The Federal Emergency Management Agency unveiled a broad series of reforms Friday to address concerns contractors conspired to underpay flood insurance settlements to homeowners after superstorm Sandy.
In a strongly worded letter to private companies that work for the government-run National Flood Insurance Program, FEMA administrator W. Craig Fugate said he had "deep concern" over allegations engineers falsified documents to deny claims.
"We must do better," Fugate wrote. "Policyholders deserve to be paid for every dollar of their covered flood loss."
The reforms include:
Revising how insurers are compensated to ensure claims aren't underpaid.
Releasing draft reports suspected of being doctored to deny claims.
Reopening claims of 270 homeowners whose appeals were denied because they missed a paperwork filing deadline.
Expanding the role of a flood-insurance advocate to assist policyholders with future claims.
FEMA's announcement drew cautious praise from advocates for the roughly 1,000 Long Islanders who for months have been locked in legal battles to collect settlements to rebuild from the 2012 storm. The proposed reforms come after a federal judge found evidence that reports for Sandy-wrecked homes were routinely rewritten to blame damage on erosion or structural defects, rather than flooding.
Those findings sparked an outcry from homeowners. The four Democratic U.S. senators from New York and New Jersey, meanwhile, demanded reforms for the flood insurance program, which is run by FEMA.
"Sandy victims must receive prompt reimbursement from flood insurance providers based on the damages incurred to their property -- end of story," Sen. Charles Schumer said.
"I'm pleased FEMA has heard our call."Flood insurance is underwritten by the federal government, but FEMA hires private companies to administer policies and adjust claims. Lawyers for homeowners have long said the program encourages private insurers and engineers to lowball settlements by penalizing them for overpayments to homeowners -- but not for underpayments.
As part of the reforms announced Friday, FEMA has asked Sen. Robert Menendez of New Jersey to convene a task force to revamp how private companies are paid for processing flood claims. That will include instituting penalties for underpayments.
"While I certainly understand the need to protect taxpayer dollars from waste, fraud and abuse, I equally want to protect homeowners from getting swindled out of money they deserve," Menendez said Friday.
Lawyers for the private companies accused in civil lawsuits of doctoring reports, including U.S. Forensic of Metairie, Louisiana, have denied the allegations. They contend the reports were edited as part of peer reviews that are standard in the industry.
Nonetheless, FEMA has ordered all private companies being sued over flood insurance claims to release draft reports.
That move, ordered by federal Judge Gary Brown for cases in New York, was initially opposed by FEMA, but after meeting with the four senators from New York and New Jersey on Wednesday, FEMA agreed to push the private companies to release the documents for homeowners suing in both states.
"We owe it to our policyholders to provide this level of transparency," Fugate wrote.
Sen. Kirsten Gillibrand welcomed the reforms. "This is finally some good news for these families devastated by superstorm Sandy," she said. "These changes by FEMA will mean significant progress to ensure that homeowners can receive the critical funding that they deserve."