The National Flood Insurance Program could look a lot different if legislation introduced this week by two members of the House of Representatives secures congressional and White House approval.
The Flood Insurance Transparency and Accountability Act of 2015, sponsored by Democrat Kathleen Rice and Republican Dan Donovan, seeks to reform the program that was accused earlier this year of fraud and underpaying homeowners after Superstorm Sandy. The legislation requires more transparency about the claims process from the Federal Emergency Management Agency and closes loopholes commonly used to deny coverage.
Under the bill’s provisions, the insurance policyholder will receive the first and final copies of engineering reports used in claims adjudication – the same reports critics claimed were altered to downplay Sandy flood damage, resulting in lower or no insurance coverage.
The law also requires FEMA to conduct yearly reviews of insurance companies and all other private entities that participate in NFIP to ensure contractors are complying with its policies.
It additionally ensures that claims cannot be denied using an “earth movement” exclusion when earth movement is caused by a flooding event – a loophole many say has been exploited to avoid payouts.
As to the claims process itself, the bill amends the statute of limitations for filing a claim to two years from the flood event, instead of using different times for different policyholders. Clear rules and forms will be introduced, and a flood insurance advocate will be appointed as a point of contact for policyholders engaged in a claims denial appeal.
Finally, the bill requires the secretary of Homeland Security to report to Congress on how the department plans to prevent fraudulent contractors from future participation in NFIP. Similarly, FEMA has one year to report on how it plans to reform the flood insurance program.
The legislation comes after more than 2,000 homeowners in New York and New Jersey filed lawsuits accusing NFIP of underpaying on claims. Last year, a federal judge concluded that engineers falsified documents to deny some of the settlements, leading FEMA to review up to 142,0000 claims stemming from Superstorm Sandy.
“Too many legitimate claims were denied or underpaid because of fraudulent engineering reports, and too many people were left feeling cheated by a program that they trusted to be there when they needed it most,” Rice said in a statement announcing the bill. “This bipartisan legislation is a critical first step toward restoring that trust.”
