State probes Tri-State Insurance over Sandy victims

Debris from superstorm Sandy sits in front of Debris from superstorm Sandy sits in front of a home in Ocean Beach. (Feb. 7, 2013) Photo Credit: Ed Betz

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State officials are investigating whether a Long Island insurance company is illegally refusing to participate in a mediation program established to help superstorm Sandy victims get fair settlements for damage to their homes, said a person with knowledge of the probe.

The New York State Department of Financial Services sent a subpoena last week to Tri-State Consumer Insurance Co. as part of the inquiry to determine whether the Jericho-based business was exploiting a loophole to avoid mediation, the person said.

Tri-State chief executive and president, Penny Hart, did not respond to requests for comment. A spokesman for the Department of Financial Services, Ron Klug, declined to comment.

The program at the heart of the investigation was launched in February to grant residents the option of challenging settlements if they believe insurers wrongly denied or underpaid a claim to cover damage from wind, falling trees and other incidents protected by homeowners policies. It does not apply to flood and automobile claims.

Companies are obliged to participate in the program under state law -- unless they suspect the homeowner is committing insurance fraud.

While insurers have willingly participated in the vast majority of mediations, the state has received 36 complaints from companies asking to be exempted because of suspected fraud. All but five of those complaints were from Tri-State, the person familiar with the investigation said.

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Roughly one-third of the insurer's complaints stemmed from claims on Long Island. State officials have been investigating the reports and have so far ruled out fraud in nearly every one, the source said. Officials are reviewing the remaining cases.

If the Department of Financial Services determines that Tri-State has been violating state regulations, the company could be fined. In extreme cases, the department can bar companies from writing policies in the state.

Tri-State, also known as TSC>Direct Inc., was founded in 1982 and writes automobile and homeowners insurance policies on Long Island and in New York City and parts of Westchester County, according to the company's website. The insurer had not reported a single case of fraud during the two years before superstorm Sandy, the source said.

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