Auditors from a federal inspector general's office have begun an investigation of the National Flood Insurance Program's handling of claims from Tropical Storm Isabel, according to flood victims and Sen. Barbara A. Mikulski's office.
Two flood victims who have been leaders in the effort to secure increased settlements, Bernice Myer and Steve Kanstoroom, said they were interviewed this week by federal auditors. Mikulski spokeswoman Amy E. Hagovsky said yesterday that the auditors plan to complete their interviews by the end of the month, but she said she was not given other details of the investigation.
"Concerns about claims adjusting were brought to my attention by Marylanders after the disaster of Hurricane Isabel. They raise serious questions about potential violations of state and federal law that must be investigated," Mikulski said yesterday in a written statement. "I am pleased that the Inspector General of the Department of Homeland Security has agreed to conduct a full review."
Mikulski had previously sent a letter to the inspector general's office to request an investigation, writing that she had heard allegations from constituents that they were offered money to stop public complaints about the settlements, that adjusters might have received incentives to keep claims low and that settlement offers were in many cases based "not on how much damage [victims] incurred but based on how much complaining they had done."
The letter, dated April 8, was made available to The Sun this week. In a written response early last month, Clark Kent Ervin, the Department of Homeland Security's inspector general - who oversees the NFIP - said his staff would review the allegations.
The inspector general's office, according to its mission statement, is "an independent and objective inspection, audit, and investigative body ... to prevent and detect fraud, abuse, mismanagement, and waste."
A spokeswoman for Ervin did not return a phone call yesterday. Spokesmen for the NFIP and its chief subcontractor, Computer Sciences Corp., said yesterday that they had no comment about the investigation.
Isabel struck the East Coast in September, generating more than $400 million in claims to the federal flood insurance program. But hundreds of property owners in Maryland, Virginia and North Carolina complained that their flood insurance settlements were far too low, often tens of thousands of dollars less than the cost to repair their homes.
Flood victims complained of unequal treatment by adjusters and of pressure to settle their claims for less than they believe they are owed.
Efforts to uncover problems in the program appear to be intensifying. Maryland Insurance Commissioner Alfred W. Redmer Jr. said he is nearly ready to release a report on the NFIP based on information his staff has gathered through contacts in the insurance industry.
In May, Baltimore County Executive James T. Smith Jr. requested that the U.S. attorney's in Baltimore investigate the performance of Computer Sciences Corp.
A representative from the U.S. attorney's office said that as a matter of policy she could not confirm whether an investigation was under way.
And a flood insurance reform bill, largely authored by Sen. Paul S. Sarbanes, requires the General Accounting Office, Congress' investigatory agency, to report on the program within the year.
At the Senate hearing for the bill, Sarbanes and Mikulski demanded that the NFIP review all Isabel claims. The agency has spent the last few months in a effort to re-examine more than 1,800 claims.
NFIP spokesman James McIntyre said in a written statement that 41 percent of the people whose claims have been re-evaluated were due more money, on average about $8,200 each. The total additional settlements amount to nearly $5 million so far, he wrote.
But the review of claims has drawn criticism from flood victims, too.
Myer said some victims have accepted less than they think they deserve out of frustration, while others have not asked for reviews at all because they don't believe it will do any good.
Dan Montgomery, an adjuster who is representing flood victims in Virginia in their attempts to increase their settlements, said he has shared his concerns about the review with top NFIP officials.
He said he has toured his clients' homes with NFIP adjusters and pointed out damages that were not included in clients' initial settlements. But when he received copies of the adjusters' reports to their supervisors, "it's as if the damage never existed," Montgomery said.
McIntyre declined to comment on the complaints about the review.