Senator: FEMA Will Re-examine More Cases, Reform NFIP Claims Process

March 5, 2015

A top Federal Emergency Management Agency (FEMA) official has committed to taking aggressive steps to make sure victims of Superstorm Sandy get “every penny to which they’re entitled” from their national flood insurance claims, said U.S. Senator Robert Menendez (D-NJ).

Menendez said in a statement that he spoke directly with FEMA’s deputy associate administrator for insurance, Brad Kieserman, Wednesday night.

“”In what was, in my opinion, a very frank and productive conversation, Mr. Kieserman made a personal commitment to me that FEMA will take aggressive steps to make sure victims of Superstorm Sandy get every penny to which they’re entitled,” said Menendez.

That means creating a process to not just review cases in litigation, but all cases in New Jersey where there were questionable practices, said Menendez. The New Jersey senator said Kieserman also committed to “fundamentally reform the claims process so these egregious bad practices are never again repeated.”

Menendez also said Kieserman assured that he would “take steps to ban any engineering firm or insurance company that acted in bad faith or committed outright fraud” from the National Flood Insurance Program (NFIP). “I’m encouraged by these positive steps, but will adhere to the principle of ‘trust, but verify’ as I continue to oversee the reforms which will also be guided by the Task Force I have established,” the senator said.

“It’s been well over two years since Sandy struck, but sadly the pain and suffering lingers for families struggling to rebuild their lives. The fight for justice and fairness for Sandy victims is far from over. I will hold FEMA’s feet to the fire until every single Sandy survivor gets what they are entitled to and critical reforms are enacted to ensure this never happens again to disaster victims.”

Menendez said Kieserman made the following commitments to him during their call Wednesday:

  • Create a process that allows people who did not file lawsuits, but “were lowballed due to fraud or bad practices, to have their claim objectively reviewed, so filing a lawsuit is not a prerequisite for justice”;
  • Collect and make available to every policyholder all iterations of engineering reports;
  • Prohibit any resolution that includes criminal indemnity for any engineering firms or WYOs (Write Your Own insurers) found to commit fraud;
  • Work to sanction and expel from the NFIP any engineering firm or WYO that was found to commit fraud; and
  • Work with the Menendez Task Force on short and long term reforms including, the practice of peer-reviewed engineering reports, oversight of the WYOs, claims appeals process and balancing the penalty structure for over and underpayments.

Menendez said that during a July 30, 2014 Senate Banking Subcommittee hearing, he had questioned FEMA Administrator W. Craig Fugate about FEMA’s penalty structure, which Menendez said penalized WYOs for making overpayments far more than for making underpayments.

As a result of these hearings, Menendez said, FEMA agreed in December to significant reforms, including: conducting its own internal investigation; constituting a task force led by Menendez to realign the unbalanced penalty structure; reopening 270 policyholder appeals; and providing policyholders in litigation with all engineering report permutations.

FEMA’s Kieserman said on CBS’s “60 Minutes” program last Sunday that he has seen evidence of fraudulent engineering reports that may have been used to deny flood claims by Sandy victims. He said he has referred to the inspector general the evidence he’s seen of the reports.

Kieserman said last month FEMA is working to settle lawsuits by hundreds of Sandy victims who challenged denials or alleged underpayments of flood insurance claims. It was reported this week that settlements have already been reached in some 160 cases.

Private insurers participating in FEMA’s National Flood Insurance Program have come under scrutiny in recent months over allegations they denied or rejected damage claims based on allegedly falsified reports.

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