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Hurricane Sandy settlement lawsuits delayed in favor of negotiations


(Reuters) — A federal court in New York has indefinitely suspended a hearing over lawsuits that accuse insurers of doctoring reports on home damages caused by Hurricane Sandy after a government agency said it hoped to settle the litigation out of court.

A judicial panel had planned to examine evidence at the U.S. District Court in Brooklyn this week purportedly showing that some New York homeowners were denied federal flood insurance money as a result of the altered reports after the historic 2012 storm.

The Federal Emergency Management Agency, which administers the National Flood Insurance Program, filed a letter with the court this month saying it was seeking to meet privately with the Sandy plaintiffs and the insurance companies named as defendants in the lawsuits.

In an order issued on Tuesday, the judicial panel said it was adjourning Thursday's hearing indefinitely “to allow the parties to continue conducting meaningful settlement discussions.”

At least one high-profile case has been settled already. Frank Johnston, the owner of a two-story home on New York's Fire Island damaged in the storm, reached a deal late last week, his lawyer Steven Bertolino said. His dispute over insured losses was featured on the front page of Tuesday's New York Times.

“We were negotiating heavily all last week,” Mr. Bertolino said. “The fact that we were able to negotiate a settlement just shows that FEMA will do the right thing when pushed.”

FEMA did not respond to a request for comment.

FEMA leaves it to private insurers to assess damage to homes and administer individual flood insurance payments. But it is ultimately federal money controlled by FEMA that pays for damaged homes covered by flood insurance.

Last November, allegations that reports were doctored led Judge Gary R. Brown of the federal court in Brooklyn to order draft engineering reports to be turned over in more than 1,000 separate Sandy-related lawsuits, writing that the practice could be “widespread.”

In addition to the lawsuits, the New York State attorney general's office has opened a criminal investigation into whether insurers forged documents connected with Sandy claims,

In addition to the lawsuits, the New York State attorney general's office has opened a criminal investigation into what it calls “insurance issues” related to damage caused by Sandy, a spokesman said.

The 2012 hurricane damaged more than 100,000 homes in New York, according to FEMA.