FEMA’s (Under)Adjustment Of Flood Insurance Claims: Lessons Learned From Sandy

Blogger:  Lee M. Epstein

Many business owners and most homeowners purchase flood insurance  through the National Flood Insurance Program (“NFIP”). Unfortunately, most homeowners affected by Hurricane’s Harvey and Irma and the associated flooding won’t have insurance. For example, only 17% of those suffering flood damage from Harvey were insured. The numbers in Florida are better but nevertheless well-under 50% of those suffering a flood loss will be insured.

Even those with flood insurance may still be up the proverbial creek without a paddle. The Federal Emergency Management Agency (“FEMA”), the agency that manages the NFIP, publishes statistics that reveal systematic underpayments of flood insurance claims.

According to FEMA, in the aftermath of Superstorm Sandy, nearly 144,000 policyholders filed flood insurance claims. When numerous problems, including fraud, were uncovered in connection with the adjustment of those claims, FEMA offered those policyholders an opportunity to have their claims re-reviewed. Over 19,000 Sandy claimants took advantage of that opportunity. To date, FEMA has closed 16,744 of those claims. Approximately 83.7% of those closed claims have resulted in additional payments totaling $227,060,819, or approximately $14,000 for each underpaid Sandy claimant. Thus, FEMA openly acknowledges that it vastly underpaid policyholders. Based on that large sample, if every one of the 144,000 Sandy claimants had sought a re-review, the underpayments would have exceeded $2,000,000,000. That is extraordinary.

But there is more. If a Sandy claimant was not satisfied with the FEMA re-review, they were entitled to a Third-Party Neutral Review by, for example, a retired judge. Approximately 2,277 Sandy claimants have requested a Third-Party Neutral Review. To date, 1,087 Third-Party Neutral Reviews have been completed. Total additional payments of $19,668,316 have been made based on those Third-Party Neutral Reviews or approximately $18,000 per claim. Thus, those Sandy claimants who pursued both a re-review and a Third-Party Neutral Review of their claim received, on average, an additional $32,000 over the amount FEMA originally offered to pay on their claim.

And there is still more. Sandy claimants that pursued Third-Party Neutral Reviews with the assistance of competent legal counsel and other professionals fared even better.

Those currently suffering flood losses throughout the country can learn several valuable lessons from the experience after Sandy.

First, flood insurance policyholders should anticipate and be prepared for FEMA to initially undervalue their claim.

Second, flood insurance policyholders should not hesitate in asking FEMA to reevaluate its initial of adjustment of flood insurance claims.

Third, in order to enhance the recovery on any flood insurance claim, policyholders should seek the advice and counsel of competent professionals.

Fourth and, perhaps, most importantly, don’t give up and don’t give in.

For more information, please contact Lee Epstein, Chair of the Insurance Counseling and Recovery Department at Flaster Greenberg PC. 

The Long And Winding Road

Blogger:  Lee M. Epstein

As many commentators have noted, Hurricane Harvey made landfall nearly twelve years to the day of Hurricane Katrina in 2005. Back then, I had just completed a trial in a small Parish next door to New Orleans. Fortunately, my flight home took off safely on Friday afternoon before Katrina hit the following Monday. I personally was spared the devastation suffered by so many in New Orleans then and in Houston now. But so many that I befriended lost so much.

Over the succeeding years, I’ve had many opportunities to revisit New Orleans. I’ve watched as the people of that great city have recovered, reclaimed and rebuilt. It was slow and it was hard but it happened.

With Harvey now in the rear view mirror, and Irma rumbling through the Caribbean, more heartache is on the way. We’ve been down this road. It’s long and winding but we’ve made it through before and will do so again.

For more information, please contact Lee Epstein, Chair of the Insurance Counseling and Recovery Department at Flaster Greenberg PC. 

Stuff Happens: A Reflection on the Tenth Anniversary of Hurricane Katrina

I first began litigating insurance coverage cases along the Gulf Coast, in 2003 in a small Parish (St. Bernard) neighboring New Orleans. From the outset, whenever a major storm approached, locals would remind me that the area was under sea level and formed in the shape of a bowl. They cautioned that if the big one ever hit, the city and surrounding area would fill up and flood.

For the next two years, disasters were averted. Whenever a major storm rolled up the Gulf it always diverted course and bypassed New Orleans. That good fortune caused some to declare that they would never evacuate.

That all changed ten years ago when Hurricane Katrina made landfall on Monday, August 29, 2005. I had just completed an important insurance coverage trial the previous Friday. All of our trial exhibits, and those of our insurance company adversary, remained locked in the first floor of the St. Bernard courtroom. Little did we know that soon they would all be washed away along with so much else.

I remember being at the airport awaiting our flight home a couple of days before Katrina hit. We were eating beignets and watching coverage of the Hurricane on a big screen TV. There was no panic; no one spoke of evacuation. Everyone assumed that the city would be spared just as it had so many times before. We were wrong.

So much was lost; so many lives, so many homes, and so many businesses. My co-counsel lost his home, office building and vacation property. Fortunately, he and his family had the resources to make a last minute decision to evacuate. We were all reminded this week of the suffering sustained by those lacking the ability to leave.

We learned a lot from Hurricane Katrina and other catastrophes both before and after. Mostly, we learned that stuff happens. When it does, and if we are lucky enough to survive, we can and will recover – – my co-counsel rebuilt his homes and office and, working cooperatively with the insurance company’s counsel we were even able to replicate our lost trial exhibits. There is no storm that can’t be weathered with the support of our neighbors, government and yes, even our insurers.

Questions? Let me know.