Posted: March 12 2015
By: David W. Chen
The Federal Emergency Management Agencyhas agreed to review every flood insurance claim filed by homeowners affected by Hurricane Sandy, amid accusations that damage assessment reports were fraudulently altered to minimize claims.
The agency’s administrator, W. Craig Fugate, also revealed in a letter to members of the New York and New Jersey congressional delegations that David Miller, who was in charge of FEMA’s embattled National Flood Insurance Program, has resigned and one of his top deputies has retired.
The actions by the agency were announced on Wednesday by Senators Robert Menendez and Cory A. Booker of New Jersey, and Charles E. Schumer and Kirsten E. Gillibrand of New York, all Democrats, after a meeting with Mr. Fugate in Washington.
Even though the four senators and others have questioned for months whether doctored engineering reports led to minimizing or even denying insurance payments after the 2012 hurricane, the latest developments show just how quickly things have changed in the wake of recent law enforcement inquiries and reports in The New York Times and on the CBS News program “60 Minutes.”
The New York State attorney general, Eric T. Schneiderman, a Democrat, has been conducting a criminal inquiry since at least December. Last month, his office raided a Long Island engineering firm, shortly after The Times cited new email correspondence suggesting that it had sought to backdate some of the reports.
On Thursday, Assemblyman Vince Mazzeo, a Democrat from Atlantic County, citing The Times’s report, asked New Jersey’s acting attorney general, John J. Hoffman, a Republican, to open a similar criminal investigation.
FEMA is conducting its own internal inquiry as well. Last month, the agency named Brad J. Kieserman as the point person to review the flood insurance program, and he told “60 Minutes” that he had seen evidence of possible criminal activity by unlicensed engineers.
At the same time, FEMA has intensified its efforts to reach a settlement framework with some 2,200 homeowners who have filed lawsuits over their insurance payouts, according to lawyers and lawmakers. Those talks are continuing and are separate from the new review announced on Wednesday, which will reopen all 144,000 claims filed by people affected by the storm.
Insurance and engineering firms have denied any wrongdoing. They have noted that there is little financial incentive to cheat: Many insurers are paid a percentage fee based on total damages and, under federal rules, the money that is paid out ultimately comes from FEMA, not the insurance companies.
But if the agency determines that homeowners deserve more, they will be eligible for their maximum coverage, as set by the federal program, of $250,000 in property damage and $100,000 for the contents of their home.
Steve Mostyn of Houston, the lead lawyer representing the homeowners, praised the agency for “negotiating in good faith” in recent weeks. But he also voiced caution.
“We are happy that FEMA now agrees to reopen all Sandy claims,” he said in an email. “However, that process has not been worked out and the details of that process will determine if it is real or just window dressing.”
Federal officials will convene a task force in April in hopes of revamping the flood insurance program, which penalizes insurers for overpaying claims but not for underpaying them.
Ms. Gillibrand, in a statement, said she was pleased with the new developments, but wanted to ensure that “everyone involved in this fraud is held accountable.”
“There needs to be top to bottom reform,” she said, “so that this can never happen again.”