Homeowners who seek revisions to their superstorm Sandy insurance payouts need not fear the state will reclaim some of their grant money if the insurance review is successful.
The state Department of Community Affairs (DCA) reversed course over whether homeowners would be required to return grant money received through the state’s federally funded Rehabilitation, Reconstruction, Elevation and Mitigation (RREM) program if their insurance claims are revised upward through the National Flood Insurance Program (NFIP) review process.
Grants from the RREM program, which is funded by federal Community Development Block Grants (CDBG), are calculated in part based on the insurance money that was already received by an applicant. The higher the insurance payout, the lower the final grant will be. The Federal Emergency Management Agency (FEMA) announced plans in March to set up a review process for residents who believe flood insurance companies and the NFIP inadequately compensated them, but questions about how insurance revisions might impact grant awards loomed over the reviews.
“If a RREM homeowner … ultimately does get additional flood insurance proceeds, the DCA is not going to recapture any portion of those additional flood insurance proceeds,” Ryan said in an interview. She added that the state has instructed FEMA not to send DCA any checks related to insurance reviews and, if the state does receive any such check, it will return the money.
The change represents a 180-degree shift from the DCA’s stated policy in April, when Ryan told Greater Media Newspapers the state was “federally required to take action to recover the funds” if a homeowner’s insurance payout was revised upward after the grant was already received.
Officials at the U.S. Department of Housing and Urban Development (HUD) have said the states would be responsible for reclaiming the extra money, often referred to as a “duplication of benefits.” However, the state’s position is now that the federal government is required to recoup any funds awarded to an applicant that it feels are redundant and the state will not actively pursue the reclamation of that money.
If it is indeed FEMA’s responsibility to oversee the Stafford Act, homeowners might be in for some more good news. Rafael Lemaitre, director of public relations for FEMA, said the federal agency has also “made the commitment not to recoup” any duplication of benefits resulting from the insurance review process.
“There’s a willingness to be flexible on our part,” Lemaitre said. “Our goal is to restore trust in the National Flood Insurance Program.
“It’s really important for us that anyone who has doubts about their insurance claims has the opportunity to participate in the review.” According to Lemaitre, 142,000 claims were filed after superstorm Sandy, but only 10,000 homeowners have sought to engage in the review process. The federal agency made its first payments in relation to the flood insurance reviews earlier this month.
“It’s an important milestone for us,” Lemaitre said. “It shows that we’re serious about this.”
With the Sept.15 deadline to file for review approaching, FEMA is hoping to reassure hesitant homeowners that seeking revisions to their insurance payments won’t negatively impact them in the end.
However, officials at the U.S. Department of HUD see things a bit differently. Brian Sullivan, public affairs supervisor for HUD, said it is unclear if ignoring the duplication of benefits clause in the Stafford Act is legally possible. “They are asking us to waive the statutory requirement … which is technically illegal,” Sullivan said.
Further, the state grantees, in this case the DCA, have an obligation to abide by the Stafford Act from the moment the CDBG money is accepted, Sullivan added.
“I don’t know if they have the prerogative to decline a contractual obligation on their part, which is what they do when they sign the grant agreement,” he said.
In a letter dated August 10, members of New Jersey’s Congressional delegation, including U.S. Senators Robert Menendez (DN. J.) and Cory Booker (D-N.J.), as well as U.S. Reps. Frank Pallone (D-N.J.), Christopher Smith (R-N.J.) and Bonnie Watson Coleman (D-N.J.) urged HUD not to enforce the duplication of benefits requirements under the Stafford Act.
“Nearly three years after the storm struck, thousands of Sandy survivors still find themselves stuck in a battle with FEMA as they try to get the flood insurance proceeds they deserve,” the letter reads. “They did nothing wrong, nothing to deserve this treatment, but were nonetheless victimized by the unconscionable misconduct by certain insurance companies and engineering firms who defrauded them, all of which was enabled by FEMA’s inadequate control and oversight.
“After suffering through the largest natural disaster in our state’s history, only to then have to contend with a fundamentally broken insurance program, these families simply cannot deal with additional delays or burdens that a complex, bureaucratic duplication of benefits analysis would entail,” the letter continues. “Nearly three years after the storm, it is clear that identifying and collecting duplicative assistance would further slow the recovery process, would be costly and provide little return, and would not be in the best interests of Sandy victims or the federal government.”
A spokesperson for HUD said the situation is currently under review and provided an official statement from the federal department.
“HUD is mindful of the duplication of benefit issues presented in the settlement discussions on National Flood Insurance Program claims and is working closely with FEMA and the grantees distributing Community Development Block Grant disaster recovery in response to Hurricane Sandy,” the statement reads. “The Department is committed to a fair and rapid resolution of this unique and unfortunate situation.
According to the spokesperson, a response to the Congressional delegation has not yet been drafted, but would likely be sent later this month.
Eric Nedelkoff, executive director of the Monmouth County Long Term Recovery Group (MCLTRG), said the state made the right move in committing not to recoup the funds.
“I think it’s tremendous for these folks,” Nedelkoff said. “Many of these individuals have either depleted savings account or depleted 401(k)s, so if they get these dollars back it’s not like it’s going to a brand new car. It’s going to replace the dollars they’ve had to use because they didn’t receive the funds they were supposed to originally.”
Nedelkoff added he hopes HUD will follow suit and questioned whether the effort and cost involved with recouping the funds would even be worthwhile.
“Is it worth it? What’s the cost to go after that money and what’s the real advantage?” Nedelkoff said. “The homeowners have been through enough stress since the storm in 2012, so let’s let them get their lives back at this point.”