Homeowners whose superstorm Sandy flood insurance payouts are slated for federal review could find that they must return some of the recovery funds awarded through other programs.
The Federal Emergency Management Agency (FEMA) last month announced plans to set up a review process for residents who believe they were inadequately compensated by flood insurance companies and the National Flood Insurance Program.
In some cases, adjustments to insurance payouts could require some residents to return money received through other programs funded by federal grants, according to Brian Sullivan, public affairs supervisor for the U.S. Department of Housing and Urban Development (HUD).
“Accepting additional compensation from their flood insurance policies might negatively impact [a resident’s] compensation in these other federally funded programs,” Sullivan said.
He added that not all the insurance payouts reviewed would result in homeowners having to return monies received through programs funded by Community Development Block Grants (CDBG). “It’s really a case-by-case basis,” he added.
Eric Nedelkoff, executive director of the Monmouth County Long Term Recovery Group, said he believes the FEMA insurance review process — created in response to allegations of fraudulent damage assessments — is a great opportunity for residents affected by superstorm Sandy.
However, he added that informing residents about the potential impact that accepting additional insurance funds might have on their grant awards from state programs is imperative.
“My biggest concern is that residents need the education around any extra dollars that they may receive,” Nedelkoff said.
“We still need to find out the process of how [the review] is going to occur, and I believe there needs to be massive education on what the impact is, not just, ‘Here, apply to have your case reviewed so you can get more dollars.’ ”
According to Lisa Ryan, spokeswoman for the N.J. Department of Community Affairs (DCA), the federal government stipulates that CDBG disaster recovery funds be used only to “fill the gaps” between funds a homeowner has received from insurance or other sources and the actual cost of rebuilding a home.
“We recognize that grant recipients of the [state Reconstruction, Rehabilitation, Elevation and Mitigation (RREM)] Program may receive third-party benefits … after they sign their RREM grant agreement,” Ryan said.
“In those instances, each RREM-assisted homeowner agreed to notify the program and detail the amount they received and, if required, return any funds in excess of their needs.”
Determining whether a duplication actually occurred requires a rigorous, caseby case process of reviewing a homeowner’s history of compensation from all sources, according to Sullivan.
“This requires document review and understanding what has been paid out in terms of compensation and further analysis as to whether there is any duplication at all,” Sullivan said.
The grantee — in this case, the state — would be required to manage the process of recouping the funds, according to Sullivan. “It’s incumbent upon the grantees to make sure homeowners understand that federal law prohibits the duplication of benefits,” Sullivan said. “The long and short of it is that the federal taxpayers don’t want to pay for things twice.”
According to Ryan, if insurance adjustments result in a duplication of benefits, then the state would be required to act.
“If it’s determined that RREM funds already disbursed exceed the recalculated grant award based on additional benefits received, we are federally required to take action to recover the funds,” Ryan said.
In such a case, the DCA would review claims of hardship for affected residents and “grant reasonable accommodations when warranted,” Ryan added.
Nedelkoff said for residents still awaiting a RREM grant award or residents who did not take part in the program, the FEMA insurance claim review process could potentially make a big difference in their recovery efforts.
“For the people in the RREM program, we need to take it cautiously,” Nedelkoff said. “But all of this information needs to be decided upon before this process occurs.”