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Sanctions Issued for Discovery Violations in Superstorm Sandy Litigation

Blogs, Insurance Coverage

Recently, Magistrate Judge Gary R. Brown sitting in the Eastern District of New York sanctioned Wright National Flood Insurance Company (“Wright”) following Wright’s failure to disclose a “draft” report generated by an engineering firm hired by Wright to inspect it’s insured’s property after Superstorm Sandy. Significantly, the sanctions were imposed even though Wright and its counsel were unaware of the report’s existence. 

The case, Raimey v. Wright National Flood Insurance Co., (E.D.N.Y. Nov. 7, 2014), is part of the widely publicized consolidated civil action in the Eastern District titled “In Re: Hurricane Sandy.” The purpose of the consolidated action is to facilitate prompt and efficient resolution of Sandy-related cases through streamlined discovery procedures and mandated disclosures.

By way of background, after Superstorm Sandy damaged the rental home of its insureds, Deborah Raimey and Larry Raisfeld (“Plaintiffs”), Wright engaged the services of U.S. Forensics to investigate the scope and cause of the damage. George Hernemar (“Hernemar”), a licensed engineer with U.S. Forensics inspected the property and prepared a report in which he opined that the subject building was structurally damaged and that repair of the building was not economically viable (the “Original Report”). The Original Report was thereafter peer-reviewed by Michael Garive (“Garive”). Garive, without ever inspecting the property, substantively changed the report and concluded that the property was not structurally damaged and that the uneven roof slopes, leaning exterior walls and the uneven floor surfaces were the result of the long-term differential movement of the supporting soils at the site and long-term deflection of the building framing. Garive’s changes were ultimately incorporated into the Final Report which was issued by U.S. Forensics to Wright. Wright relied upon the Final Report in denying Plaintiffs’ claim.

Wright did not produce the Original Report during discovery and by all accounts did not know of its existence until Plaintiffs brought it to light following a failed attempt at mediation. Judge Brown held that Wright had an obligation to affirmatively ask U.S. Forensics for all draft reports and that Wright violated the case management orders by failing to obtain and produce the Original Report. Accordingly, Judge Brown issued sanctions against Wright and its counsel. Specifically, Wright was prohibited from supporting its defenses or opposing Plaintiffs’ claims with any expert testimony other than that of Hernemar and Plaintiffs were permitted to seek all fees and costs associated with the evidentiary hearing.

Additionally, with respect to all other Superstorm Sandy cases, Judge Brown ordered that all defendants provide any “drafts, redlines, markups, reports, notes, measurements, photographs and written communications related thereto—prepared, collected or taken by any engineer, adjuster or other agent or contractor….”

Notably, Judge Brown’s ruling issued approximately two weeks after it awarded attorney fees against Narragansett Bay Insurance Company in another Superstorm Sandy case. Cohen v. Narragansett Bay Insurance Company, No. 14-cv-3623 (PKC) (fees awarded for improper removal of the insured’s state court suit where the amount in controversy was far below the $75,000 threshold).

Since Judge Brown’s Order, United States Senator Robert Menendez issued a letter seeking a full investigation into the fraudulent altering of reports by carrier friendly experts. Additionally, Chip Merlin of the Merlin Group, a liaison to Plaintiffs’ in Superstorm Sandy litigation, also issued a letter urging New Jersey’s federal court presiding over consolidated Sandy-related actions to adopt Judge Brown’s Order in Raimey.