The federal official who oversaw the National Flood Insurance Program has resigned after allegations that damage reports were falsified to deny claims to superstorm Sandy victims, officials said Wednesday.
David Miller, a Federal Emergency Management Agency associate administrator who since 2011 has supervised the insurance program, is the first high-ranking official to step down since the scandal broke last year. One of his top deputies, Ed Connor, has announced he will retire.
The shake-up comes after a growing number of homeowners from Long Island, Brooklyn and New Jersey have accused private companies that process claims for the government-run insurance program of conspiring to alter engineering reports after the 2012 storm.
Miller, who will leave FEMA in April, told his staff in a letter that "current health and family circumstances" led to his departure. He has not been accused of wrongdoing.
"FEMA may not have been part of the fraud. But it had very poor oversight and is culpable in that way," Sen. Charles Schumer (D-N.Y.) said. "While Miller is the first to be replaced, I do not think he will be the last."
FEMA disclosed Miller and Connor's departures Wednesday in a letter to members of Congress. The agency said other personnel changes may be necessary as part of efforts to reform the troubled insurance program.
The allegations surfaced amid the more than 1,800 pending lawsuits filed by homeowners saying they were shortchanged on flood insurance settlements. The New York State attorney general's office has launched a criminal probe.
FEMA, meanwhile, has reached tentative agreements to settle roughly 275 of the suits and is in talks to resolve the rest.
Wednesday the agency told senators from New York and New Jersey that it would establish a process for all 144,000 Sandy victims who filed flood-insurance claims to have their cases reviewed.
Washington underwrites flood insurance. But FEMA hires insurance companies to administer the policies and determine how much to pay out on claims.
The government pays the settlements, but homeowners say insurers still lowball claims. That is primarily, they say, because the program penalizes insurers caught overinflating claims. There are no penalties for underpayments. So lawyers say insurers err on the side of paying too little -- and pressure engineers and adjusters to skew reports to avoid any chance of paying too much.
FEMA has promised to revamp the program to eliminate any incentives to cheat homeowners.
"There needs to be top-to-bottom reform so that this can never happen again," Sen. Kirsten Gillibrand (D-N.Y.) said.