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Senate study concludes Sandy storm underpayments were not widespread

A boat floats in the driveway of a

A boat floats in the driveway of a Lindenhurst home on Oct. 30, 2012, in the flooding aftermath of superstorm Sandy. Credit: AP / Jason DeCrow

An investigation by a Senate committee has concluded the National Flood Insurance Program did not systematically underpay superstorm Sandy victims, despite allegations that have prompted Washington to reopen thousands of claims, according to a report to be released Tuesday.

The probe, by the Senate Banking Committee, examined audit data from the Federal Emergency Management Agency. It is being released in advance of a hearing Wednesday in Washington on the flood insurance program's response to the 2012 storm.

"Despite widespread concerns, it does not appear that systematic incentives exist for any participant in the program to underpay on claims. Nor does there presently exist evidence of any such pattern of underpayments," according to a draft of the report.

The study comes as the flood insurance program has been under scrutiny for months after dozens of Sandy victims filed lawsuits saying private companies hired by the government forged documents to improperly deny settlements.

The allegations have led to two ongoing criminal probes and the departure of two top officials at the flood insurance program. FEMA, meanwhile, has launched a process to review up to 142,000 claims.

A FEMA spokesman, Rafael Lemaitre, said he had not seen the report, but, he added, not a single policy holder should be underpaid.

"We're going to continue moving forward to reform the National Flood Insurance Program regardless of whether underpayments were systemic or not," Lemaitre said.

Lawyers for Sandy victims, meanwhile, questioned drawing conclusions from FEMA audits when the agency has acknowledged problems with its flood insurance data.

"If they are relying on FEMA to produce evidence of its own wrongdoing, they have missed the mark," said Steve Mostyn, a Texas lawyer who represents Sandy victims. "We've looked at case after case, and they all show the same thing -- systematic underpaying."

A spokeswoman for the chair of the Senate Banking committee, Alabama Republican Richard Shelby, did not respond to requests for comment.

The study, which did not examine individual allegations of fraud, acknowledged some Sandy victims were underpaid and attributed the errors to adjusters and engineers being overwhelmed. It recommended several steps to reform the program, including better record-keeping and improved training for adjusters.

Sen. Charles Schumer (D-N.Y.), who has previously called for those same steps, said the report gave him "hope that there will be bipartisan support in the Senate for pushing FEMA to make these necessary changes."

Denis Kelly, a Long Beach lawyer, said it's hard to believe FEMA would reopen 142,000 claims if there wasn't a pattern of underpayments. "That sounds like a rewriting of history," he said.

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