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Watch for Disaster Fraud This Tornado Season

Tornado season is fast approaching. In the aftermath of significant storms, potential claims are ripe for fraudster picking. Addressing potential fraudulent claims as a result of tornados and other disasters, Michael Parker presented on these threats at the National Tornado Summit on February 28, 2018 in Oklahoma City.

Parker not only explained several different types of disaster fraud schemes, but he also mentioned how to combat some of them.

  • Contractor Fraud

A contractor visiting a building damaged by disaster may require a large cash deposit but reassure the potential customer by claiming to be certified or endorsed by the Federal Emergency Management Agency, or FEMA.

Parker explained that FEMA does not certify or endorse anyone. Contractors like the one described will often require prepayment, followed by poor or incomplete work, or nothing at all, and then disappear.

  • Price Gouging

Almost always, a disaster zone has price gouging, which occurs when businesses or individuals increase the price of goods that are in demand or in limited supply.

Price gouging affects everyone. For example, exorbitant replacement and construction costs increase the deductible of the insured, exceed the payout of the insurer, and drain the financial assistance of the Federal Emergency Management Agency, or FEMA.

Fortunately, those affected by price gouging can turn to state prosecutorial tools and federal statutory tools. The Federal False Claims Act allows the government or private parties to bring a qui tam action against someone defrauding the government, recovering the benefits duplicated in a price gouging situation.

  • Property Insurance Fraud

In a disaster zone, damage is common. Unfortunately, property insurance fraud is also common. The insured may inflate losses, fake repairs, claim lost services and sometimes deliberately damage property to collect from insurance companies.

Parker said that rejecting the claim of a fraud is just the first step. Calling the National Center for Disaster Fraud should be the next one. Established in 2005 to deter fraud in the wake of Hurricane Katrina, the NCDF has evolved into a centralized organization providing relief and information to related to disaster relief fraud. More recently, the NCDF and the U.S. Attorney Offices in the region will establish a Disaster Fraud Task to target potential fraud in the wake of a disaster, such as Hurricane Harvey and Hurricane Irma.

If you are dealing with disaster fraud or have additional questions about it, or are interested in presentation opportunities on this topic, please consult the experienced legal counsel of Parker Straus, LLP at (888) 557-3311. For additional information on the NCDF, please visit their website at www.justice.gov/disaster-fraud.