With a mid-September deadline fast approaching, victims of Superstorm Sandy who believe they were underpaid by their flood insurance companies are running out of time to reopen their claims.
After allegations surfaced that engineering reports had been doctored to minimize insurance payouts to Sandy victims, the Federal Emergency Management Agency took the unprecedented step of allowing policyholders to request another review of their claims.
FEMA started sending out letters to about 142,000 policyholders in May. As of Friday, 19,892 had either contacted the Sandy review call center or downloaded an application. Nearly 13,000 had been approved for review, according to FEMA spokesman Rafael Lemaitre. The deadline is next Tuesday.
Lemaitre said FEMA was encouraged by the figures and noted that while there is evidence that fraud and underpayment occurred, there are also many people who either received the maximum benefit allowed or have reported being satisfied with their payout. He also pointed to a Senate Banking Committee report issued in June that found no evidence of “systematic underpayment” by insurers.
But lawmakers and advocates say that homeowners have been reluctant to participate in the process, either wary of getting involved in yet another bureaucratic system or fearful that the review will actually have a negative effect, forcing them to give back money or be subject to additional regulations.
“Nobody wants to do it,” said Tess Tomasi of the Bergen County Long-Term Recovery Committee, which provides resources to help those affected by Sandy. “The No. 1 thing people say is, ‘I’ve had enough. I can’t take it anymore.’”
Firm raided
Concerns about the FEMA-run National Flood Insurance Program, which provides flood insurance through private companies to homeowners, renters and business owners, have been bubbling up for months, but it wasn’t until the beginning of this year that things came to a head. The New York Times and CBS’ “60 Minutes” both published investigations into the engineering report allegations, and in February, investigators from the New York State Attorney General’s Office raided the headquarters of a Long Island engineering firm suspected of fraud.
Then in March, less than two weeks after the “60 Minutes” report aired, FEMA agreed to allow policyholders affected by Sandy to reopen their flood insurance claims.
More than 140,000 flood insurance claims were filed after the storm, including about 2,000 in Bergen County. All policyholders were eligible for the new review, except those who had filed suit or who have already received the maximum benefit permitted under their policy.
Lori and Bill Scheffler, who were living in Montvale at the time of the storm, are among those who have decided to again try their luck with FEMA. The Schefflers’ Jersey Shore home in Beach Haven West was significantly damaged in Sandy, torn off its foundation by the storm surge, said Lori Scheffler, 58.
They received about $60,000 from their flood insurer. They were insured for $250,000, said Lori.
But even as they go through the process, the Schefflers – who have since moved to the Shore permanently — say they are not holding out much hope.
“If we get money from FEMA, that’s a bonus,” said Lori Scheffler. “But we’re not counting on it.”
The mayor of Little Ferry, which was also hard hit by Sandy, said that while some residents were unhappy with their payout, he did not believe many had applied to reopen their claim.
“It’s not an overwhelming majority of people,” said Mayor Mauro Raguseo.
But advocates are urging residents to take advantage of this unique opportunity, arguing that they could be leaving millions of dollars on the table.
Sue Marticek, executive director of the Ocean County Long-Term Recovery Group, has been a big proponent of the claims review. Her group has run multiple clinics to assist homeowners, and in 90 percent of the cases she has seen, policyholders appear to be owed money, in some cases a significant amount, she said.
“This is not a gift. This is money that people are owed in a contract,” said Marticek. “They paid money for coverage, and they did not get what’s rightfully owed to them.”
Several concerns
Homeowners have hesitated to get involved for a variety of reasons, according to advocates. Some have worried that any additional insurance payments they receive could affect the funding they already got through the state’s primary rebuilding program, the Rehabilitation, Reconstruction, Elevation and Mitigation, or RREM, program.
The state program is intended to bridge the gap between the cost of repairing or rebuilding a home, and any funding – including insurance payouts – that a homeowner receives toward that work. So the fear was that if a homeowner got additional flood insurance money, then that state funding would have to be repaid.
If a policyholder in the rebuilding program receives additional flood insurance proceeds, either through the claims review or a legal settlement with FEMA, the state will not try to recoup that money, said a spokeswoman for the Department of Community Affairs, which administers the building program. The state has informed FEMA that it does not want to be included as a payee on any flood insurance check, and, if either FEMA or a homeowner sends the state a check with additional flood insurance money, it will be returned to the sender, said the spokeswoman, Lisa Ryan.
Another concern has been the impact on a property’s damage assessment. If a homeowner’s damages are considered more than half of what the home is assessed for, the house is classified as “substantially damaged” – a designation that requires homeowners to comply with FEMA flood zones and height requirements when they rebuild and, in many cases, to elevate their houses.
Homeowners worried that a successful appeal of their payout, then, would result in a reclassification of their home.
U.S. Sen. Bob Menendez, D-N.J., has said that he received assurance from the head of the National Flood Insurance Program, Roy Wright, that any supplemental payments received through the claims review process would not affect a property’s damage assessment.
Given the initial confusion, New Jersey’s congressional delegation called on FEMA Administrator Craig Fugate last month to extend the deadline to request a review by three months.
“Extending the deadline to Dec. 15 would give Sandy victims the time necessary to understand this complex process and decide whether or not it is in their best interest to participate,” the lawmakers wrote in a letter to Fugate.
The deadline remains unchanged, Lemaitre said in an interview last week. He added, “We’re going to remain laser-focused from now until then to make sure those who feel they were underpaid at least register with us.”
Lemaitre said FEMA has been working with media throughout the region, put out public service announcements in both Spanish and English, collaborated with lawmakers to get the word out and participated in town hall meetings with local officials. He noted that critics of the National Flood Insurance Program, including the group Stop FEMA Now, have also been encouraging people to sign up.
FEMA has tried to make the claims process easy to navigate, said Lemaitre. Policyholders will be assigned an adjuster who will stay with them throughout the process, rather than be bounced from person to person. The agency has also created a neutral third-party arbitration system for those who disagree with their claim decision, said Lemaitre.
The agency’s main goal, he said, is to restore trust in the insurance program. Officials want to remove any doubt, he said, in the minds of policyholders that they were paid less than they were due, he said.
“We owe it to our policyholders that they get every dollar they deserve under their policies,” said Lemaitre.
Email: lueddeke@northjersey.com