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FEMA Faces Potential Record Breaking Legal Fees As a Result of Hurricane Sandy

It’s been 22 months and the residents of New York and New Jersey are still feeling the effects of Hurricane Sandy, specifically the policyholders whose homes have yet to be repaired. About 400 residents in New York and 450 in New Jersey are suing the government for giving insufficient insurance payments from a plan that offers a maximum of $250,000 in coverage. This issue has led FEMA, the Federal Emergency Management Agency, to face a record high in legal fees.

Many believe the defense lawyers are dragging out these cases as a strategic move to lower insurance payments, which ironically goes against their main purpose of helping citizens. “‘The NFIP, [National Flood Insurance Program], was designed to efficiently help people in disasters…It seems like it’s reached a critical point now where the tactics of the defense has to stop or the program’s not going to work like it was intended to,’” said Tracey Rannals Bryan, a representative of the homeowners. Bryan claims the defense attorneys are willing to do anything to prolong the case. For example they’re allegedly willing to issue countless subpoenas and do as many inspections as possible. As well, Bryan stated the attorneys are “prolonging the process by requesting interviews with construction contractors in order to verify that their costs matched the estimates provided by homeowners.”

Not only is delaying the case racking up legal fees, potentially draining the U.S. Treasury between 25 and 50 million dollars, but such a tactic may be fraudulent. Craig Fugate, FEMA’s administrator said, “…the tactics seem to run counter to the program’s intent, if not the law, by aggressively opposing homeowners’ claims rather than negotiating a swift settlement.” As FEMA reaches an amount of legal fees that is likely to exceed all the defense costs combined from the past 20 years for all flood events, a settlement would certainly save FEMA millions. With an effort to control such costs, David Miller, an associate administrator at FEMA sent a memo to the insurance companies who employed these defense attorneys. Miller emphasizes how the lawyers should be seeking the most efficient and inexpensive solutions. Unless a solution is reached soon, both parties are in for many more months of costly litigation.

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