Altered Engineering Reports Lead FEMA to Overhaul Flood Insurance

May 2015

Altered Engineering Reports Lead FEMA to Overhaul Flood Insurance

Altered Hurricane Sandy engineering reports lead to increased oversight.

The Federal Emergency Management Agency is overhauling its national flood insurance program in the wake of litigation stemming from allegations of fraud and tampering with engineering inspection reports of homes damaged by Hurricane Sandy.

FEMA will be reviewing insurance claims of affected policyholders and associated engineering reports and expenses. On March 16, the agency requested that insurance companies that service policies with the flood insurance program to submit information on all claims with dates of loss from October 27 through November 6, 2012. There were 144,473 claims stemming from Hurricane Sandy damage, with 15,841 identified as claims with engineering expenses. Only 530 of these claims were paid at policy limits. Of the 15,311 claims not paid at policy limits, 54% were associated with three questionable firms.

The agency is overhauling the program to ensure that claims adjustment practices, which seek to prevent overpayments, are not incentivizing underpayments. Program reforms will also include changing the claims and appeals process, aligning management of litigation to prioritize the needs of the flood survivors, and improving customer service throughout the claims process.

Professional engineers and the importance of ethical practice were recently highlighted in a CBS 60 Minutes prime-time news story about the altered engineering reports. The story, which aired on March 1, gave national attention to the improper alteration of PE reports following Hurricane Sandy. CBS’s Sharyn Alfonsi interviewed Andrew Braum, P.E., who inspected more than 180 homes after the hurricane. He said at least 175 of those reports were changed after he completed them. Braum will be recognized at NSPE’s Annual Meeting in July for honoring his duty to the public as a PE and helping to bring this issue to light.

NSPE released a statement applauding the 60 Minutes story for bringing the public’s attention to the important health and safety role that ethical and licensed professional engineers play. The report highlighted the serious ramifications and consequences associated with the unlicensed practice of engineering.