The federal government's review of flood insurance claims filed after superstorm Sandy has found that more than half of homeowners who asked to have their settlements re-examined were underpaid by an average of nearly $16,000.
The preliminary findings, based on about 550 claims, mark the first time Washington has produced evidence that appears to confirm that underpayments to policyholders were widespread after the 2012 storm.
"These numbers say to me that there are clearly some unmet payments that we need to make," Roy Wright, director of the National Flood Insurance Program, said Friday.
The Federal Emergency Management Agency, which runs the flood insurance program, launched the review in May, prompting more than 12,000 homeowners to reopen their claims.
The results of the first 556 reviews, released Friday, found that 60 percent had been underpaid. The shortfalls ranged from $130 to $104,000, and the average underpayment was $15,890, FEMA said. Once homeowners sign off on the revised settlements, the agency will begin sending checks to make up for the shortfalls.
The move comes nearly three years after Sandy hit Long Island, ravaging homes across the South Shore. Many of those properties were covered by flood insurance. Yet thousands of homeowners complained they were shortchanged on their settlements, leading to more than 2,000 lawsuits.
In November, a federal judge presiding over those cases concluded documents may have been routinely forged in an effort to underpay homeowners. The allegations have led to a criminal probe and the departure of two top flood insurance officials. FEMA, meanwhile, agreed to review up to 142,000 claims.
Karen and Wayne Howard, whose $140,000 initial settlement left them about $40,000 short of the cost of fixing their flood-wrecked South Amityville home, were among those who registered to have their claims reexamined. The review confirmed they were underpaid but FEMA has not given them a number yet, the couple said Friday.
"I am cautiously optimistic," Karen Howard said.
Wright, who took over the flood insurance program in June, cautioned that the review's findings do not necessarily mean that 60 percent of all homeowners who filed flood insurance claims after Sandy were underpaid.
The claims examined in the review were submitted only by homeowners who suspected they were lowballed. Policyholders who felt they were paid fairly would not have signed up to have their claims reviewed and, hence, are not factored into the average, Wright said.
Nonetheless, advocates for Sandy victims say the findings prove what they have been saying for months: that homeowners were cheated on a mass scale.
"It definitely confirms that there were significant underpayments made, and I think we are going to see even bigger underpayments as they continue to work through the rest of the claims," said Denis Kelly, a Long Beach attorney who has represented hundreds of Sandy victims.
FEMA plans to spend roughly $40 million -- not including payments to homeowners -- to run the review process, saying it's critical to restore the program's credibility.
Roughly 12,650 homeowners, or about 9 percent of the 142,000 eligible homeowners, have registered for the process. Homeowners who disagree with the outcome will have the option to appeal to a third-party arbiter. Wright, the program's director, will have the final say over any settlements.
Yet advocates for storm victims say many are wary of having their claims reviewed, saying they fear the process will be laden with red tape and, ultimately, stacked against them. Most of all, they say, homeowners worry that larger insurance payouts could force them to return federal disaster assistance grants.
Policyholders have until Sept. 15 to sign up for the process. Friday, New York Democratic Sens. Chuck Schumer and Kirsten Gillibrand asked FEMA to extend that deadline.
"We believe that it is critical to ensure that each and every one of these eligible homeowners has the opportunity to have their claim reviewed," the senators wrote to FEMA administrator William Craig Fugate.
Melissa Luckman, who directs the Disaster Relief Clinic at Touro Law School in Central Islip, said every Sandy victim who suspects they may have been lowballed on a flood claim should sign up.
"I think that it's pretty obvious that people were underpaid," she said. "If you just take a look at these people's homes and see the amount of money they got -- it's pretty obvious it's a widespread issue."