FEMA agrees to Sandy insurance reforms

SECAUCUS, N.J. — After weeks of criticism from Superstorm Sandy victims, the Federal Emergency Management Agency has reversed course and agreed to a series of flood-insurance reforms that advocates say should benefit victims.

The reforms, announced Friday by Sens. Robert Menendez and Cory Booker, along with Reps. Frank Pallone and Bill Pascrell Jr., all Democrats, have been agreed to by FEMA Administrator Craig Fugate.

Menendez said Fugate committed to take administrative action to ensure that insurance companies are penalized for underpaying or overpaying policyholders on flood damage claims.

FEMA also has agreed to reopen and consider appeals from 270 policyholders who suffered damage from Sandy but had their appeals dismissed because they missed a deadline. And FEMA officials have recommitted to quickly establishing a flood insurance advocate charged with helping owners navigate the complicated claims and appeals process.

George Kasimos, a realtor who started the Stop FEMA Now out of frustration, praised the developments, especially the creation of a consumer advocate within FEMA.

"This goes a long way in helping 'mediate' our claims instead of 'litigating' our claims," he said. "Mediating our claims will help us with quicker resolutions and more money for the homeowner because we won't have to hire an attorney who will subtract his fees from the award."

Problems with flood insurance payouts have been consistently cited by Sandy victims as one of the reasons why they have been unable to rebuild, especially as reconstruction of flood-damaged homes lingers into its third year.

Menendez and Booker had a meeting with Fugate, in which they discussed several complaints by Sandy victims, including the delays, and amounts, of flood insurance payments.

As a result of that meeting, the lawmakers said FEMA agreed to implement the following changes:

• All engineering reports that were secretly modified will be provided to policyholders. A Sandy-related lawsuit between a New York homeowner and their flood-insurance provider recently revealed what many worry might be a widespread practice that could have been employed to cost individual policyholders tens of thousands of dollars each.

In that case, the report of an engineer who was examining a Long Beach, N.Y., home after Sandy was changed by another engineer who had never visited the property or discussed the home with his colleague. In testimony, this was portrayed as an accepted practice The cause of the damage was originally assigned to the storm surge, but after the modification it became earth settlement and the claim for structural damage was denied, costing the homeowners up to $170,000 in this instance.

"Why is it that when policyholders conceal or provide erroneous information it's called insurance fraud, but when the insurance companies engage in the same practice they are given a free pass?" Menendez said.

• Insurers will be penalized just as much when they underpay a legitimate flood-insurance claim as when they overpay. Menendez has long complained that flood-insurance carriers are incentivized to lowball their customers. Right now, if a federal audit determines that a carrier paid more on a claim than it should have, it's up the carrier to make up the difference. However, if that same carrier underpays a claim, there is no rule in place that punishes them for not paying out enough.

• The flood-insurance appeals of 270 Sandy victims will be reinstated. These individuals and families lost their opportunity to dispute the reasonableness of the payouts they received because they failed to submit forms by a specific date. However, FEMA was simultaneously missing its own deadlines, some of which were to provide information that people could use to appeal flood-insurance decisions.

"If FEMA can't meet its own deadlines under the law, they can't penalize disaster victims for not meeting theirs," Menendez said.

• Installment of a flood-insurance advocate's office within FEMA will be speeded up. As it's described, staff from the office would help homeowners work through all the steps of filing a claim and, if necessary, the appeals process.

"Disaster victims need someone on their side on the inside and not to have to spend enormous amount of money on lawyers in order to make their claim," Menendez said.

Not included in the list of improvements was any action for the 1,200 New Jerseyans who have received what FEMA refers to as a recoupment letter. The disaster-response agency is seeking $8 million in repayment from people it now says shouldn't have received that money in the first place. Menendez said that situation was being looked into.

Contributing: The Associated Press