Many people who complained a federal insurance program shortchanged them after Superstorm Sandy swamped their homes are getting some validation three years later in the form of cash.
A Federal Emergency Management Agency review launched in the spring has been finding that many policyholders in the National Flood Insurance Program should have gotten more money to fix their homes after the Oct. 29, 2012, storm.
The examination is far from complete, but so far FEMA has found that roughly three out of five of the 17,000 policyholders eligible for the review were entitled to more money.
The amount of the underpayments varies from a few hundred dollars to more than $100,000. On average, policyholders are being offered an additional $15,000 to make up for errors by the adjusters who initially handled their claims, said Roy Wright, FEMA’s deputy associate administrator for insurance.
Common mistakes include things like failing to factor in sales tax on materials and labor, failing to account for all the damage, or misapplying the formula used to calculate the cost of debris removal.
Among those have received checks so far include Dawn and Stanley Markoski, whose house in Long Beach Township, New Jersey, filled with 27 inches of water.
Originally, the insurance company handling the couple’s claim wrote them a check for $59,000. Stanley Markoski, a former police chief in Beach Haven, said he suspected right away he had been shortchanged.
“Everybody around us was getting more money than us,” he said. One neighbor with similar damage had gotten $113,000. Another received $90,000.
Markoski pinched pennies by doing a lot of work himself. The couple took out a $40,000 Small Business Administration disaster loan and got a $47,000 federally funded rebuilding grant. It still wasn’t enough to complete repairs.
Last winter, Markoski said he had to repeatedly thaw exposed pipes beneath his now-elevated house because he hadn’t been able to finish enclosing the bottom of the building.
But this month, FEMA said the family was entitled to an additional $56,000 because their original insurance adjuster hadn’t factored in sales tax or the cost of removing asbestos from the damaged house. The revised adjustment also overrode a determination that some foundation damage had been pre-existing.
“We won’t be totally back to where we were financially before the storm, but it will be a lot better than it is now,” Markoski said.
The National Flood Insurance Program was created to protect homeowners in flood zones who are largely unable to buy insurance in the private sector because of the high risk of damage to their property. FEMA oversees the program, sets rates and designs payment rules, but the policies are sold and serviced by private-sector insurance companies.
It paid out more than $8.1 billion to about 144,000 policyholders hit by the superstorm, which was born when Hurricane Sandy merged with two other weather systems and caused catastrophic coastline flooding in New York and New Jersey. It was blamed for more than 180 deaths in the U.S.
Those initial payments saved many homeowners from financial ruin, but there were also widespread complaints about sloppy work by some of the multitudes of adjusters and structural engineers who were rushed into the disaster zone to evaluate the damage.
FEMA has been working since the winter to settle more than 2,000 lawsuits brought by Sandy victims who challenged their insurance payouts. As of the end of September, the agency had paid more than $72 million to resolve those cases.
Initially, the insurers that service policies had taken a hard line against the people who sued, but that changed last year after some homeowners and their lawyers uncovered evidence that at least two engineering companies hired to assess damage had a practice of rewriting reports turned in by field inspectors in ways that often reduced payouts.
That ultimately prompted FEMA to invite all Sandy victims to apply to have their case re-examined.
While complaints about the program are easy to find, Wright noted that the great majority of policyholders didn’t sue, and didn’t take up FEMA’s offer to review their payment.
“I do have confidence in where this program is headed,” he said.
Others say much more reform is needed.
August Matteis, a Washington, D.C., lawyer whose firm is representing about 1,200 policyholders going through the FEMA review, said he believed many more homeowners also deserved more money, but didn’t bother to apply by a mid-October deadline because they were fed up with the process.
“The 90 percent or so who opted not to do it, I think, were just exhausted,” he said.
He blamed much of the problem of underpayment on adjusters, some with relatively poor training and oversight, being pressured to rush through too many homes in too short a time.
Some homeowners also may not have applied because they were afraid FEMA would conclude that they received too much money, and ask for a refund.
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