RENEE MONTAGNE, HOST:
And some good news for people living along the coast in New York and New Jersey. FEMA will reopen every flood claim related to Superstorm Sandy for policyholders who feel they were shortchanged. There could be tens of thousands cases reopened, and they could cost more than $4 billion. From member station WSHU, Charles Lane reports that while there are still unanswered questions, lawyers for homeowners are optimistic.
CHARLES LANE, BYLINE: The allegations were mind-boggling. First, a dozen, then hundreds, then thousands of people said Sandy completely destroyed their homes, but they got less than half the value of their policy, even though they paid all of their premiums to insurance companies who administered the National Flood Insurance Program. A global settlement was reached at a meeting yesterday. New Jersey Senator Bob Menendez, who was briefed on the details, says all claims will be reopened.
SENATOR BOB MENENDEZ: FEMA's going to go so far as to direct mail all of those individuals to know of the process and the opportunity. That's a very significant turnaround in this process.
LANE: The insurance companies and the engineering firms they contract deny all wrongdoing. It's unclear how many of the 144,000 people will who filed claims will want their cases reopened, but elected officials and lawyers pressured FEMA to make the process as accessible as possible.
MENENDEZ: They will be able to move forward in a non-litigate - meaning non-lawyer process - to be able to make their claims.
LANE: Currently the National Flood Insurance Program, or NFIP for short, is more than $23 billion in debt to the U.S. Treasury, but Menendez says FEMA has the money to pay for this global settlement.
MENENDEZ: The answer is yes, barring any national catastrophe in which there would be other claims against FEMA. But right now, they have the money to pursue on these claims.
LANE: But FEMA won't have to reconsider all of these claims while relying on the same insurance companies whose work is now in question. Steve Mostyn is the lead lawyer on behalf of the homeowners. He says it will take several weeks for him and FEMA to create a process for people to get what they deserve.
STEVE MOSTYN: What we don't want to have happen and FEMA doesn't want to have happen and I don't want to have happen is, you know, just this mad rush that people kind of run in and re-file claims 'cause that's going to cause an inability to kind of move. So there's got to be a uniform process set up with criteria of what is acceptable for additional information.
LANE: The 15,000 homeowners who received significant structural damage could get the full amount of their $250,000 policy, but Mostyn hopes an even greater number of people will benefit in a smaller way if FEMA agrees to reimburse for the higher cost of building materials in New York and New Jersey and also for the sales tax that wasn't included in most adjustment reports. Still not addressed is what reforms FEMA will undertake. FEMA says it will overhaul the flood program top to bottom. The head of the program, David Miller, resigned last week. Mostyn says over time, FEMA will eventually regain the trust of its policyholders.
MOSTYN: I don't believe that NFIP was organically the bad actor. I believe the insurance company was organically the bad actor, and I believe that NFIP went along.
LANE: An insurance industry trade group declined to comment, but a spokesman reiterated past statements that insurers are fiscal agents of the federal government. And while they have a duty to protect tax dollars, they have no financial incentive to uniformly keep payouts low. For NPR News, I'm Charles Lane in New York.
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