FEMA Found to Have Overpaid Florida Residents by $177M

The federal agency that provides grants to states following a major catastrophe is under fire for providing Florida residents an estimated $177 million in funds that should have been covered by private insurers.

A recent report by the Department of Homeland Security Office of Inspector General found that the overpayment in claims was due to the Federal Emergency Management Agency’s inadequate claims review process.

At issue is FEMA’s role in helping Florida residents rebuild following the 2004-2005 hurricane season, when seven major hurricanes and two tropical storms made landfall in the state.

All told, the seven hurricanes resulted in FEMA paying out $4.4 billion in emergency assistance to Florida residents.

FEMA is often the first source of public assistance for residents following a disaster. But by law, FEMA is required to review a residents’ private insurance to prevent them from receiving duplicate claims payments.

Inspector General Joseph Roth, however, said that FEMA failed to follow procedure, resulting in the agency paying on claims that should have been covered by private insurers.

“FEMA officials must assure that aid recipients’ private insurers bear their share of disaster losses before they approve the use of federal funds,” said Roth in a statement.

The inspector general’s report focused on 78 claims filed by nine different applicants that equaled $66 million in FEMA grants. That amount, however, was offset by payments from private insurers of nearly $15 million, resulting in FEMA paying out a total of $51 million.

The inspector general, however, said that upon closer inspection that amount was overstated and should have been less.

For example, out of the 78 claims, 38 claimants said that no private insurance was available or that their insurance company did not cover the damages. Of those 38 claims, FEMA insurance specialists could only justify four that claimed they had no insurance. Of the remaining 34 claims, specialists were found to either incorrectly arrive at a decision about the applicants’ private coverage or could not support their decision.

As a result, out of the 34 claims, FEMA specialists incorrectly determined that 23 claims had no private insurance for a total claims amount of $8.6 million. Further, the specialists could not justify their decisions on 11 claims, which represented $2.5 million.

Taken as a whole, the 78 claims were a subset of the 2,088 claims, which were filed by 154 applicants and approved by FEMA in the 2004-2005 hurricane season.

Out of 154 applicants for assistance, FEMA approved $177 million on those 2,088 claims. But auditors said that there is little chance that $177 million is correct.

“Because our audit shows that these projects are at high risk, we conclude that FEMA has little assurance that its insurance specialists properly reduced the $177 million in FEMA-approved damages,” stated auditors.

The inspector general found that FEMA insurance specialists routinely waived a requirement that those receiving assistance maintain coverage for future catastrophic damage.

Florida’s Recovery Office, however, failed to detect the problem and make sure that those receiving grants have the necessary insurance.

The inspector general estimated the failure of FEMA and the Florida Recovery Office to enforce the insurance requirement could result in FEMA having to pay out up to $1 billion in future assistance because many residents do not have the kind of coverage needed to fund catastrophic losses.

“It is unconscionable that those officials would also leave the taxpayers liable for future losses by defying policy and ignoring the requirement that recipients obtain insurance coverage for future storms,” stated Roth.

The inspector general’s report is just the latest in a round of audits that uncovered problems with FEMA’s claims review process.

Previously, the inspector general in two separate audits found that the City of Vero Beach collected more disaster funding than it should have. The city received $10 million in FEMA money for losses attributed to Hurricane Jeanne and $9.6 million due to losses stemming from Hurricane Frances.

The inspector general, however, found that FEMA’s assistance included $762,000 in funding for Jeanne and $2 million for Frances, amounts that should have been paid by the city’s private insurer.

Additionally, FEMA paid out $24.7 million in disaster relief to the City of Coral Springs following Hurricane Wilma, which included $1.5 million that the city’s private insurer should have covered.

FEMA said it is withholding making any comment on the report until it is finalized and available for review. Once the final report is issued, FEMA will have up to 90 days to make a written response.

Topics Florida Catastrophe Carriers Claims Hurricane

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