Evidence of Insurance Companies Defrauding the National Flood Insurance Program (NFIP)
[Click here to read the 24 documents that document Evidence of Fraud by Insurers Handling Katrina Losses With Both Wind and Flood Damage.] After a major hurricane such as Katrina, there are hundreds of thousands of properties where it is not possible to clearly distinguish the wind damage from the flood damage. The wind/water controversy comes down to a classic question of who pays. Private insurance companies collect premiums to cover wind damage to property. The National Flood Insurance Program (NFIP), an American taxpayer subsidized progam, covers flood. Every legal precedent in every state and federal court places the burden on insurers to prove that property damage is excluded before insurers can deny coverage to its policyholders. Under the prior administration, however, the NFIP maintained weak oversight. Insurers took advantage of that fact and shifted the burden of proof away from themselves and onto the shoulders of America's home and business owners. As a result, insurance companies blamed all of the hurricane's wind and water damage on the flooding alone. Then they denied the wind-damage claims of their own policyholders unless homeowners could prove that their property damage was caused by wind alone. Private insurance companies billed the federal taxpayers--via the NFIP-- for all damage where flooding was at all possible while paying wind claims only where wind was the only possible cause. In every case, the benefit of the doubt favored the insurance company at the expense of taxpayers and homeowners, while NFIP did nothing to protect either. Insurance companies paid for wind damage as far north as Memphis, Tennessee, while denying wind damage claims for home and business owners along the Gulf Coast, which took the brunt of the hurricane force winds.
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