N.Y. Regulators to Examine 3 Insurers for Claims Practices Related to Sandy

New York Gov. Andrew Cuomo announced Thursday that the Department of Financial Services is investigating the claims practices of three insurers following the aftermath of Superstorm Sandy.

The three insurers are: Narragansett Bay Insurance Company, Tower Insurance Company and Kingstone Insurance Company. The regulators said these insurers have had a “much higher than average” consumer complaints rate.

The regulators said the insurers are being investigated for (1) failure to send adjusters in a timely manner, (2) failure to process claims in a timely manner, and (3) inability of homeowners to contact insurance company representatives. New York State has been tabulating the number of complaints against insurers and publishing updated report cards assessing insurance companies’ performance in the wake of Sandy.

In New York State, Insurance Regulation 64 requires that damaged property be inspected within 15 business days of a claim being filed, but for certain Sandy victims, the inspection time was shortened on Nov. 29, 2012 to six business days.

Also, in New York State, insurers are required to make a decision on a claim within 15 business days of completing the claim investigation. If they are unable to meet that deadline, insurers are required to send a letter to homeowners explaining the reason for the delay. The department is asking insurers to provide information about how many extension letters they are sending, the reasons given for needing the extension and the projected time to completion.

“It is essential that people whose homes were damaged or destroyed by Storm Sandy receive insurance they are eligible for as quickly as possible so they can return to their homes and begin rebuilding,” Gov. Cuomo said.

“We have been working with the insurance industry to streamline the rules and thank the companies who have responded. But we won’t tolerate insurers not doing what homeowners paid them to do—respond quickly in a disaster, the governor said.

Benjamin Lawsky, superintendent of financial services, said, “We know that the storm produced extraordinary circumstances, but we still expect insurers to live up to the highest standards.”

The Department of Financial Services said it is investigating the three insurers’ claims practices by issuing an Insurance Law Section 308 letter — which is a request for information.

Commenting on each insurer, the regulators said that Pawtucket, R.I.-based Narragansett Bay’s policyholders have frequently complained that they have been unable to reach adjusters or that adjusters have failed to show up for scheduled appointments.

“Some homeowners were particularly disturbed because they had waited weeks for appointments and had taken time off from work to meet with adjusters, only to find that adjusters cancelled appointments with little or no notice,” according to regulators’ comment on Narragansett Insurance.

Naragansett Bay received 11,029 Sandy-related claims in New York State. Among those claims, 8,882 claims closed with payment and 1,356 claims closed without payment as of Feb. 15. It had 147 consumer complaints, or a claims complaint rate of 1.33 percent, according to the insurers’ report cards released by New York regulators.

Regarding Tower Insurance in New York, the regulators said that the complaints about the company create the appearance that the company has engaged in a pattern of failing to send adjusters to inspect damaged properties. “Many New Yorkers had difficulty scheduling an inspection with Tower, while others have had their claims denied over the telephone without an adjuster visit,” according to regulators.

“The department has also received several complaints from Tower policyholders that they were unable to reach a company representative, that the company has delayed the processing of consumers’ claims, and that the company has improperly denied claims under the sewer backup endorsement.”

Tower Group received 16,777 Sandy claims in New York State. Among them, 10,716 claims closed with payment and 4,765 claims closed without payment as of Feb. 15. It had 249 consumer complaints, or a claims complaint rate of 1.48 percent.

Commenting on Kingstone, N.Y.-based Kingstone Insurance, regulators said complaints against Kingstone concern the company’s failure to send, or to timely send, an adjuster; sending an adjuster who only inspected part of the property (for example, solely roof damage and not internal property damage); denying wind damage claims; disputed settlement amounts; and delayed settlement. Kingston’s claims data were not included in the regulators’ report cards.

Tower Strongly Objects to Characterizations of Its Claims Handling

In its official response, Tower Insurance strongly objected to regulators’ allegations.

“On Feb. 21, Gov. Cuomo’s office issued a press release announcing that Tower Insurance Company of New York, a member of Tower Group Inc., is among three insurers the New York State Department of Financial Services (DFS) is investigating for claims practices related to Superstorm Sandy,” the insurer stated.

Tower said that on Jan. 18, 2013, Tower received a letter from the department reciting a number of alleged claims handling violations and requesting data regarding all Sandy claims handled by Tower Insurance Company of New York.

“Tower responded promptly to the request, and on Jan 31, 2013, the company provided voluminous information that refutes any factual basis for the allegations contained in the January 18 letter. To date, Tower has received no further correspondence from the department regarding the data we submitted,” the company said.

“The alleged claims handling violations listed in the Jan. 18 letter are the same allegations identified in Thursday’s announcement,” the company said.

“As we described in our response to the DFS’s letter, we emphatically reject the allegations set forth in the DFS’s letter and Governor’s press release. We were surprised and disappointed to see that the Governor’s office repeated the same allegations in his Feb. 21 press release without any acknowledgement that Tower complied with the DFS’s requests with information that fully refutes the allegations contained in the DFS’s original inquiry.”

The company said, “Tower takes seriously our obligations to our policyholders. In addition, as a New York-based company with our headquarters in lower Manhattan, many Tower employees were personally affected by Sandy for weeks after the event.”

“Despite these hardships, thousands of our employees, adjusters and agents spared no effort in meeting our obligations to the Sandy-affected communities, often the same communities where they live and work.”

Tower Closed Over 95% of Personal Auto, Homeowner Sandy-Related Claims

“To date, we have closed over 95 percent of personal auto and homeowner Sandy-related claims,” Tower said. “So far, Tower Insurance Company of New York and its affiliated entities have paid out more than $160 million in claims payments to businesses and individuals, enabling them to rebuild their homes, businesses and lives.”

“We are proud of our employees and our producers, who have worked tirelessly in response to Sandy, and we stand behind our track record. Although we were surprised by Governor Cuomo’s press release, we are confident that when the DFS completes its review of the data we submitted on Jan. 31, 2013, they, too, will conclude that their characterizations of our claims handling practices have no factual basis.”

Narragansett Bay Issues Response

Additionally, Narragansett Bay Insurance Company issued the following statement after the New York regulators’ announcement.

“Narragansett Bay Insurance Company, like all insurance companies in the post-Sandy period, has been communicating with the Department of Financial Services over hurricane claims processes. NBIC has also responded to all requests for information from the department,” the company said.

“We believe the discussions with the department have been productive, and we look forward to continuing our posture of cooperation with them as they continue their review.”

Kingstone Insurance was not immediately available for comment.