FOLLOWING CBS NEWS INVESTIGATION OF FRAUD IN NATIONAL FLOOD INSURANCE PROGRAM, GILLIBRAND AND CASSIDY DECRY “SHOCKING LACK OF OVERSIGHT,” DEMAND ANSWERS FROM FEMA

Wednesday, May 23, 2018

Contact: Whitney Brennan (Gillibrand), 202-224-3873

Ty Bofferding (Cassidy), 202-224-5824

FOLLOWING CBS NEWS INVESTIGATION OF FRAUD IN NATIONAL FLOOD INSURANCE PROGRAM, GILLIBRAND AND CASSIDY DECRY "SHOCKING LACK OF OVERSIGHT," DEMAND ANSWERS FROM FEMA

CBS Reports Louisiana Homeowners Affected by 2016 Flooding are Victims of Same Schemes and Underpayments that New York and New Jersey Families Faced After Superstorm Sandy

Washington, DC - U.S. Senator Kirsten Gillibrand (D-NY) and U.S. Senator Bill Cassidy (R-LA), along with U.S. Senate Minority Leader Charles E. Schumer (D-NY) and U.S. Senators Robert Menendez (D-NJ), Cory A. Booker (D-NJ), and John Kennedy (R-LA), are urging the Federal Emergency Management Agency (FEMA) to immediately crack down on flood insurance fraud in the National Flood Insurance Program (NFIP). The Senators' action follows an alarming CBS News investigation on the "broken" National Flood Insurance Program that continues to shortchange homeowners nearly six years after Superstorm Sandy and two years after devastating flooding in Louisiana. CBS News reported that after flooding in Louisiana in 2016, "much of the money that should have helped people rebuild...instead goes to the very people fighting against them." This report comes nearly six years after the same "broken system" systematically shortchanged New York and New Jersey families who were victims of Superstorm Sandy.

"We are alarmed by news reports that conduct similar to that which led to the creation of the Sandy Claims Review continues to occur, and the victims this time are residents of Louisiana who experienced severe flooding in the summer of 2016. If these reports are true, this represents a shocking lack of oversight by FEMA and calls into question the efficacy of the reforms FEMA has made internally to date," states the Senators' letter. "Policyholders pay their flood insurance premiums expecting that when a flood occurs, they will be treated fairly and receive the payments they are owed under their policy in a timely manner in order to aid their recovery. Any attempt to intentionally deny, delay or underpay claims through extensive and costly litigation, or profit off this federal program at the expense of policyholders and taxpayers is unacceptable and must end."

Senator Gillibrand passionately urged for immediate reforms to FEMA and the NFIP after Superstorm Sandy victims faced an extensive and burdensome flood insurance claims process. Companies underpaid potentially thousands of claims. Along with Senator Shelley Moore Capito (R-WV), Gillibrand and Cassidy introduced bipartisan legislation last year to create urgently needed reforms as part of the reauthorization of the NFIP that is currently extended and set to expire on July 31, 2018. For a full summary of the bill, go to:.

The text of the Senators' letter is available at: https://www.gillibrand.senate.gov/download/letter-to-brock-long-re-cbs-news-nfip-report and below:

The Honorable Brock Long

Administrator

Federal Emergency Management Agency

500 C Street, SW

Washington, D.C. 20024

Dear Administrator Long:

We are writing to express our deep concern about the treatment of National Flood Insurance Program (NFIP) policyholders as recently reported by CBS News[1]. Policyholders pay their flood insurance premiums expecting that when a flood occurs, they will be treated fairly and receive the payments they are owed under their policy in a timely manner in order to aid their recovery. Any attempt to intentionally deny, delay or underpay claims through extensive and costly litigation, or profit off this federal program at the expense of policyholders and taxpayers is unacceptable and must end.

Unfortunately, these problems are not new. Following Superstorm Sandy, a number of bad actors were found to have deliberately falsified engineering reports used to evaluate NFIP claims in an effort to deny or underpay those claims[2]. A federal magistrate judge[3] in the Eastern District of New York described this as "reprehensible gamesmanship," and ultimately an engineering company and one of its former employees pleaded guilty to fraudulent activity. Also uncovered was a scheme by attorneys representing insurance companies participating in the Federal Emergency Management Agency's (FEMA) "Write Your Own" program. The lawyers would use costly litigation tactics and delays in order to charge exorbitant fees[4].

Subsequent to the discovery of this fraud and gamesmanship, FEMA acknowledged that policyholders' claims were underpaid and created the Sandy Claims Review to identify underpayments and provide additional money to the policyholders who are owed. The Sandy Claims Review process, which began in 2015 and ended this year, resulted in more than $258 million in additional payments to more than 15,000 NFIP policyholders. Additionally, FEMA announced that it was making a number of changes to its claims process and oversight of the Write Your Own program and litigation expenses.

Given this history, we are alarmed by news reports that conduct similar to that which led to the creation of the Sandy Claims Review continues to occur, and the victims this time are residents of Louisiana who experienced severe flooding in the summer of 2016. According to the reports[5], some private attorneys representing Write Your Own companies publicly bragged about receiving exorbitant profits by dragging out litigation filed by policyholders who were just trying to recover what they were entitled too. As if this was not bad enough, the reports also indicate that, even years later, at least one of these individuals is also involved in ongoing litigation disputing claims related to 2016 flooding in Louisiana. If these reports are true, this represents a shocking lack of oversight by FEMA and calls into question the efficacy of the reforms FEMA has made internally to date.

Congress has a duty to exercise robust oversight of these programs and their affiliates. To further our understanding of the changes FEMA made and the current procedures in place to protect policyholders from unscrupulous and fraudulent behavior by Write Your Own participants and contractors, we request answers to the following questions:

1.Are any companies or individuals that participated in falsifying or misrepresenting the findings of engineering reports or any document used to evaluate a claim still allowed to participate in any capacity in the Write Your Own program?

2.What concrete steps has FEMA taken to ensure it is providing proper oversight of litigation expenses incurred by attorneys representing Write Your Own companies in cases involving disputed claims?

3.How much money has FEMA paid, either directly or indirectly, to law firms representing Write Your Own companies since October 2012? Please provide a breakdown of the total amounts provided to the top 5 law firms that received the most money.

4.Does FEMA have the authority under current law and/or regulations to prohibit a law firm or individual attorney from serving as counsel to Write Your Own companies in cases for which FEMA reimburses the companies for litigation expenses?

a.If yes, what is the standard FEMA would use to make a decision to bar a law firm or attorney from participating in such cases?

b.Has FEMA taken any action to bar any law firms or attorneys from participating in NFIP cases?

5.What is the process FEMA will use to evaluate whether payments for NFIP claims related to the 2016 floods in Louisiana and any other major flooding events since Superstorm Sandy have been unreasonably delayed, and whether policyholders have received payments that are less than what they are entitled to under their policy based on the damage they sustained?

Thank you for your attention to these matters. We look forward to receiving your response to these questions.

Sincerely,

[1] "Federal program meant to help flood victims spends millions fighting claims." CBS Evening News report with Jeff Glor. April 30, 2018. https://www.cbsnews.com/news/national-flood-insurance-program-meant-to-help-victims-spends-millions-fighting-claims/

[2] "Guilty Pleas to Falsifying Reports on Hurricane Sandy Damage." New York Times report by David W. Chen. January 10, 2017. https://www.nytimes.com/2017/01/10/nyregion/hurricane-sandy-damage-geb-hirise-engineering.html

[3] "Underwater & Underpaid: Hurricane Sandy controversies renewed in LA." WWL report by WWL Staff. February 22, 2017. https://www.wwltv.com/article/news/investigations/underwater-underpaid-hurricane-sandy-controversies-renewed-in-la/412815773

[4] "Hurricane Sandy Victims Say Damage Reports Were Altered." New York Times report by David W. Chen. February 16, 2018. https://www.nytimes.com/2015/02/17/nyregion/hurricane-sandy-victims-say-damage-reports-were-altered.html

[5] "Federal program meant to help flood victims spends millions fighting claims." CBS Evening News report with Jeff Glor. April 30, 2018. https://www.cbsnews.com/news/national-flood-insurance-program-meant-to-help-victims-spends-millions-fighting-claims/