RICO class action alleges post-Sandy scheme to manipulate FEMA program

BROOKLYN, N.Y. – A prominent Texas attorney is representing two victims of Hurricane Sandy in a recently filed class action lawsuit against an insurance company and several associates, claiming they schemed to manipulate a Federal Emergency Management Agency (FEMA) program for profit.

The lawsuit, filed by attorney Steve Mostyn on Nov. 21 in the U.S. District Court for the Eastern District of New York on behalf of Deborah Ramsey and Robert Kaible, alleges that Florida-based Wright National Flood Insurance profited by denying claims to the National Flood Insurance Program (NFIP), which is managed by FEMA.

The other defendants – which include Louisiana-based U.S. Forensic LLC, Florida-based Colonial Claims Corporation and individual employees and contractors – are alleged to have gone along with the scheme to ensure continued work provided by Wright National Flood Insurance.

Other defendants listed include U.S. Forensic partners Gary L. Bell and Michael P. Garove, engineer Harry George Hernemar and individual adjuster David Maxime.

The lawsuit claims the defendants violated the Racketeer Influenced and Corrupt Organizations (RICO) Act.

Wright National Flood Insurance allegedly profited by increasing claim handling expenses – including amounts paid to U.S. Forensic and Colonial Claims – and in turn received more money from FEMA and the NFIP for administering the program.

Ramsey and Kaible, owners of a rental property in Long Beach, N.Y., claim that Maxime inspected their property on Nov. 17, 2012, and found it unsafe to live in because of damage suffered during Hurricane Sandy. Maxime allegedly observed uneven flooring, five-inch differentials in ceiling height and out-of-line foundation framing in the home during his inspection.

Rather than authorize payment of the full policy benefit purchased, Maxime instead requested an engineering analysis in conjunction with his employer – Colonial Claims – to satisfy the desire of Wright National Flood Insurance to reduce payments on covered losses, the suit says. Not doing so, the suit claims, would result in a loss of future claims assignments.

The suit further claims that U.S. Forensic altered those engineering reports, which are relied on to process insurance payments under NFIP, and that Colonial Claims and Maxime accepted U.S. Forensic's altered reports. Wright National Flood Insurance either encouraged the fraud or looked the other way, the lawsuit alleges.

As a result, the plaintiffs received only $80,000 of their $250,000 insurance coverage and were unable to continue renting the property, they claim. With no rental income, the plaintiffs sold the property for the price of the lot, and the home was condemned and demolished by the city of Long Beach.

The class action suit is open to individuals insured by Wright National Flood Insurance whose claims were denied in whole or part based on an allegedly altered engineering report by U.S. Forensic after the inspecting engineer’s report was submitted to U.S. Forensic for review.

Mostyn, of the Mostyn Law Firm in Houston, and Denis G. Kelly, of Denis G. Kelly & Associates, are representing the plaintiffs. Mostyn's principal offices are in Houston and Beaumont.

U.S. District Court for the Eastern District of New York case number 2:14-cv-06861.