Bob and Karen Valentin

Bob and Karen Valentin survey the damage Isabel did to their home more than six months ago. They and their two children are living in the garage after the house was condemned. (Sun photo by Karl Merton Ferron / April 6, 2004)

When Tropical Storm Isabel sent nearly 3 feet of water through Bob Valentin's bungalow at the mouth of the Bird River, he figured his insurance agency would send someone out to survey the damage and write him a check. Just as if he had been in a car crash.

But he was wrong.

Although he bought the insurance from a private company for his eastern Baltimore County home, it actually comes from the federal government. The adjuster who came to assess his claim worked for a subcontractor. The person who approved the claim worked for another company, and when he tried to appeal his settlement, he ended up talking to someone who works for yet another firm.

For all that, he says, he's still about $120,000 short of what it will cost to rebuild, and he and his wife and two children are still living in their garage.

"The paperwork just goes from this one to that one to that one," he said. "It's absolutely ridiculous."

What started out 36 years ago as a government program to provide insurance for flood-prone homes has evolved into a convoluted system of public agencies and private corporations seeking to administer policies that are like no other in the insurance industry.

Still struggling with their claims six months after Isabel, hundreds of policyholders like Valentin have yet to return to their homes. But instead of giving up, they have packed town hall meetings, complained to local, state and federal officials, and banded together to keep their cause in the public eye. Amid the continuing outcry, the federal insurance program plans to re-evaluate all 24,000 Isabel claims up and down the East Coast.

Nothing less than an overhaul of the system is under way.

"We just have to fix it," said Anthony S. Lowe, head of the National Flood Insurance Program.

Why the outcry?

Those involved in the Isabel saga offer theories why this storm has led to such an outcry and a move to reform. Some victims in North Carolina who have experienced floods before said the NFIP's response was much less effective this time. Others, particularly adjusters, say that the only difference was that Isabel hit communities near Washington in an election year.

The NFIP was born in 1968 after large-scale flooding of the Mississippi River. When private flood insurance carriers dropped out of the business, saying they were going broke, Congress stepped in.

The idea was that the federal government would offer the insurance in exchange for local governments' adopting strict regulations to mitigate the impact of flooding, such as requiring new buildings to be elevated above the flood plain.

Two changes in the 1980s contributed to the complexity that has been evident since Isabel. In 1983, the program authorized private insurance companies to sell and service the policies, on the theory that using the existing network of insurance agents and adjusters in private industry would help get more people to buy the policies.

It worked. The number of policyholders has more than doubled since the 1980s, according to NFIP documents. The program now has more than 4 million policyholders in nearly 20,000 communities nationwide.

At about the same time, the program stopped relying on tax dollars. Although the Treasury would back the program in the case of a massive disaster, all claims and administrative costs since then have been paid through premiums.

Robert Jackson, who owns a flood adjusting company in Florida, said that's when the policy started becoming more and more limited and, as a result, complicated.

The NFIP saved money by limiting claims for damaged basements, decks, walkways, indoor swimming pools and more.

Officials have issued more than 40 policy interpretations during the past 10 years alone -- and not all of them are incorporated into the policy itself, a fact that adjusters say makes it difficult to properly handle claims. The limitations can also come as a shock to people, like many of those flooded by Isabel in Maryland, who haven't ever had to rely on the program before.