WASHINGTON — The Federal Emergency Management Agency on Monday said it would make changes to the flood insurance program following revelations that the private companies that handle claims have been shortchanging Hurricane Sandy homeowners.
The agency said it would take control of the appeals process, as it has done with the Sandy homeowners who felt they were lowballed by their insurers, and would have the power to review the legal fees and arguments used by the private companies when they are sued for denying claims.
Currently, the companies basically have carte blanche when it comes to their legal expenses, which are picked up by taxpayers.
“We need ensure that you have a process to get a fair resolution,” said Roy Wright, FEMA’s deputy associate administrator for insurance and mitigation.
In addition, FEMA proposed changing the rules governing the flood insurance program to make it easier for the agency to renegotiate its arrangements with the private companies that handle claims. The current rules date to the 1980s and were last updated in 1999.
“There were plenty of problems we came across that we were under the constraints of the existing regulations,” Wright said. “This gives us the flexibility to address the needs of policyholders and to ensure that we’re getting the greatest value from the companies.”
Rep. Tom MacArthur wants a House committee to investigate following charges leveled by FEMA subcontractors.
FEMA’s actions come after the agency had been criticized by New Jersey lawmakers for failing to ensure that Sandy victims were properly compensated for their losses. Insurance companies or their engineering firms reportedly adjusted inspection reports to avoid paying full damage claims.
In response to those reports, FEMA agreed to reopen the claims process for almost 142,000 Sandy homeowners. To date, more than $58 million in additional funds have been paid to Sandy homeowners who asked the agency to reconsider their claims.
Even now, there are questions as to whether the Sandy victims are being properly compensated. Rep. Tom MacArthur (R-3rd Dist.) last month released affidavits from three former employees of a FEMA subcontractor claiming that they were told to use a formula based on a structure’s square footage and its construction to decide how much money a homeowner was entitled to, not review actual damage reports.
In a separate announcement, the agency agreed that homeowners facing financial hardship who want to appeal their extra payments can get their initial award while waiting to see if they will receive any additional money. Currently, they would not get any money until the entire appeals process is completed.
“This should not be a game of ‘Let’s Make a Deal’ where Sandy victims are forced to choose between their initial offer and what’s behind door No. 2,” said U.S. Sen. Robert Menendez (D-N.J.), who led the effort to get FEMA to reopen the Sandy claims. “I am pleased that FEMA has fixed this injustice and I will continue to hold their feet to the fire until every Sandy survivor recovers.”
Email the author | Follow on Twitter
on May 23, 2016 at 12:55 PM