The Federal Emergency Management Agency agreed Wednesday to establish a process to review the claims of all superstorm Sandy victims who suspect they were defrauded on flood insurance settlements.
The move, which applies to storm victims regardless of whether they filed lawsuits, is part of a series of reforms outlined by the agency during a call Wednesday night with Sen. Robert Menendez of New Jersey. FEMA also said any company caught cheating homeowners would be barred from processing claims for the National Flood Insurance Program. "I'm encouraged by these positive steps but will adhere to the principle of 'trust, but verify,' " he said.
The actions also will include personnel changes at the National Flood Insurance Program that will be announced in the coming days, a spokesman said.
Menendez was briefed on the reforms by FEMA's deputy associate administrator, Brad Kieserman. The move comes one day after he and fellow Democratic Sens. Charles Schumer and Kirsten Gillibrand asked the agency to ensure any deal to settle disputed claims include provisions for storm victims who suspect they were defrauded but never filed a lawsuit. "We are going to make sure that everybody who got taken will get fully compensated," Schumer said.
The allegations of fraud, which began surfacing last year, have led to a criminal probe by the New York attorney general's office. Kieserman has begun ongoing negotiations to settle the more than 1,800 lawsuits filed by Sandy victims.
Meanwhile, a federal judge in New Jersey has scheduled a hearing to examine evidence from a Sandy victim who says an adjuster falsified a report to avoid paying a claim. The homeowner said Selective Insurance Company of America underpaid his insurance settlement by about $80,000 by ordering the adjuster to rewrite a damage report.
A lawyer for Selective did not respond.
The hearing, set for May 18, could have broad implications, lawyers say. That's because, unlike the allegations in New York, it involves an adjuster rather than an engineer. "Not every claim had an engineering report, but every single one had an adjuster," said Mitchell B. Shpelfogel, a lawyer for the New Jersey homeowner.
"So if there is evidence that adjusting reports were falsified, that means countless claims could be fraudulent," he said.