Sandy-affected homeowners and storm-victim advocates in New Jersey say they’re generally pleased with the news that FEMA has agreed to reopen and review the flood insurance claims of any of the 144,000 Sandy victims who feel they were unfairly compensated.
The decision was announced earlier this week after a series of meetings between FEMA Administrator Craig Fugate and lawmakers from both sides of the Hudson. It follows growing allegations that some insurance adjusters falsified their damage assessments to wrongfully deny or underpay claims.
According to a joint press release from Sens. Robert Menendez, Cory Booker (both D-NJ), Kirsten Gillibrand, and Charles Schumer (both D-NY) — who helped hammer out the agreement — FEMA has acknowledged widespread problems in the National Flood Insurance Program’s handling of Sandy flood-insurance claims and committed to taking a number of steps to fix them. The details have yet to be ironed out, however, so most people interviewed for this story say they’re taking a wait-and-see approach.
The pressure on the Federal Emergency Management Agency began to mount a number of months ago after a Long Island couple whose home had been knocked off its foundation during Sandy received an engineering report from their flood insurance company declaring it not substantially damaged. This despite the fact that their city had condemned the house, saying it was beyond repair.
The couple disputed that determination, so their insurance company sent back the same adjuster to do another inspection, but when he arrived, he told them that the engineering report they had received was not the same report he had filed. In other words, someone within the company had apparently changed it to downplay the extent of the damage and underpay their claim.
The case ended up in the courts, and it began snowballing, with growing suspicions that this sort of practice may have been widespread, affecting potentially tens of thousands of storm victims throughout the region. Last November, a magistrate judge in New York ordered all insurance companies in his district involved in Sandy-related litigation to turn over thousands of draft engineering reports to homeowners who may have been similarly affected. The following month, the FEMA administrator expanded that order to flood insurers in all Sandy-affected areas — including New Jersey.
The agency also announced a series of reforms in December, including appointing a Flood Insurance Advocate to help policyholders navigate the claims and appeals process.
Meanwhile, the New York State attorney general launched a criminal probe, and lawmakers continue to pressure New Jersey’s attorney general to do the same.
Earlier this month, the federal government — which oversees the private flood-insurance companies in the NFIP — began settling hundreds of the 1,500 outstanding lawsuits brought by homeowners against their insurers. But there were still tens of thousands of homeowners who had effectively lost their rights to appeal earlier in the Sandy recovery when they decided not to engage in litigation and instead settled for a lesser amount.
This week’s announcement opens the floodgates — so to speak — for any homeowners who feel they were wrongly denied or underpaid on their claims to receive another review.
Lorraine Heucke’s story is typical. Her home in Beach Haven West had a damaged foundation after Sandy; she said she was even able to see daylight through a crack in her dining room wall. But the engineering report her insurance company gave her claimed that the damage was preexisting, which she found hard to believe, especially since she said the adjuster who came never even went into her crawlspace to do a thorough inspection.
After months of calls and emails, Heucke eventually settled with her insurance company for just $20,000 — three or four times less than what it would take to repair her damage — since she felt like she didn’t have any other choice.
She ended up taking out loans to pay for the rest of her repairs.
Informed yesterday that she might now have a chance to have her claim looked at again, she was pleasantly surprised.
“Well that’s good news,” she said, “because I believe I was seriously underpaid!”
“This should have really never happened in the first place,” she added. “It was mind-boggling to be told that my house was uninhabitable prior to Hurricane Sandy. And I’m not the only one.”
She’s not getting her hopes up yet, however.
“You can talk the talk, but you’ve got to walk the walk,” she said, recalling the widely reported problems with FEMA’s handling of the Katrina recovery along the Gulf Coast.
“So far they don’t have a good track record.”
Michael Mazzuca’s home in Beach Haven West was also badly damaged during Sandy, and his insurance company also paid him much less than he felt he was owed, since they argued that flooding wasn’t the cause of his damage.
“I’m interested to see what’s going to happen. That’s for sure,” he said. “I’d certainly like to throw my hat in the ring to see if I can recover any remaining funds that are available. I’m realistically an optimist, but I’ve been through this exercise a lot, so you kind of get beat up and worn out.”
To David Charles, who’s worked as an adjuster for close to four decades, FEMA’s announcement represents a major breakthrough.
“It’s huge. It’s gigantic!” he said, “but the job’s not done yet. The proof will be in the pudding. When they say that they’re reopening these cases, what does that really mean? It’s the fox guarding the henhouse if you let the same adjusters, the same firms oversee the reopening that turned [the policyholders] down to start with. Are they going to bring a third party in that had nothing to do with the original documentation? If they don’t it’s just lip service.”
Beyond offering to reopen these cases, FEMA has promised to punish any engineering firm or flood insurance company that it discovers committed fraud, including possibly expelling them from the National Flood Insurance Program.
It will also create a Sandy task force next month to evaluate what went wrong and how things can be improved. Among the changes being discussed are more oversight of these insurance companies, mandating peer review of engineering reports, and instituting harsher penalties if companies underpay or wrongfully deny claims.