FEMA In Talks To Settle Sandy Flood Insurance Claims

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The Federal Emergency Management Agency has been holding talks with lawyers representing Superstorm Sandy victims who say insurance claims fraud cheated them out of tens of thousands of dollars.

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Some other news, Superstorm Sandy victims say widespread fraud cost them tens of thousands of dollars. The Federal Emergency Management Agency has been holding talks with their lawyers. And these settlement talks are expected to lead to arrests, as well as more money for thousands of homeowners and major reforms. From member station WSHU, Charles Lane reports.

CHARLES LANE, BYLINE: After Sandy, insurance companies sent engineers to verify damage. But many homeowners were shocked when those engineering reports came back saying Sandy didn't cause the damage. What dozens of homeowners say they learned later was that those reports were either written before the engineers even showed up or they were altered in order to deny claims and lowball insurance payouts. Insurance companies and engineering firms deny this. But FEMA is negotiating a sweeping settlement as if the allegations are true. Steve Mostyn is the lead lawyer for the homeowners already in litigation, but he says this future settlement will likely include many more Sandy victims.

STEVE MOSTYN: In regards to those who are not in litigation who FEMA wants to address any underpayments or fraud that may have occurred, they've expressed to me that that's their desire.

LANE: Citing ongoing talks, FEMA declined to comment. But it pointed to a letter indicating they want to resolve all questionable insurance claims. Sandy damaged some 500,000 homes and businesses in New York and New Jersey. It's unclear how many of those will receive extra payouts. But Mostyn says victims will not need a lawyer in order to get paid. Mostyn also expects the settlements to include arrests of people at engineering firms.

MOSTYN: If you alter a document, if you perform an inspection without an engineering license, those types of things are in the criminal statute.

LANE: New York's attorney general seized documents from one engineering firm on Wednesday. That firm has denied wrongdoing, but an engineer who worked at that firm testified that his reports were altered after he submitted them. In its letter to the court last week, FEMA wrote that it wants to repair the faith lost by flood policyholders. To do that, Mostyn says, FEMA is conducting a review of the entire program.

MOSTYN: So how do we stop this from happening again? Those conversations on reform are sprinkled in because we were explaining how the process went. And a lot of this information has not made it up to the top of FEMA and is now making it up to the top of FEMA.

LANE: Insurance companies within the federal flood program say FEMA has begun questioning litigation costs and overall trying to get a better handle on how insurance companies administer the program. For NPR News, I'm Charles Lane in New York. Transcript provided by NPR, Copyright NPR.