on C Span 3.
Rep. Gene Taylor (MS-04) gives opening remarks and discusses a reported meeting between a National Flood Insurance Program official and insurance agents as well as a State Farm Fire and Casualty Co. memo on filing claims as flood versus wind damage, thus passing the costs to taxpayers:
|Rep. Gene Taylor:
“In light of today’s article in the Times-Picayune, I would ask that this committee subpoena records of a September 7, 2005 meeting between the administrator of the flood program, David Maurstad, and approximately 300 insurance agents in which he outlined the National Flood Insurance Program’s attitude towards the whole wind vs. water… So on one hand the United States code gives them the responsibility to sell the policy and adjudicate the claim, and then a State Farm memo to its agents, tells them that whenever there’s wind and water, blame it all on the water.”
Procedural changes speeded insurance payouts, but may have allowed abuses
Rebecca Mowbray, Times-Picayune – June 11, 2007
But questions are mounting about whether insurance companies have used the flood program to overpay flood claims while they underpaid wind claims, thereby shifting costs that should have been borne by the private sector onto taxpayers. Some now wonder whether those hassle-free adjustments facilitated a raid on the federal treasury by the insurance industry while FEMA, which runs the national flood program, was ill-equipped to catch it because of deficient auditing methods.
Miss. Attorney General Sues State Farm for Breach of Contract
Brian H. Kern, Insurance Journal – June 12, 2007
In the Circuit Court of Hinds County Monday, Mississippi Attorney General Jim Hood filed a complaint against State Farm Fire and Casualty Co. alleging bad faith breach of contract related to the settlement agreement the two parties entered into on January 23.
“It’s unfortunate when you have to force a company to do the right thing,” Hood said at a press conference Monday. “It surprises me that a company this large enters into an agreement with a state this large and then just backs out of it.”
Hood attributed the travesty of Mississippi residents still living in FEMA trailers nearly two years after Hurricane Katrina to “State Farm not living up to their agreement.”
State Farm officials maintain that they are upholding their end of the deal struck in January and they accused Hood of stumping for votes in an election year.
“Sadly, it appears that Mississippi’s attorney general is more interested in making headlines in an election year than in making headway for the people of Mississippi,” said Mike Fernandez, State Farm vice president of public affairs. “You have to wonder what would motivate Attorney General Hood to disrupt an agreement that mirrors the one he was ‘happy to announce’ on Jan. 23 and asked other insurers to emulate as ‘a step to recovery’ two days later?”
During Monday’s teleconference, Hood was relentless in his disdain toward State Farm’s actions and did not hold back: “The only thing they understand is when they have to write a check,” he said, “They can put all the spin on it they want, but there are people on the coast living in FEMA trailers in 95 and 100 degree weather.”
Hood accused State Farm of reporting false statistics, saying the insurer asserted it had settled 99 percent of its Katrina claims. The Attorney General said if the insurer considered a residence damaged by water, it didn’t consider it a claim at all. He also accused the company of withholding claimants’ complete files.
Rep. Gene Taylor questions Matt Jadacki, Deputy Inspector General, Disaster Assistance Oversight, Office of the Inspector General for the Department of Homeland Security:
|Rep. Gene Taylor:
“I am troubled, Mr. Jadacki, that your agency took so long looking into this. I mean by the second week of September checks for hundreds of thousands of dollars were being drawn on the Treasury, the cumulative effect of that is in the billions of dollars, but to the best of my knowledge, June of ’06 your agency was not looking into was this was handled properly…”