Hoeven Presses FEMA Head On Alleged Fraud in Flood Insurance Estimates for Sandy Victims

Agency to Begin Reviewing Closed Claims in May

WASHINGTON – At a recent hearing of the U.S. Senate Appropriations Committee on Homeland Security, Senator John Hoeven pressed Federal Emergency Management Agency (FEMA) Administrator Craig Fugate to outline steps he is taking to address charges that thousands of Hurricane Sandy homeowners were underpaid on their claims because of apparent wide-spread fraud and falsified engineering reports. Hoeven posed the questions while taking Fugate’s testimony on FEMA’s $11.2 billion budget request for Fiscal Year 2016.

“It is a very serious charge that engineering companies and others representing the agency falsified estimates and shortchanged homeowners on compensation they were entitled to,” Hoeven said. “Now we need to find out exactly what happened, hold those responsible accountable and make sure homeowners are treated fairly.”

Hurricane Sandy resulted in a record number of National Flood Insurance Program (NFIP) claims. Of the 144,473 claims from Hurricane Sandy, 15,841 include some sort of engineering services. Due to the fraudulent reports, many insurance claims were paid out significantly below the true costs of the incurred damage. Further, the issues with these claims were not revealed during FEMA’s appeals process. The personnel of the Federal Insurance and Mitigation Administration (FIMA), a part of FEMA, either did not recognize the signs or ignored them.

Many of the homeowners impacted by the fraudulent engineering reports are now filing suit against the engineering firms and FEMA, and there is currently an Inspector General’s investigation underway to find out what happened. Meanwhile, Fugate said his agency is committed to resolving these cases, reviewing policyholder claims and examining potential reforms to FEMA’s claims and appeals processes to prevent such incidents from occurring again.

Fugate testified that to address their concerns, FEMA will establish a process by which all victims of Sandy who filed claims under the NFIP can have their claims reviewed. He said the process will be detailed at the beginning of May; FEMA staff says they will start reviewing the claims during the first or second week of the month. FEMA will be sending letters to all 144,473 policyholders who filed claims as a result of damage caused by Sandy, starting with prioritizing the 15,311 who used engineering services but did not get the full pay out.