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Judges set date to examine evidence on claims of Sandy underpayments

This corner lot on Michigan Street in Long

This corner lot on Michigan Street in Long Beach is among the properties affected by a federal judge's order to release flood insurance documents suspected of being falsified to deny superstorm Sandy claims. It was photographed on Nov. 13, 2014. Credit: Johnny Milano

A federal judicial panel overseeing superstorm Sandy lawsuits has scheduled a hearing next month in response to allegations that engineers falsified reports in at least four new cases to deny homeowners' flood insurance claims.

The hearing, set for Jan. 28 in U.S. District Court in Brooklyn, will examine evidence from homeowners who say reports were secretly doctored in a broad effort to avoid paying settlements from the 2012 storm.

"These allegations, if true, raise a number of important issues that must be resolved," the three-judge panel wrote in an order Monday.

The new round of accusations by the four homeowners makes for a total of five cases in which lawyers say they have evidence of falsified reports on Long Island and in Brooklyn.

In October, a judge held a hearing to examine evidence in the fifth case and concluded that a report was secretly rewritten to partially deny the claim.

To determine whether the practice was widespread, the judge, Gary Brown, ordered all insurers being sued over Sandy claims to release copies of their draft engineering and adjusting reports.

In Monday's ruling, the three-judge panel said that order also requires homeowners to release their own draft engineering reports. Engineers and insurance companies have denied wrongdoing, saying the reports were changed as part of standard peer reviews.

Flood insurance is underwritten by the federal government, but Washington hires private companies to administer policies and adjust claims. Lawyers for homeowners say those insurers regularly lowball settlements to avoid being audited by the Federal Emergency Management Agency, which runs the flood insurance program.

Last week, FEMA ordered all private companies that work for the flood insurance program to comply with Brown's order to release draft reports. If engineers refuse, the federal judges said they would subpoena the documents.

The allegations, meanwhile, have led to several class-action lawsuits, naming Hartford Insurance Co., Travelers Cos. and Wright National Flood Insurance Co.

John S. Mostyn, a lawyer who filed the class action suits, said he expected next month's hearing to show a coordinated effort to minimize payments. Mostyn, based in Houston, said he has found 26 reports used to deny claims that contain identical passages describing damage.

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