BALTIMORE - Travelers Casualty and Surety Company ("Travelers") and Electronic Data Systems Incorporated ("EDS") have agreed to pay the United States $2,850,000 to settle claims under the False Claims Act that they paid for flood insurance losses knowing that those losses were not covered by National Flood Insurance Program ("NFIP") policies, announced United States Attorney for the District of Maryland Rod J. Rosenstein.
The settlement resulted from an investigation by the Federal Emergency Management Agency (FEMA) in conjunction with the United States Attorneys Office for the District of Maryland into Travelers and EDS performance as part of the "Write Your Own"("WYO") Program, through which FEMA utilized private insurance companies to sell and administer NFIP policies under their own names on behalf of the federal government. Under the Financial Assistance/Subsidy Arrangement entered into between FEMA and the WYO companies, the companies were required to issue policies and to settle claims in accordance with NFIP statutes and regulations. Various WYO carriers elected to fulfill such obligations through contracts with EDS to service NFIP policies, including the administration and payment of NFIP claims.
The settlement agreement resolved claims that Travelers and EDS paid claims under policies that were not properly in place under NFIP rules at the times the losses were incurred. As a result, Travelers and EDS paid claims for flood losses under 58 NFIP policies that Travelers and EDS knew should not have been paid. Pursuant to the agreement, Travelers and EDS do not admit that they violated the False Claims Act, nor does the Government concede that its claims are not well founded.
The settlement resolves a lawsuit originally filed by Wayne Lutz, a former EDS employee, under the qui tam provisions of the False Claims Act, in which the United States intervened. Enacted during the Civil War, the False Claims Act is the governments primary civil tool to combat fraud and abuse in federal programs and procurement.
United States Attorney Rod J. Rosenstein commended Assistant United States Attorney Jamie M. Bennett and the Department of Homeland Security Office of Inspector General for their work on the investigation and settlement.