An insurance inspection report on Superstorm Sandy damage to a New Jersey couple's home was extensively rewritten at the engineeering firm's home office, overturning hours of on-site examination in 48 minutes and reversing findings that had supported their claim for coverage.

Exterior view of the Kleinfelder's house in Seaside Heights. (Provided by Robert Trautmann, Esq.)

Details of the reversal are laid out in documents submitted by the couple's attorney, Robert Trautmann, to a federal judge on Feb. 20 and reviewed by Townsquare Media. Trautmann, who used the word  "fraud" to describe the altered report, said emerging evidence points to many such cases in New Jersey.

The homeowners, John and Rosemary Kleinfelder, said their Seaside Heights home was leaning so far off center after the Oct. 29, 2012 storm – as much as six inches in some spots - that the doors of the house wouldn’t close.

But their insurance claim was denied for payment after an extensive rewrite of the original engineering report. Attribution of damage to the storm was removed and new language added to blame earlier structural wear and soil erosion at the site of the home in Seaside Heights.

The Kleinfelders have responded by taking legal action against Fidelity National Casualty Insurance Company, of St. Petersburg, Florida and its engineering contractor, U.S. Forensic of Metairie, Lousiana.

The altered report “didn’t even look like a report on our house," Rosemary Kleinfielder said. "They’re full of crap because I knew the house was not leaning like that before Sandy and they were trying to say it was.”

After paying for insurance "for years," John Kleinfelder said, "when you need a claim, they don’t want to give you anything. . .   it’s terrible.”

The sequence of events came to light after the Federal Emergency Management Agency, in December, pressed insurance carriers to release initial inspection reports to New Jersey homeowners who were challenging Sandy claim denials. The move, urged by New Jersey's U.S. Senators, Bob Menendez and Corey Booker, followed a federal court ruling ordering the same remedy for New York homeowners whose Sandy claims had been denied.

[UPDATE: Menendez said Monday that he is "outraged" by the inspection report alterations and dissatisfied by the pace of FEMA's response to inquiries he and Senate colleagues made about homeowner complaints as early as last July. He, Booker and New York Senators Charles Schumer and Kirsten Gillibrand Monday called for new hearings on the handling of Sandy insurance claims because, Menendez said, "FEMA has to account for this and we've got to get to the bottom of how widespread this fraud is."}

The Kleinfelders’ attorney, Robert Trautmann, said his firm is handling about 300 such cases and is discovering repeated instances of initial engineering reports being rewritten to remove information that would support payment of claims.

“The same language appeared time and time again,” Trautmann said, describing the altered reports. “It didn’t matter what engineer was writing the report, the [revised] reports all looked exactly the same.”

Asked about possible outcomes of the revelations, beyond an eventual trial for the Kleinfelder suit, Trautman said: “The fact that this is going on to folks up and down the Jersey coast - it’s infuriating. In my mind, it is a crime and somebody needs to be punished for it. I do believe you’re going to see criminal prosecutions come out of this.”

Highlighting shows how an engineer's original words "was structurally damaged" under "deleted" in the right hand margin are replaced by the words "were not" in the revised passage on the left. The photo, also part of the inspection report, shows a collapsed floor support beam in the Kleinfelder's basement. (Materials shown here provided by Robert Trautmann, Esq.)

Trautmann sent documents in the Kleinfelder case to to U.S. District Court Judge Lois H. Goodman Feb. 20. In a cover letter, he said that U.S. Forensic, the engineering firm used by Fidelity National, originally hired Michael Steffner of Hackettstown to inspect the damage to the Kleinfelder home.

The project involved 14 hours of work by Steffner, who filed a 29-page "draft" of his report with Gary Bell, a managing partner of U.S. Forensic on Jan. 2, 2013. In it, Steffner wrote that physical evidence showed the home “was structurally damaged by hydrodynamic forces, hydrostatic forces, scour or erosion of the supporting soils, or buoyancy forces of the floodwater” from the tropical storm.

Steffner further wrote that the storm “added to and contributed to” damage of foundation and support structures that had also been subject to “long-term” soil erosion and wear.

Other storm damage cited by Steffner included:

  • “Staining evident in the kitchen and foyer has resulted from wind driven rain that entered the building through damaged flashing between the main building and foyer.“
  • The air conditioning unit on the south side of the building and the heating unit in the crawl space were inundated by flood water and replacement is required.
  • “Plumbing pipe insulation in the crawl space was damaged by floodwaters.”
Engineer's photo of the Kleinfelder's basement, taken during the post-storm inspection, shows a foundation wall under the home's foyer rotated out of alignment. (Photo provided by Robert Trautmann, Esq.)

As a result of his inspection, Steffner recommended replacement of the foundation under the home’s foyer and said part of the kitchen floor would also have to be ripped up so that “broken and damaged” supports beneath it could be repaired. In all, he said, 45 linear feet of foundation wall and 200 square feet of flooring would require replacement.

“Had this report been produced to Fidelity, it cannot be disputed that the damage to the Plaintiffs’ home would have been covered,” Trautmann wrote Judge Goodman.

Instead, Trautmann said, Bell sent Steffner’s draft to Michael Garove, another partner and professional engineer at the firm, at 11:56 a.m. on Jan. 3, with instructions to provide “direction” to Steffner.

Documents submitted to the court, including printouts of internal emails, detail what happened next:

  • Garove emailed Bell later in the day: “Do you want me to teach this guy [Steffner] or just get it [the report] ready and out the door? It looked like you wanted to stop using him."
  • The emailed reply from Bell: “Out the door.”
  • “Two minutes later, Garove replies, ‘Alrighty then,’ Trautman’s letter states, adding, “just 48 minutes later, Garove sends Steffner the altered report” which would “completely change the conclusions in a manner that would deny coverage” to the Kleinfelders.

The rewritten report states that Kleinfelder home’s building and foundation system “were not” structurally damaged by the storm and omits Steffner’s finding that the storm had “added to and contributed to” long-term soil erosion and building component deterioration.

The documents submitted by Troutmann include a copy of Steffner’s original report showing Garove’s extensive deletions and other changes, detailed in the margins and shaded in the main text, which was created and edited in Microsoft Word. The deleted text included Steffner’s original attributions of damage to Superstorm Sandy. The end result was a rewritten report casting the damage as having occurred over time and before the storm.

“To find out they [the insurance company] . . . said everything that happened [to the house] took place before Sandy was such a crock.” John Kleinfelder said. “It made me just so angry.”

Calls and emails by Townsquare Media to representatives at Fidelity Insurance, US Forensic, and Steffener, have not been answered.

According to Trautmann’s letter to Judge Goodman, Fidelity claimed through its lawyers Feb. 20 that the alterations to Steffner’s original report are “moot” because they have since hired another engineer "as a post hoc justification for denial of my client's claim."

Trautmann called the Fidelity response  “misleading as it only includes the altered report and refers to it as Mr. Steffner's draft reporter that was edited by a US Forensic engineer. . . it would be far more accurate to state that the report was completely re-written."

Further, Trautmann wrote, Fidelity has produced no explanation "as to what information Garove reviewed in those 48 minutes that permitted him to negate Steffner's on-site  of the damage and "completely change the conclusions in a manner that would deny coverage" to the Kleinfielders.

“The fact that this is going on to folks up and down the Jersey coast - it’s infuriating,” Trautmann said. “In my mind, it is a crime and somebody needs to be punished for it. I do believe you’re going to see criminal prosecutions come out of this.”

[UPDATE: In a 60 Minutes report on the New York cases, aired Sunday night, Brad Kieserman, FEMA's deputy associate director, said such inspection report alterations appear to have been widespread. He said the agency has launched an internal investigation. In a statement issued Monday, Homeland Security Secretary Jeh C. Johnson said: "Any allegation of fraud is highly troubling, and especially so when it involves Americans who have lost their homes in a natural disaster."

Sen. Menendez said Monday: "Homeowners in New Jersey who have been hurt by the actions of insurance companies that write FEMA's flood insurance program - they need to be made whole. Where their damages truly were damages as a result of Sandy, they need to be compensated."]