[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]
REVIEW AND OVERSIGHT OF THE
NATIONAL FLOOD INSURANCE PROGRAM
=======================================================================
HEARING
BEFORE THE
SUBCOMMITTEE ON
HOUSING AND COMMUNITY OPPORTUNITY
OF THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED NINTH CONGRESS
FIRST SESSION
__________
APRIL 14, 2005
__________
Printed for the use of the Committee on Financial Services
Serial No. 109-17
U.S. GOVERNMENT PRINTING OFFICE
25-513 WASHINGTON : 2005
_____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
HOUSE COMMITTEE ON FINANCIAL SERVICES
MICHAEL G. OXLEY, Ohio, Chairman
JAMES A. LEACH, Iowa BARNEY FRANK, Massachusetts
RICHARD H. BAKER, Louisiana PAUL E. KANJORSKI, Pennsylvania
DEBORAH PRYCE, Ohio MAXINE WATERS, California
SPENCER BACHUS, Alabama CAROLYN B. MALONEY, New York
MICHAEL N. CASTLE, Delaware LUIS V. GUTIERREZ, Illinois
PETER T. KING, New York NYDIA M. VELAZQUEZ, New York
EDWARD R. ROYCE, California MELVIN L. WATT, North Carolina
FRANK D. LUCAS, Oklahoma GARY L. ACKERMAN, New York
ROBERT W. NEY, Ohio DARLENE HOOLEY, Oregon
SUE W. KELLY, New York, Vice Chair JULIA CARSON, Indiana
RON PAUL, Texas BRAD SHERMAN, California
PAUL E. GILLMOR, Ohio GREGORY W. MEEKS, New York
JIM RYUN, Kansas BARBARA LEE, California
STEVEN C. LaTOURETTE, Ohio DENNIS MOORE, Kansas
DONALD A. MANZULLO, Illinois MICHAEL E. CAPUANO, Massachusetts
WALTER B. JONES, Jr., North HAROLD E. FORD, Jr., Tennessee
Carolina RUBEN HINOJOSA, Texas
JUDY BIGGERT, Illinois JOSEPH CROWLEY, New York
CHRISTOPHER SHAYS, Connecticut WM. LACY CLAY, Missouri
VITO FOSSELLA, New York STEVE ISRAEL, New York
GARY G. MILLER, California CAROLYN McCARTHY, New York
PATRICK J. TIBERI, Ohio JOE BACA, California
MARK R. KENNEDY, Minnesota JIM MATHESON, Utah
TOM FEENEY, Florida STEPHEN F. LYNCH, Massachusetts
JEB HENSARLING, Texas BRAD MILLER, North Carolina
SCOTT GARRETT, New Jersey DAVID SCOTT, Georgia
GINNY BROWN-WAITE, Florida ARTUR DAVIS, Alabama
J. GRESHAM BARRETT, South Carolina AL GREEN, Texas
KATHERINE HARRIS, Florida EMANUEL CLEAVER, Missouri
RICK RENZI, Arizona MELISSA L. BEAN, Illinois
JIM GERLACH, Pennsylvania DEBBIE WASSERMAN SCHULTZ, Florida
STEVAN PEARCE, New Mexico GWEN MOORE, Wisconsin,
RANDY NEUGEBAUER, Texas
TOM PRICE, Georgia BERNARD SANDERS, Vermont
MICHAEL G. FITZPATRICK,
Pennsylvania
GEOFF DAVIS, Kentucky
PATRICK T. McHENRY, North Carolina
Robert U. Foster, III, Staff Director
Subcommittee on Housing and Community Opportunity
ROBERT W. NEY, Ohio, Chairman
GARY G. MILLER, California, Vice MAXINE WATERS, California
Chairman NYDIA M. VELAZQUEZ, New York
RICHARD H. BAKER, Louisiana JULIA CARSON, Indiana
PETER T. KING, New York BARBARA LEE, California
WALTER B. JONES, Jr., North MICHAEL E. CAPUANO, Massachusetts
Carolina BERNARD SANDERS, Vermont
CHRISTOPHER SHAYS, Connecticut STEPHEN F. LYNCH, Massachusetts
PATRICK J. TIBERI, Ohio BRAD MILLER, North Carolina
GINNY BROWN-WAITE, Florida DAVID SCOTT, Georgia
KATHERINE HARRIS, Florida ARTUR DAVIS, Alabama
RICK RENZI, Arizona EMANUEL CLEAVER, Missouri
STEVAN, PEARCE, New Mexico AL GREEN, Texas
RANDY NEUGEBAUER, Texas BARNEY FRANK, Massachusetts
MICHAEL G. FITZPATRICK,
Pennsylvania
GEOFF DAVIS, Kentucky
MICHAEL G. OXLEY, Ohio
C O N T E N T S
----------
Page
Hearing held on:
April 14, 2005............................................... 1
Appendix:
April 14, 2005............................................... 55
WITNESSES
Thursday, April 14, 2005
Beam, Beth, Ellwood City, Pennsylvania........................... 30
Bearekman, Larry, Poquoson, Virginia............................. 32
Berginnis, Chad, CFM, Association of State Floodplain Managers,
Inc., Chair, State of Ohio..................................... 21
Griffin, Donald L., Vice President, Personal Lines for the
Property Casualty Insurers Association of America.............. 28
Jenkins, William O. Jr., Director, Homeland Security and Justice
Issues, United States Government Accountability Office......... 24
Kanstoroom, Steven J., Oxford, Maryland.......................... 34
Maurstad, David I., Acting Director and Federal Insurance
Administrator, Mitigation Division, Federal Emergency
Management Agency, Emergency Preparedness and Response
Directorate, Department of Homeland Security................... 11
Redmer, Alfred W. Jr., Maryland Insurance Commissioner, Maryland
Insurance Administration....................................... 26
Stelyn, Georgette J., Seaford, Virginia.......................... 36
APPENDIX
Prepared statements:
Oxley, Hon. Michael G........................................ 56
Davis, Hon. Jo Ann........................................... 58
Hoyer, Hon. Steny H.......................................... 59
Kelly, Hon. Sue W............................................ 61
Ney, Hon. Robert W........................................... 62
Beam, Beth................................................... 64
Bearekman, Larry............................................. 69
Berginnis, Chad.............................................. 114
Griffin, Donald L............................................ 125
Jenkins, William O. Jr....................................... 131
Kanstoroom, Steven J......................................... 150
Maurstad, David I............................................ 174
Redmer, Alfred W. Jr......................................... 181
Stelyn, Georgette J.......................................... 244
Additional Material Submitted for the Record
Davis, Hon. Jo Ann:
``Flood Insurance Offers Peace of Mind'', press release,
FEMA, October 16, 2003..................................... 255
Maurstad, David I.:
Response to written questions from Hon. Jo Ann Davis......... 256
Response to written questions from Hon. Michael G.
Fitzpatrick................................................ 261
Response to written questions from Hon. C.A. Dutch
Ruppersberger.............................................. 266
Response to written questions from Hon. Earl Blumenauer...... 269
Bartlett, Griffin and Vermilye, Inc., prepared statement......... 282
Craftsman Book Company, prepared statement....................... 287
Independent Insurance Agents & Brokers of America, prepared
statement...................................................... 295
REVIEW AND OVERSIGHT OF THE
NATIONAL FLOOD INSURANCE PROGRAM
----------
Thursday, April 14, 2005
U.S. House of Representatives,
Subcommittee on Housing and Community Opportunity,
Committee on Financial Services,
Washington, D.C.
The subcommittee met, pursuant to notice, at 11:08 a.m., in
Room 2128, Rayburn Office Building, Hon. Robert W. Ney
[chairman of the subcommittee] presiding.
Present: Representatives Ney, Waters, Frank, Scott,
Fitzpatrick, Ruppersberger, Hart, Neugebauer, Cleaver, and
Green.
Also Present: Representatives Blumenauer, Davis, and Kelly.
Chairman Ney. I am going to bring the subcommittee to
order.
Today, the Subcommittee on Housing and Community
Opportunity meets to conduct review and oversight of the
National Flood Insurance Program. Specifically, the hearing
will focus on the administrative problems facing the National
Flood Insurance Program and the steps currently being taken by
FEMA and the private insurance industry to resolve those
problems that are out there. Also, it is my hope to discuss the
current funding difficulties affecting the implementation of
the Flood Insurance Reform Act.
Last year, this committee spent considerable time and
effort on legislation to reauthorize and reform the National
Flood Insurance Program, and on June 30, 2004, President Bush
signed into law the Flood Insurance Reform Act. This
legislation re-authorizes the National Flood Insurance Program
through September of 2008. It includes provisions to strengthen
the operational and financial aspects of the National Flood
Insurance Program by providing States and local communities
with an additional 40 million a year for flood mitigation
efforts for repeatedly flooded properties and allows for
increases of flood insurance premiums on properties that refuse
government mitigation offers.
In addition to repetitive loss and re-authorization, the
legislation requires FEMA and insurance companies to provide
better information to flood insurance policyholders to ensure
they are fully aware of the details of their policies so they
will know the rights that they have. During the deliberations
on the re-authorization legislation, however, many concerns
were raised regarding the administration of the program and
these concerns were brought to the attention of FEMA.
Policyholders often did not have a clear understanding of their
policy. Insurance agents often did not understand what they
were selling or how to process claims correctly. Many
policyholders did not know of or understand the appeals process
and many questioned the adequacy of payments and the adjustment
of the system.
Of course, you can imagine the trauma people go through. We
had three floods, major flood incidents, in my district. People
are going through a lot of trauma, and there are members here
today that are concerned about what is going on with people,
and to add problems to it, the confusion I think further,
obviously, made things so difficult for so many people.
The lack of coordination between private insurers, NFIP,
and FEMA and inadequate training were listed as possible
sources for some of the administrative problems affecting the
program.
The goal of today's hearing is to focus on which
administrative problems face the program and what steps are
currently being taken by FEMA and the private insurance
industry to resolve those problems. Floods have been and
continue to be one of the most destructive and costly hazards
to our Nation. During this past year, as I stated earlier,
there have been three floods in the district I represent. All
three of these incidents qualified for Federal relief granted
by the President. Recent flooding in January of this year
resulted in historic levels in several local dams, and in
Tuscarawas County, three communities that I represent were
forced to evacuate and displaced 7,000 people. I was able to
witness this devastation firsthand when I toured those
properties with people that were affected in many of the
counties.
The National Flood Insurance Program is a very valuable
tool in addressing the losses incurred throughout this country
due to floods and ensures that businesses and families have
access to affordable flood insurance that would not be
available on the open market.
And I would want to get approval for members who are not on
this committee to sit here today.
Without objection, we have Mrs. Kelly and Mrs. Davis and
Mr. Blumenauer. Is there anybody else that is not regular? Mr.
Frank is always an officio member and our ranking member. And
they have concerns, so without objection, they will be
participating members of this today.
The gentleman from Massachusetts.
[The prepared statement of Hon. Robert W. Ney can be found
on page 62 in the appendix.]
Mr. Frank. Thank you, Mr. Chairman. This is a very
important hearing. Some issues that we deal with are very
controversial. They are weighted with ideology, and they
attract a lot of attention. They are important, but there are
also some important things that we do that are more technical
in nature, but less ideological. One of the main
accomplishments for which this committee in particular obtained
credit in the last Congress was the substantial amendment to
the Flood Insurance Program. It was thoroughly bipartisan. The
gentleman from Oregon, not a member of our committee who is
with us now, Mr. Blumenauer, and the gentleman from Nebraska,
formally a member of this committee, a very distinguished one,
Mr. Bereuter, took a very important lead. We did a very good
job, and I note that the director and administrator said that
what we did was give a vote of confidence in the program. That
is partially true, but it was, frankly, not a vote of
confidence in the existing program, and one of the things that
the chairman of the full committee, my colleague from Ohio, and
I had made clear, people will remember, is that we were
prepared to block an extension of the program as it then
existed.
There were serious concerns from groups that don't always
work together, but major taxpayer groups, groups concerned with
inefficient government spending, environmental groups, united
to be critical of the old program, and it was a condition made
very clear by the chairman of the full committee and myself,
speaking on behalf of the great majority of members of this
committee that re-authorizing the program was conditional on
our getting these kinds of improvements, and that is why I and
some others are disappointed that we have not seen nearly as
much progress that we had hoped for this much after the bill
passed last June in getting those improvements implemented,
both financially and otherwise. We are not talking about huge
amounts of money, but the lack of money, the lack of attention
to the pilot program, the fact that we don't have the rules and
regulations. I worry that this will jeopardize not just the
amendments of last year, but the whole program, because it
should be very clear had there not been the effort by the
gentleman from Nebraska, the gentleman from Oregon, and others
which the chairman and I were able to support, this program
would not have had the support to get through the House of
Representatives. This program would have ended.
I believe that what we did last year was not just to
improve the program, but to rescue it and to greatly improve
it, and if that is not fully implemented, we are going to be
back in that sort of crisis. So I hope that we are going to
hear today and that when I read the testimony of the acting
director, I don't to my disappointment see a lot about, the
commitment to these newer approaches, and they are essential.
So I hope that we will come out of today with a commitment
that we are going to see this both funded to the extent
possible, and we are talking about millions of dollars, not
even tens of millions in some cases with the pilot program, and
that we will get the rules and regulations passed. Let me say
if there is anything in the legislation that causes problems--I
haven't heard that there is--but if anybody feels charged with
the responsibility for this, the legislation needs to be
clarified or whatever, we are here to do that. In fact,
previously I think we have already acted and reacted, and I
hope the other body will soon to make clear that the
compensation would be tax exempt. Obviously you don't always
legislate perfectly. So as things come forward, we are ready to
straighten them out.
But this really is essential to the program. A broad
coalition of groups put this package together last year. I
think it deserves a more energetic effort at implementation
than it has been getting, and I hope that that is what we will
see today.
Chairman Ney. I thank the gentleman for his comments.
The gentlelady from New York.
Mrs. Kelly. Thank you, Mr. Chairman. I appreciate the
opportunity to sit with the subcommittee today to represent the
needs of my constituents in Deer Park and Port Jervis, New
York. They are coping with an aftermath of massive flooding
which has damaged homes, businesses, and public property in our
area. FEMA and the local officials have been assessing the
extensive damage together over the past week, and about an hour
ago, Governor Pataki of New York requested Federal disaster aid
for Orange County and 13 other counties in New York.
We are counting on FEMA to review and to approve this
Federal disaster request immediately. Hundreds of people have
been displaced from their homes. Small businesses and
livelihoods have been shut down indefinitely. Time is so
critical in this rebuilding process, and there is no time to
waste. The damage I viewed in Deer Park, Port Jervis, Warwick,
and Washingtonville is among the worst I have ever seen from a
natural disaster in the Hudson River Valley. Washed out roads
in towns and villages throughout Orange County are further
compounding public and individual damage totals. The flooding
in the Black Dirt Agricultural Section is likely to cause
serious problems for our local farmers during their upcoming
growing season and has already done so.
Nevertheless, local residents and local leaders have very
impressively shared a valiant and very positive spirit toward
recovery and the selfless efforts of our emergency volunteers,
and they have been nothing short of remarkable.
I will be back there again frequently in the days ahead as
well as another in other areas like Warwick and Washingtonville
to help in any way that I can. I have been working with local
officials and the FEMA, the Federal Emergency Management
Agency, to facilitate prompt and effective Federal response in
order to provide the assistance my constituents need in the
most immediate manner possible.
FEMA needs to have public meetings throughout our region in
the days ahead to help our affected residents and get their
questions answered and the Federal support that they are
relying on. A vital part of the recovery from this disaster and
earlier floods along the Delaware River is the National Flood
Insurance Program. The NFIP has been vital in relieving the
costs to my constituents and making coverage available to those
who rebound and who want to rebuild their homes and their small
businesses, but we have got to work together to ensure that
this program is as well managed as possible and that my
constituents and the program administrators, adjusters, and the
sales people have the best information about their opinions and
their resources from my people.
I am really hopeful that this hearing will help ensure that
the people in Deer Park, Port Jervis, and throughout Orange
County who have suffered extreme damage to their homes and
their businesses and their farms will receive the best possible
assistance from the NFIP and have the means to rebuild, and I
look forward to the testimony today, but I also look forward to
your working with us immediately, consistently, and
straightforwardly with the people of Orange County.
Thank you, Mr. Chairman. I yield back the balance of my
time.
Chairman Ney. I want to thank the gentlelady also for
prompting us to have this hearing and supporting this hearing.
The gentleman from Georgia, Mr. Scott.
Mr. Scott. Thank you very much, Mr. Chairman.
I too want to congratulate you on having this important
hearing. Our Nation has suffered drastically from flooding and
other natural disasters. In my home State of Georgia, we have
had numerous examples of that same tragedy with the overflowing
of our Flint River down in southwest Georgia. Farms have been
affected. Small businesses have been affected, even in our
metro area with constant flooding in the Nassie Creek area.
I think it is very important that we are holding this
important hearing today regarding the future of the National
Flood Insurance Program. I think it is very important that the
committee continue to monitor implementation of the program
which Congress reauthorized that last year. I support the
National Flood Insurance Program because I believe that it
provides an important service to people who have had property
hit by natural disaster.
With the budget battles that are currently being waged in
the house, we need to find the best ways to target scarce
Federal dollars, including flood assistance; however, Congress
must also ensure that consumers are protected and given
adequate compensation for their losses.
I certainly want to thank the distinguished panel of
witnesses today before our committee, and I certainly look
forward to the testimony. I do believe the central question
that we are faced with today is this, that in view of the fact
that this Administration did not authorize funding for the
flood insurance program in the Fiscal Year 2006 budget, the
question is, where do we go from here? How do we maintain the
program? How has the Administration's budget decisions affected
the effectiveness of the program? And what will the
Appropriations Committee do? And what level of funding will
this program receive?
I think the American people are very anxious to get some
answers to these questions, and so am I. Mr. Chairman, I look
forward to the testimony.
[The prepared statement of Hon. Sue W. Kelly can be found
on page 61 in the appendix.]
Chairman Ney. Thank you.
The gentleman from Pennsylvania, Mr. Fitzpatrick.
Mr. Fitzpatrick. Thank you, Chairman Ney. I have seen
firsthand the devastation that flooding can create. I was up to
my knees in water helping the residents of Pennsylvania's
Eighth District when we thought we had experienced the worst
flood possible last September after Hurricane Ivan hit;
however, flooding the weekend before last was even worse. It
forced more than 6,000 of my constituents to evacuate. The
district suffered damage in the tens of millions of dollars.
More than 500 houses sustained major damage. Another 500
sustained minor damage, and 100 businesses felt the affects of
the worst flooding in the region over half a century.
As a former Bucks County commissioner, now as a Member of
Congress, I have heard from my constituents about the
administrative problems plaguing the National Flood Insurance
Program like the claim processing and inconsistencies and
interpretations about the standard used to determine claim
amounts.
I want to know what the Federal Emergency Management Agency
is doing to educate policyholders on their coverage under the
policy to see that insurance agents clearly articulate the
terms and conditions of the policy at the time of sale and know
how to process claims correctly and inform policyholders of the
appeals process. Mr. Chairman, we must ensure that we are
protecting families that have to endure the destruction of a
flood. The families in the Eighth Congressional District in
Pennsylvania will continue to be discouraged until we resolve
these problems which are facing the program.
I yield back my time.
Chairman Ney. I want to thank the gentleman.
Mr. Blumenauer.
Mr. Blumenauer. Thank you, Mr. Chairman, for your courtesy
in permitting me to join with you again. I appreciate your
leadership personally and that of this subcommittee in
fashioning important reform for this program.
Chairman Ney. Thank you.
Mr. Blumenauer. One is sympathetic to the problems that we
have already heard you and other members reference in terms of
the devastation that flooding can have. It is the most common
and most damaging natural disaster that is afflicted upon our
citizens. That is why we were able to work with you in crafting
some specific provisions to make the tragic stories that have
been witnessed by these members less frequent. In particular,
dealing with repetitive flood loss, something that we had
focused on, understanding that for the last 25 years, 38
percent of all flood insurance claims have dealt with one
percent of the properties, and I salute you for designating
that there would be an additional $70 million set aside that
potentially in the pilot project could have helped 7,500
severely repetitive loss properties from being put in harm's
way.
When we think of 10,000 properties in this country that
have suffered repetitive loss four times or more or have
received payments in excess of the value of the property, the
benefit for accelerating our efforts is clear, and I have
appreciated over the course of the last 6 years we have been
working with FEMA with our administrator and his predecessors
to try and craft a way to make it work better, but I too am
concerned, as Mr. Frank, about the pace with which we are
moving forward, in part, because this was crafted in
consultation with the committee and with people from FEMA for
the last two administrations.
We thought that we had targeted this, but as yet we haven't
yet promulgated the regulations to implement the pilot project,
nor have we seen funding requested for the full authorized
level.
Now, it may have been understandable because we passed it
late last year after the budget had been submitted, but this
year, it is troubling. It is troubling that there is only $8
million, the potential new money that has been authorized. As
Mr. Frank says, yesterday we were talking about trillions and
hundreds of billions of dollars. To be talking about less than
a hundred billion dollars sounds like small change around here,
but for the people in harm's way, some of whom I suspect are
here today, being able to adequately fund the program and help
move them out of harm's way can make a huge difference in terms
of their lives and livelihood, and every person that we move
out of harm's way is less pressure on millions of people to not
pay higher premiums and it means that we will save millions of
dollars every month in the future from future losses.
So Mr. Chairman, I do appreciate your courtesy, the
leadership of this subcommittee, of Ranking Member Frank and
Chairman Oxley in providing a united front to help improve this
vital program for our constituents, and I look forward to an
interesting and productive hearing today. Thank you.
Chairman Ney. I want to thank the gentleman and I
appreciate his comments.
The gentlelady, Ms. Davis.
Mrs. Davis. Thank you, Mr. Chairman, and I want to first
thank you for holding this, what I think to be a very important
hearing, and also thank your staff. They have been absolutely
wonderful in helping us put this all together, and thank you
for the hospitality of inviting me and allowing me to sit in on
it.
In September of 2003, Hurricane Isabel struck the eastern
United States, doing so much damage it was actually one of the
worst disasters in Virginia's history. There was damage
exceeding $1.5 billion. Strong winds knocked out power lines.
Trees were downed everywhere, and storm surges flooded many
homes. The First District of Virginia was devastated in many of
its areas.
Today, two of my constituents, Larry Bearekman and Ginger
Stelyn both had their homes flooded, and they are here. You
will hear their stories. I want to thank them both for coming
today to testify and to share their difficult times that they
have had. Both faced tremendous strain and difficulty
attempting to rebuild their homes and their lives, and
unfortunately they are not alone. Many residents from my
district and across the country continue to face challenges in
rebuilding their lives from many of these disasters.
Many of these challenges, in my opinion, are because of the
National Flood Insurance Program. My office received many, many
calls from constituents that they felt they were unfairly
treated, that the process was inadequate and that they were
just totally misled, and I felt it my responsibility as their
representative to do all that I can to help them.
I have concerns with the administration and oversight
policies of the National Flood Insurance Program. Thousands
trust and rely on their flood insurance to restore their
property that was destroyed by flood waters, but many, many,
have been disappointed to find that their claims adjustment
process has, as I said, been unfair and inadequate.
Today, I hope that we will be able to get to the bottom of
it, that we will be able to find out why my constituents and
many folks' here constituents felt they were told one thing and
then another thing was done. I just hope that the committee can
get to the bottom of it and come up with regulations, find out
what the real truth of the matter is, and make sure that our
National Flood Insurance Program is being run adequately and
correctly and operating as we in Congress intended.
I want to thank you again, Mr. Chairman, for holding this
important hearing and for allowing me to join you today.
Chairman Ney. I thank the gentlelady.
The gentleman from Maryland, Mr. Ruppersberger.
Mr. Ruppersberger. Chairman Ney, thank you very much for
allowing me to participate in this hearing, also Ranking Member
Frank. This is a very important hearing, as we all know,
concerning the National Flood Insurance Program and the
problems that we face concerning this program.
Before I get started, I would like to recognize the
Maryland Insurance Commissioner, Al Redmer, who is going to be
on one of the panels. I also would like to recognize over 50-
plus victims from my district of Hurricane Isabel and who have
come down to participate in this hearing and also Steven
Kanstoroom from Ashton, Maryland, who I believe is one of the
panelists. I know what you have gone through, and we are going
to try to help you out.
As we discuss these proposed policy changes concerning the
National Flood Insurance Program, I hope that we will all
remember that ultimately what we are talking about is families.
In my State of Maryland, we still have families that have not
received a settlement and some that are, sadly, still in FEMA
trailer housing, and this is wrong.
We are here today to talk about the National Flood
Insurance Program. In September 2003, Hurricane Isabel tore
through the east coast and devastated Maryland's Second
Congressional District. This storm did well over $200 million
in damage and devastated the lives of thousands of Marylanders.
In my district, the Bowleys Quarters Fire Department became
Hurricane Central. During the storm, these firefighters pulled
people from homes that were quickly overcome by storm waters.
The Bowleys Quarters Fire Department distributed rations,
supplies, and helped provide hot meals, and I want to thank
them for their involvement as the other fire departments that
were involved throughout the Second Congressional District.
Thousands of Marylanders banded together to help each other
rebuild and get back on their feet, and they should all be
applauded for their actions. After Hurricane Isabel, there was
a lot of misinformation. There was a lot of confusion and a lot
of education that had to occur. Thousands of Marylanders were
shocked to learn that flood insurance coverage they purchased
was inadequate and would barely restore any of the life that
they had built. It was truly heartbreaking to hear some of
these stories.
The most frustrating part from my perspective was that
thousands of Marylanders were run around in circles to only
come into dead ends. It was very frustrating for them. Some
people had their claims processed while others had claims
denied or their settlements were remarkably low. We had to keep
fighting to get these people the money they deserved.
The biggest problem was that many of my constituents dealt
with untrained agents and adjusters that provided at times
inaccurate information and data. The biggest problem was that
pricing guidelines literally varied from one agent to another,
from one adjustor to another. For example, an adjustor would
tell someone that dry wall would be repaired at $10 per sheet,
only to get a settlement for the dry wall which was $3 per
sheet. The obvious affect is the victim does not get as much
money to rebuild, which is frustrating and confusing and wrong,
and they couldn't afford it.
This confusion coupled with losing a home and all of one's
belongings created an angry and frustrated community. We cannot
allow this to happen again. We have a chance here to make
strides in changing the program to make it workable in the
future.
What is the solution? We need plain English description of
a homeowner's flood insurance coverage with what is and is not
covered. We need to have timely training for adjusters and
agents and not crisis training. We need to have the insurance
companies at the NFIP work together to develop standards and
procedures so that everyone is on the same page, and, finally,
I hope that we will all get a better understanding of where
there are deficiencies in the program. We need to understand
this so that we can fix it and not have the problems that have
arisen in the past.
I look forward to hearing from the witnesses so that we
have a complete understanding of the situation and find out
what we need to do to fix the problem for our constituents.
Thank you, Mr. Chairman.
Chairman Ney. I thank the gentleman.
The gentlelady from Pennsylvania, Ms. Hart.
Ms. Hart. Thank you, Mr. Chairman. I especially appreciate
the opportunity to be here today as a former member of your
subcommittee and somebody I think like the other Members who
have joined us today that have unfortunately similar situations
to report.
I am not sure how many of us have actually seen the
commercial on television for the National Flood Insurance
Program. Some of you may not even notice that is what it was
for, but there was a nice pretty frame house that you see and
then you see all these bad things happen to the house except
one thing, a flood, and at the end of the commercial, they say
your homeowner's insurance covers all these things except one
thing, and then the waters come and they surround the home, and
on the screen comes a little logo for the NFIP, and it says if
you are in a flood zone, you need to get national flood
insurance because it will help you if you have this incident
happen.
Well, unfortunately, I think for folks who are going to
testify here today, that ad is a pretty cruel joke. You know,
we have made this program, I think the Members of Congress,
believing that it would provide assistance to people who face
that very situation of the waters and flooding. Everybody knows
that when you get a mortgage and you are in a flood zone, you
are required to get this flood insurance. It is something that
people expect will help them in the occurrence of a flood.
Well, the opportunity for this committee to work on
improving this policy is one that I really find after what I
know our constituents experienced is a very important one.
Following the September 2004 in Western Pennsylvania with
Hurricane Francis and then Hurricane Ivan, my staff worked long
hours to coordinate with Federal agencies to help assisting
victims in securing relief. The damage was vast, covered a vast
area. The damage in several areas was quite intense. The
response of Federal agencies for the most part was immediate.
Officials were on the ground. They worked with my staff and
others to help clean up the neighborhoods, to get people moved
back into their homes, back into their businesses.
We knew it wasn't going to be an easy process. Hundreds of
homes and businesses suffered severe damage, and we expected
that it was going to take some hard work to get folks back on
their feet. In many instances, they are back on their feet. We
were able to help Federal agencies provide necessary
assistance. Neighborhoods removed debris. Communities got
involved. Other Federal programs certainly were utilized to
help people put their lives back together.
Unfortunately, this hasn't always been the case, and in
February of 2005, we really began to face the underlying
problem. Months after the flooding, local citizens were
organizing to ask for relief. We had town meetings. There were
a number of different opportunities to sit down and talk with
different agencies to figure out how they could move forward.
Many still had not had their insurance claims settled. Their
properties continued in that form that they were in right after
the flooding. They were still damaged. Families were forced to
live out of their homes, imposing on family and friends, using
their savings to pay for hotels.
My office worked with other local officials to try to
resolve these problems, and as we talked with our constituents,
a pattern became clear. In addition, we also heard similar
stories that we have heard from my colleagues today in Maryland
and Virginia and North Carolina, and as the picture became more
clear, many of these cases remained unresolved. We contacted
the Financial Services Committee to raise the concerns, and I
am very pleased that the committee is focusing on it with this
hearing.
They fall into three categories really: Improper insurance
coverage, inaccurate information about the insurance programs,
about adjustments, concerns about what happened after the
properties were assessed, low estimates, that sort of thing,
and then after those low estimates were given, an impossible
situation in trying to challenge those estimates and get the
real damage assessment, the appropriate damage assessment.
I don't fault anyone in particular for these problems that
my constituents have had with these programs, and I didn't
write the committee about these issues to place blame on an
individual or individuals. I contacted the Committee in order
to address some of these concerns to make these programs
operate better and more appropriately for the people that they
are expected to serve.
I will wind up, I promise.
The failures of the Federal program are clear. The only way
for us to address them is to discuss it in an open forum. I
asked the Committee and they have offered the opportunity for
one of my constituents, Beth Beam of Ellwood City, to come here
and testify about the issues that she faced.
I see this as a starting point. These people have suffered
not only devastating losses, but they have also suffered a lack
of appropriate assistance through the National Flood Insurance
Program. I thank Mrs. Beam for making the trip here, her
husband, Mike, and her children who continue to live with their
parents as a result of this problem.
And I thank you, Chairman Ney, for giving me the
opportunity to be here today.
Chairman Ney. I want to thank the gentlelady.
Again, I want to thank members of both sides of the aisle
for the amount of interest you have had in this and the true
concern you have for your districts and constituents. I would
ask to be included in the record, without objection, testimony
of the Independent Insurance Agents and Brokers of America, the
statement of William Griffin, Jr., the testimony of Gary
Mosell, the statement of Congressman Steney Hoyer. Without
objection, they will be made part of the record.
Panel one, we will move to David Maurstad, who is appointed
Acting Director of FEMA's Mitigation Division and Acting
Federal Insurance Administrator in June 2004. His areas of
oversight include the National Flood Insurance Program, the
National Earthquake Hazards Reduction Program, the National Dam
Safety Program, and the National Hurricane Program. Previously,
Mr. Maurstad served as Regional Director of FEMA's Region 8
where he coordinated FEMA activities six western States,
including the State of Nebraska where he has served as
Lieutenant Governor.
I would also note that our Ranking Member, the gentlelady
from California, Congresswoman Waters had to speak on the rule
and will be here later.
Thank you.
STATEMENT OF DAVID I. MAURSTAD, ACTING DIRECTOR AND FEDERAL
INSURANCE ADMINISTRATOR, MITIGATION DIVISION, FEDERAL EMERGENCY
MANAGEMENT AGENCY, EMERGENCY PREPAREDNESS AND RESPONSE
DIRECTORATE, DEPARTMENT OF HOMELAND SECURITY
Mr. Maurstad. Good morning, Chairman Ney and members of the
subcommittee. I appreciate this opportunity to appear here this
morning. First, let me thank this subcommittee and Congressman
Blumenauer for the work that it accomplished last year by re-
authorizing the National Flood Insurance Program through Fiscal
year 2008. I appreciate the priority that Congress and the
President demonstrated through the re-authorization and the
stability gained through a multi-year re-authorization.
The Flood Insurance Reform Act of 2004 enhanced the
existing flood mitigation assistance programs and authorized a
pilot and individual grant program for reducing severe
repetitive loss properties. The President's Fiscal Year 2006
budget request includes an additional $8 million for the
enhanced Flood Mitigation Assistance Program, and we are
working on options that may allow us to implement the pilot
program.
Since starting in this position last June, I found that the
NFIP has been successful through its 37-year history, in part,
because this program has integrated 95 of the country's
property insurance companies and their agents that sell and
service approximately 95 percent of the 4.7 million policies in
force. Under our arrangement with the insurance companies, it
is our responsibility to ensure their performance. To that end,
FEMA conducts regular audits to assure each company is meeting
its financial requirements, performance objectives, and
adhering to program policies.
One of my goals is to ensure that flood insurance claims
are handled fairly, equitably, and expeditiously. Based on my
experience, I have found that the NFIP meets or exceeds
industry standards in this regard. Even so, I want this
subcommittee to know that I strive to challenge myself, my
staff, and our partners to continuously improve.
Last year, the NFIP experienced a catastrophic loss year
due primarily to an historic hurricane season. The NFIP
received approximately 59,000 flood insurance claims in 2004,
and we anticipate paying $1.6 billion to resolve these claims.
This level of claim activity represents the single largest loss
year in the history of the NFIP. As a result, the program has
exercised its borrowing authority in the amount of $200 million
to date. This is the fourth time since 1990 that the program
has been in a position of borrowing, and as with previous
times, we anticipate repaying the current Treasury borrowing
with interest by the end of the year.
The claims adjustment process associated with flood loss
has not ben without appropriate scrutiny. As you are aware,
after Hurricane Isabel in September of 2003, there were a
number of concerns raised. These concerns received a
significant level of attention from policyholders, local and
State officials and Congress. As a means of addressing these
concerns, FEMA created a task force that undertook an
unprecedented review of the Hurricane Isabel claims for every
policyholder that requested a review. To ensure that
policyholders were aware of the review option, FEMA implemented
an outreach strategy that consisted of a targeted series of
community meetings, newspaper ads, press releases, and a toll-
free number to field policyholder questions as well as initiate
a request for a review. FEMA mailed approximately 24,000
letters, received over 4,300 calls, and held over 40 outreach
sessions in three States.
As a result of this effort, nearly 2,250 policyholders
requested and received an additional review of their claim of
which 1,101 received an additional payment. The amounts paid
represents less than two percent of the over $453 million paid
in claims for Hurricane Isabel.
It is my assessment that there is a fundamental
misunderstanding of the intent of the NFIP. For example, some
policyholders believe that if they paid premiums for a hundred
thousand dollar limit of coverage on their dwelling, they were
entitled to a $100,000 claims payment regardless of the actual
flood damages sustained. Another common misconception is that
the original intent was to restore homes or property to what
has been referred to as a pre-flood condition which FEMA may
have inadvertently contributed. It has come to my attention
that there is a press release dated October 16, 2003, on the
FEMA web site that states flood insurance can make you whole
again. This statement is inaccurate. The press release has been
removed from the FEMA web site.
This is the only instance that I am aware of that supports
this misconception. In fact, my review of the legislative
history, committee reports, the statute, the standard flood
insurance policy, and how the program has been administered
since its inception clearly indicates that the NFIP was never
intended to restore policyholders to pre-flood condition. It
was designed to help them recover.
There is a high risk associated with flood losses. In fact,
prior to the establishment of the NFIP, a flood insurance
policy was expensive and generally unavailable. In response,
Congress created the NFIP in 1968. The design of the program as
cited in Section 1302 of the National Flood Insurance Act of
1968 was to provide, and I quote, a reasonable method of
sharing the risk of flood loss. The 1968 Act created a flood
insurance mechanism that tied the availability of this
insurance to a community's management of its flood risk.
This policy has been successful. The NFIP standards for new
construction are now saving an estimated $1.1 billion annually
in avoided flood damage. Additionally, it should be recognized
that since 1968, the NFIP paid out from policyholder premiums
approximately $14 billion in insurance claims, which in
addition to helping homeowners, renters, and business owners
recover financially from a flooding event, otherwise would have
greatly increased taxpayer funded disaster relief.
The standard insurance policy has specific limitations and
coverage for high-risk areas such as basements and areas below
elevated buildings. The policy also does not provide for
additional living expenses unlike a typical homeowner's policy
and only allows replacement cost coverage in certain
circumstances, and there is a statutory limit on coverage for
residential buildings and commercial buildings.
Even more significant, FEMA regulations specify that
communities require flood-prone properties be brought into
compliance when a structure is substantially damaged; however,
the program only provides partial funding for the cost of
complying with that requirement.
[The prepared statement of David I. Maurstad can be found
on page 174 in the appendix.]
Chairman Ney. If we could, because we have a vote, I want
to ask one question because I have another commitment and Mr.
Fitzpatrick will be chairing the committee. So if I could, and
I am sorry to interrupt you, but I want to get my one question
in that I have got and I will be, again, back later.
There is some type of huge disconnect that has occurred,
some type of huge disconnect. Now, I know you had that up on
the web site, and that was an error, and people might have
assumed from that that in every single situation they were made
whole. Beyond that, there still is a disconnect between what
the citizen thinks that they are getting. So the question I
want to ask is, what is FEMA doing to find out or work with
what the agents think they are selling to people and what
agents are telling people and what people think they are
getting? Because there is some huge disconnect.
Mr. Maurstad. Sir, we continue to work with the 95
insurance companies that we rely on to service and sell the
standard flood insurance policy. It is a part of the
arrangement that they are required to make sure that their
agents are trained appropriately to sell the flood insurance
product. In addition, it is the agent's responsibility from a
professional point of view, regardless of what, whether it is
homeowner policy, an auto policy, or a flood insurance policy,
for them to be adequately trained and have the necessary
education and knowledge to be able to provide what their
policyholders deserve.
Chairman Ney. Do you think it has been effective, or how
long has the Government been embarking on this? Because I
really don't know the answer to that question.
Mr. Maurstad. Well, I would contend that those provisions
that I spoke about have always existed, and, for example, 2
years ago, there were about 47,000 claims handled by the NFIP
program, last year about 74,000 claims. The vast majority of
those were settled to the satisfaction of the policyholder.
Chairman Ney. One thing I wanted to ask you, we have been
doing this for years--and I am just going to tell you my
personal experience because I have been in office 24 years, 10
out here and then 14 in the State legislature. Over the period
of years, of course, you will get some people that will
misunderstand something, but I have got to tell you honestly,
in the last few years, it has just swelled in the amount of
people that said I thought I was getting this and I didn't get
it versus my entire time I have been in office. I can judge
over the last 24 years. You know, things have peaks and
valleys, but it has just went way up the charts of what I am
hearing around my district, and I am hearing that from other
members of both sides of the aisle. So I wonder why it is
happening in the last, I don't know, 4 or 5 years.
Mr. Maurstad. I think we need to address it, sir, and I
think that the companies are working with us. The agent
associations are working with us to re-emphasize the need for
agents to have the knowledge that their policyholders, their
customers, expect from them. Anecdotally, just my opinion as I
look at this, one factor that tends to stick out is if an area
has not had a major flooding event within a relatively short
period of time, there tends to be more misunderstanding by the
policyholders and the agents in that particular area than areas
that have frequent flooding events.
Chairman Ney. Unfortunately, we tend to flood all the time
down the Ohio River and areas we are in. We really have had
fairly consistent flooding over the years. So I just wanted to
add that. Again, I used to not hear a lot, just a few
occasional things. It has just grown by leaps and bounds. So
there is something out there or something is not working, and
that is going to be the purpose of why we will continue, of
course, with the questions, and I want to work with you to help
people.
With that, we are going to take a recess and we will
return. Thank you.
[Recess.]
Mr. Fitzpatrick. [Presiding] The committee is now in order.
We have a little bit of time between votes, and we would like
to accommodate Mr. Maurstad's schedule.
Mr. Maurstad, as a new member and a Representative of a
district that has experienced significant flooding, I really do
appreciate your time and your testimony here today and your
willingness to answer the questions. I just have one question
for you.
About a year ago, in March of 2004, the Senate Subcommittee
on Economic Policy held a hearing on flood insurance losses,
and at that hearing, a variety of problems were outlined, such
as policyholders who often do not have a clear understanding of
their policy, the limits, and what is covered. Insurance agents
often do not understand what they are selling and how to
process claims in an effective, quick, and efficient way. Many
policyholders do not know or understand the appeals process.
Many question the adequacy or the inadequacy of the payments
they received.
At that hearing, Anthony Lowe testified in his capacity as
the Federal Insurance Administrator, Mitigation Division
Director, and at that hearing, he acknowledged many of these
problems. Mr. Lowe indicated that FEMA was conducting a
comprehensive review of what he called top to bottom.
Furthermore, he indicated that the agency was taking steps to,
quote, address these concerns on the front end by stepping up
outreach efforts to explain the National Flood Insurance
Program policy provisions and simplifying the claims procedure.
Mr. Maurstad, I was wondering if you could explain for the
committee what steps have been taken since that hearing a year
ago to address these concerns.
Mr. Maurstad. To specifically address the concerns from
Isabel, the outreach effort that I talked about in my opening
is the manner in which we, I believe, successfully attempted to
provide that type of information during that process. Since
then and since the re-authorization last June and the direction
provided in the re-authorization to NFIP to institutionalize a
number of those, we have been working actively with our
stakeholders in trying to develop those various products and
are in the rule-making process for establishing those and hope
to have that completed by fall.
Mr. Fitzpatrick. Thank you, Mr. Maurstad.
At this time, I recognize Ms. Kelly for 5 minutes.
Mrs. Kelly. Thank you very much.
Mr. Maurstad, the names Francis, Ivan, Isabel, Hugo, Floyd,
they are names given to tropical storms. They are names given
to hurricanes. We in New York, as I mentioned in my opening
statement, have just had our governor declare a disaster area
for 13 counties on an unnamed storm. There are lots of storms
that don't have those names. This storm has hit my people very
hard.
You mention in your testimony the extensive outreach
campaign that the flood insurance program conducted after
Hurricane Isabel, that you sent out 24,000 letters, 40 outreach
sessions for policyholders. I want to know what you have
planned for my constituents in Orange County. Are they going to
receive some intensive outreach from you?
Mr. Maurstad. What we have done and what we would certainly
do to help is continue to participate in community meetings to
try to share the information that is needed for policyholders
to assist them in that claims handling process. Of course, we
need to while we certainly work together distinguish between
the efforts, the recovery efforts, that will go on and the
meetings that will be held there with the communities on
available assistance through the recovery, public assistance,
and individual assistance. We will specifically assist in those
cases where we can provide your constituents information that
they need to have their claims adjusted appropriately if they
are having difficulties with their agent or with the adjusters
that are responsible for making sure that they are paid
appropriately and fairly within the provisions of the standard
flood insurance policy.
Mrs. Kelly. You said that your flood insurance program, in
your testimony, you say that it paid it two percent more
because of the extensive outreach that you did on Hurricane
Isabel. Frankly, I believe that FEMA ought to be paying out 100
percent of eligible claims, not 98, not two percent more. There
shouldn't be two percent more. You have got a hundred percent
record that I am looking for, and I expect FEMA to take
additional outreach steps that you described in your testimony
in New York because of this terrible flooding that we have just
experienced.
I have walked in those fields with my people. I have
watched them. I have been with them when they have opened the
doors in their housing returning after the flood. It breaks my
heart. We need you to get the outreach out there. We need you
to do it rapidly. People can't wait, sir. The mold begins to
attack the house. The problems are my farmers are having to re-
dig the ditches in the fields. My sod farmers have had flooding
that has covered over the sod, and now is the time when they
need to sell that product.
We need your help and we need it now. Part of what I hear
from my constituents and part of what you are hearing in the
passion in my voice, sir, is a frustration with what appears to
be just a bureaucracy that is hung up and not producing rapidly
and producing for the needs of the people that we represent
here. I think you have heard that from the members this
morning.
I would ask you, Mr. Maurstad, to go back and tell your
people, those people who are in those offices working for you
that we here on Capitol Hill expect prompt response, and we
expect it yesterday. We are the Federal Government. We should
be helping these people. You are being paid by tax dollars. We
expect these people to have their support, and we expect it
immediately.
I am not blaming you, sir, but I am blaming the
bureaucracy. You are in charge. The buck is stopping on your
desk right now. Please get back there. Please get back to me.
Don't let two weeks go by. Don't let four weeks go by. People
need to reclaim their lives. I have got a whole lot of people
along the Delaware River and Western Orange County who need
your help and they need it now.
Mr. Fitzpatrick. The chair recognizes Mr. Ruppersberger of
Maryland.
Mr. Ruppersberger. Yes. Thank you, Mr. Chairman.
First, you can see how passionate people are because you
disrupt families and their everyday life, and I know that FEMA
and our engagement with FEMA and people involved are saying,
Look, we can only do what we can do pursuant to the law,
pursuant to our statute. I will say in the beginning, I was
very impressed with the way FEMA came in in support for people
who were dislocated and helped them, but then the problems
started to rebuild and where are we going to go, and we still
have people in trailers today.
So it is important that we get to the core of the problem,
we learn from what has happened, and then try to fix it because
there will be other floods.
There are a couple of issues I want to get into. The first
thing, the issue of FEMA generally, and I am not sure--because
you are a part of the large bureaucracy of Homeland Security, I
am concerned with the fact this FEMA is in Homeland Security.
When we have a national disaster in our country, we are the
best country in the world. It is a high priority to help people
as soon as we can. And the fact that we are in such a large
agency, it seems to me that FEMA should have a direct line to
the President so that when we need to move, we can move
quickly, and when we have problems, even though it might not be
pursuant to the law, we can adjust what we have to do to help
our people.
So my first question, do you feel that FEMA being in
Homeland Security, you have your hands tied, you are not able
to get the money quickly enough, you are not able to move
through that bureaucracy, and would it be better when we have
national disasters to go directly to the President and not be a
part of a large bureaucracy whose real goal is to protect
homeland security in areas such as ports and airports and all
those other areas?
Mr. Maurstad. Well, sir, I believe that becoming a part of
the Department of Homeland Security has actually been a benefit
to FEMA in the way that we have been able to respond to the
hurricanes of last year. I think we have demonstrated that a
number of times. Because of the other entities that we are now
partners with within the department, we are able to utilize
what they bring to the table. The Coast Guard comes to mind,
for example, in the assistance that they are able to provide
FEMA in the response and the recovery associated with major
disasters.
So I think that it certainly has not crippled our ability
in being able to respond.
Mr. Ruppersberger. I think that is something that we are
really going to have to keep looking at because we need to
produce in this area, and when there is a national disaster,
our concern in Maryland is that all of a sudden there were
hurricanes in Florida and then the people who were involved in
Maryland were not getting service because people had to move to
Florida. So I think that is something we have to look at.
You have standards in FEMA, evaluation goals. Do you have
those same evaluation goals for the adjusters in the insurance
program? A lot of what we saw and our staff personally saw and
the people at least in my district, you had all sorts of
inconsistencies. You had adjusters that seemed not to be
trained. You had different price evaluations, different
estimates, no standards.
Two questions: First, do we require the insurance companies
to have that standard? And if we do, I think that we have not
held them accountable for performance. I think that is
something we have to look at, and basically we need a standard,
to develop a standard, in natural disasters and the fact that
FEMA is coming in and saying pursuant to the law we can only do
this, then we need to change the law and we need to evaluate
that and we need recommendations from you all and talking to
our constituents and our people in the different States and our
insurance commissioners from the States to find out what we
need to do so that if this happens again, we can do it better.
Mr. Maurstad. Well, we do have a process by which we
evaluate adjusters' performance with re-inspections and we
also, of course, hold the insurance companies accountable for
the work of their adjusters. We audit the claims process. We
audit the work of those. When we are able to identify that
there are areas where a particular company or a particular
adjustor within a company is not meeting the standards, then we
take action with that company in correcting them.
Mr. Ruppersberger. My experience has been that we had
inconsistency all over the map. We didn't have people that were
qualified, didn't know what they were doing. So let me ask you
this: When was the last performance standard done?
Mr. Maurstad. Well, with adjusters, we do it routinely
while the losses are occurring, and so it is an ongoing process
with the adjusters. Now, companies, we do the large audit,
performance audits, on a rotating basis.
Mr. Ruppersberger. My time is almost up. Are we going to
have another round, Mr. Chairman, of questions?
Mr. Fitzpatrick. We will not.
Mr. Ruppersberger. Well, then let me go quick. I know the
light is on.
I really want to get to the bottom of this. I think right
now--you talk about standards and training--we don't have,
really, the standards. I want to make sure that we take what we
have now--you can take my district. You can take other
districts and that we look at what the problems were and then
re-evaluate those problems and the people involved, and
sometimes the people, such as the adjusters, don't have the
tools and resources either. This is something that has to be
fixed and we have to learn from what has happened now and we
have to take care of these people that are still out there.
Now, you have certain laws you have to abide by. There is
no question, but we have to go further. We are the finest
country in the world and it is not appropriate or fair that we
cannot help people in need in our country.
So I really have more questions. I will submit those
questions to you, and I would like you to get back. We have a
long way to go here. I know that you are representing your
agency. You have to take certain positions, but let us keep an
open mind. It is about the families.
Thank you.
Mr. Maurstad. Yes, sir.
Mr. Fitzpatrick. We will make those questions part of the
record as well if you submit them to the committee. Thank you.
The chair recognizes Ms. Davis of Virginia for 5 minutes.
Mrs. Davis. Thank you, Mr. Chairman.
Mr. Maurstad, I hope you took note. Representative Kelly
said that she hoped two weeks, four weeks, wouldn't go by, and
I hope you will recall that 19 months has gone by, and I still
have constituents in little trailers.
Please don't take my time to clap. Let me get my questions
in here, but I appreciate it.
You stated in your statement that you were aware of a
release dated October 16, 2003, and I just want to know for the
record, you were made aware of that release on the FEMA web
site dated October 16, 2003, that stated flood insurance can
make you whole again, because you were in my office the day
before yesterday and I asked you did you know it was on there,
and you were not aware of it. I ask you now when was it taken
off?
Mr. Maurstad. It was taken off as soon as I got back to the
office.
Mrs. Davis. So this release that, Mr. Chairman, I would
like to put in as part of the record, dated October 2003, one
month after Hurricane Isabel hit my district has been on your
web site from October 2003 until April 2005. It is no wonder
constituents think that flood insurance can make you whole
again.
I would like to submit this for the record, Mr. Chairman.
Mr. Fitzpatrick. Without objection, it will be made part of
the record.
Mrs. Davis. You also talked about the flood insurance
program being established back in 1968. You quoted from it, but
let me quote from the program. It says the program was
established to, in quotes, provide the necessary funds promptly
to assure rehabilitation or restoration of damaged property to
pre-flood status or to permit comparable investment elsewhere.
It sounds to me like the program was started to restore it to
pre-flood status. What do you think?
Mr. Maurstad. Well, in my looking at that, that is
actually, I believe, from a Senate and House report in 1967 on
a previous attempt to establish a flood insurance program.
Mrs. Davis. But it sort of says the intent of Congress,
does it not?
Mr. Maurstad. In 1968, when the bill was actually put in
place, that language was not a part of the legislation, nor was
it a part of the Senate and House comments, and so my
conclusion is that there was a conscious reason for having that
language in a report that was not adopted versus a report on a
bill that was adopted.
Mrs. Davis. But it seems clear to me if it was a Senate
report, it was the intent of Congress. Here we are 19 months
later since Hurricane Isabel, and as I said, I have
constituents that still are not taken care of. What are you
doing to address the length of time that it takes to process
the claims? As you know, I have two constituents who will be
testifying after you. One just has moved back into her home.
The other gentleman is still in a rental place.
Mr. Maurstad. Well, at the end of the review process, we
had either settled with all of the individuals that asked for
their claim to be reviewed or we provided them with what was a
final offer based on the coverages that are provided by their
standard flood insurance policy.
Mrs. Davis. Do you think that your insurance providers
believe that their insurance is there to make people whole?
Mr. Maurstad. No, I do not.
Mrs. Davis. I have a web site here from Travellers
Insurance that says in their advertisement, and I quote: The
Mitchells were very fortunate to have flood insurance, and then
on and on and, ``the cost to repair or replace the building was
covered less the minimum $500 deductible. Wall to wall
carpeting was replaced. Floors were dried and refinished. The
walls were painted and cabinets and appliances were replaced.''
If the everyday folk pull up something like this on the web
site, and I am sure there are plenty more of these, they have
to assume that they are going to get replacement cost or that
they are going to be restored, and that is wherein I think we
have the problem.
And you and I had this discussion the day before yesterday,
and I understand you are reading from the book and, you know,
the rules are what they are, but the perception is reality in
the United States of America, sir. If I have constituents that
are sitting in trailers and they, because they looked at your
web site one month after Hurricane Isabel hit, plus not to
mention what they were told by people when they came into my
district--how do I go back to my constituents and say sorry,
the Government is not going to help you even though we have
this on your web site? You said yourself in your statement it
was an error. It is a mighty big error, sir. What do I tell my
constituents?
Mr. Maurstad. What I indicated, it was inadvertently
included in a press release.
Mrs. Davis. For almost two years.
Mr. Maurstad. I want to make sure that there is a
distinction in that the benefit associated with folks having
trailers provided under the individual assistance program in
the recovery division of our agency and the benefits that are
provided that are not a part of the standard flood insurance
policy. And I do take very seriously my responsibility to
balance the needs of the fund and the charge of Congress to
make sure that flood insurance is affordable, and I also take a
great deal of responsibility in making sure that the policy is
followed because it is law and that is my responsibility to
enforce it.
I don't have the discretion to be able to authorize claims
to be paid that are not provided for under the standard flood
insurance policy.
Mrs. Davis. My time is up. I wish we had more time, but I
would say that it is your interpretation of the program versus
my interpretation of the program, sir, and I think that is
probably the problem throughout the agency.
Thank you, Mr. Chairman.
Mr. Fitzpatrick. Thank you, Mr. Maurstad, for your
testimony. Clearly, we have a lot of work to do. I know that
the committee looks forward to working with the Federal
Emergency Management Agency and the National Flood Insurance
Program, but we have to do a better job reaching more flood
victims, repetitive flood victims, to be quicker, to be fairer,
and I am sure that we are going to be working together toward
that.
Before I dismiss panel one, the chair notes that some
members may have additional questions for this panel which they
may wish to submit in writing. Without objection, the hearing
record will remain open for 30 days for members to submit
written questions to these witnesses and to place their
responses in the record.
The first panel is dismissed.
Mr. Fitzpatrick. We would ask the second panel to please
take their seats at the table, Mr Berginnis, Mr. Jenkins, Mr.
Redmer, Jr., Mr. Griffin, Ms. Beam, Mr. Bearekman, Mr.
Kanstoroom, and Ms. Stelyn. Please take your seats at the
table. The subcommittee does need to recess until we conclude
the votes of early this afternoon. The members will be back to
conclude the subcommittee hearing.
The subcommittee is in recess until the sound of the gavel.
[Recess.]
Mr. Fitzpatrick. I would like to thank the individuals, the
distinguished panelists who are here in the Nation's capital to
testify as part of panel two.
First, I would like to recognize Ms. Davis of Virginia who
wants to introduce two of her constituents who are here with us
today.
Mrs. Davis. Thank you, Mr. Chairman. I appreciate the
opportunity. As I told the chairman, unfortunately I am going
to have to leave here at 1:30. So I hope I can get back, but I
wanted to have the opportunity to introduce two of my
constituents who have had to bear the brunt of some very
unfortunate situations, and they are Mr. Larry Bearekman from
Poquoson, and Mr. Bearekman, just for the record, is still in
temporary quarters; and the other is Ms. Georgette, otherwise
known as Ginger, Stelyn, and she lives in Seaford, York County,
Virginia, and she has just recently gone back in her home.
I appreciate you both so much for taking the time to travel
here to tell your stories that are so similar to so many other
stories with the district.
Thank you.
Mr. Fitzpatrick. Thank you, Ms. Davis. The first witness on
panel two is Chad Berginnis. Mr. Berginnis is the Flood Plain
Management Program supervisor in the Division of Water with the
Ohio Department of Natural Resources. He has co-authored a
comprehensive revision of the Model State Flood Plain
Regulations, drawing in part on his previous experience as the
planning director of the Perry County Planning Commission.
Without objection, Mr. Berginnis, your written statements
will be made part of the record. You will each be recognized
for a 5-minute summary of your testimony, and it will go for
each of those who are here today to testify.
Mr. Berginnis, you have 5 minutes.
STATEMENT OF CHAD BERGINNIS, CFM, ASSOCIATION OF STATE
FLOODPLAIN MANAGERS, INC., CHAIR, STATE OF OHIO
Mr. Berginnis. Good morning and thank you, Mr. Chairman and
the subcommittee, for giving the Association of State Flood
Plain Managers the opportunity to testify.
I currently serve as chair for the ASFPM and I also work in
the State of Ohio's Flood Plain Management Program which
implements the National Flood Insurance Program at the State
level. I and most of the 7,000 members of the ASFPM work as
jack of all trades in the NFIP on a daily basis. We are the
State and local officials that are involved in implementing the
NFIP.
The 2004 Reform Act holds great promise. From our
standpoint, it contains three significant elements: The
creation of aggressive mitigation programs to address the
repetitive loss program, changes to existing NFIP and
mitigation programs to improve effectiveness, and the final two
provisions which make positive changes to the insurance side of
the program.
Repetitive flood losses are a significant threat to the
NFIP, whether it be perception such as the black eye the NFIP
receives when a homeowner who has made repetitive flood
insurance claims totalling several times the value of the home
is profiled on programs like ``Fleecing of America'' or the
reality that in the average year, claims for repetitive loss
properties are $200 million. Repetitive flood losses threaten
the financial stability of the NFIP. Furthermore, everybody
pays for them. Policyholders in Ohio, where relatively few
repetitive loss properties exist, bear the cost of increased
flood insurance premiums which are at least partially due to
the excessive repetitive loss claims.
The 2004 Reform Act repetitive loss mitigation programs
should make in-roads into this problem, but they are
meaningless until they are funded. This is why we are perplexed
that the Fiscal Year 2006 budget requested only $8 million of
the $70 million authorized. None of these funds authorized are
new taxpayer dollars. They are a transfer from the National
Flood Insurance Fund.
Acting quickly is critical. Over half of the newly
authorized funds are for a pilot program that will fund 2009,
and funds for this program were not even requested in 2006. The
Reform Act doubled the funding for the basic Flood Mitigation
Assistant Program, $20 million in new authorization, but only
$8 million was requested. Why is that?
The FMA program already exists. While it is true that rule-
making must occur, especially for the Repetitive Loss
Mitigation Programs created in the Reform Act, we understand
that part of the delay is debate over whether these funds
should come out of premium dollars or fee dollars associated
with the flood insurance policies. We submit that it can come
out of either and should come out of both.
Some may argue that to take funds out of premiums opens the
door for other programs to be similarly funded. That is
nonsense. These programs were created specifically to mitigate
properties that most impact the flood insurance fund. It is a
literal investment in the fund to help protect the fund. Our
written testimony also identifies other issues related to the
implementation of the new mitigation programs.
Another important aspect of the Reform Act was to improve
existing NFIP and mitigation programs. One such improvement is
with increased costs of compliance benefits. The new mitigation
tool created under the 1994 Reform Act, ICC, helps offset the
cost to the property owner for making their buildings more
flood resistant, as required by local and State codes. The
maximum benefit under the ICC is $30,000. The surcharge on
flood insurance policies to pay for this benefit yields over
$80 million annually. Unfortunately, as implemented, ICC is not
well utilized. The average ICC claim is well below the maximum
limit, and data as of 2 years ago showed that less than $2
million was being spent nationwide; thus, nearly all ICC
surcharge dollars are not being utilized for their intended
purposes and, instead, likely cross-subsidizing the general
flood insurance policy.
The Reform Act changes will help, but we also need FEMA's
help to create a framework that meets the intent of the statute
and not be so conservative in its interpretation that ICC is
overly burdensome.
We would also like to highlight one of the new mitigation
options that the Reform Act officially recognized, the
demolish, rebuild, or modify elevation option. For several
years, FEMA has piloted this option as an alternative to
existing mitigation. For some reason, the pilot use has
stopped. We are unclear as to why and we are hopeful that FEMA
will take quick action to again allow the use of this option.
Although our members are less affected by Title II
provisions of the Reform Act, we would like to say one thing
about flood insurance policies. The single largest complaint
flood managers get across the Nation are that flood insurance
policies are too expensive. We realize that there is a
legitimate question made about what policy coverages should or
should not be, but we also hope the committee recognizes that
it will affect the cost of policies.
In conclusion, what I have highlighted are just some of the
problems, but there is one problem in particular I would like
to mention, and that is FEMA has several critical missions
vital to nearly every community and State in the Nation. Its
legacy missions, those that pre-date becoming part of the
Department of Homeland Security, were to prepare for, respond
to, recover from, and mitigate against flooding. FEMA's focus
tended to be on natural hazards. Now that FEMA is part of the
Department of Homeland Security, we are witnessing a systematic
dismantling of some of their functions. Funds are being
transferred or under constant threat of transfer. Staff
positions are being lost, and FEMA has borne a large share of
the DHS organizational and administrative costs.
I would, finally, like to thank both on behalf of the State
of Ohio and the ASFPM for the good work that FEMA does with
Under Secretary Brown and the folks that have helped us through
the years. In Ohio, we have had seven Presidential flood
declarations in the last 2 years, and recovery is always a
very, very difficult thing, but we are doing the best we can,
and I think FEMA folks do deserve some of the credit for that.
Thank you.
[The prepared statement of Chad Berginnis can be found on
page 114 in the appendix.]
Mr. Fitzpatrick. Mr. Berginnis, thank you for your
testimony.
There will be questions for the witnesses after all the
witnesses have testified. Mr. Jenkins will testify next, but
before Mr. Jenkins testifies, the members have been called for
another vote. So we are going to recess this committee hearing
for 15 minutes, and we will be back together at approximately
1:23 this afternoon.
Thank you.
[Recess.]
Mr. Fitzgerald. The committee will be in order.
Mr. Jenkins serves as director of homeland security and
justice issues in the United States Government Accountability
Office. His areas of responsibility include emergency
preparedness and response, elections, the Federal judiciary,
sentencing and corrections, and bankruptcy.
Mr. Jenkins, you have 5 minutes.
STATEMENT OF WILLIAM O. JENKINS, JR., DIRECTOR, HOMELAND
SECURITY AND JUSTICE ISSUES, UNITED STATES GOVERNMENT
ACCOUNTABILITY OFFICE
Mr. Jenkins. Thank you, Mr. Chairman, and members of the
subcommittee. I appreciate the opportunity to be here today to
discuss some preliminary results of our ongoing work on the
National Flood Insurance Program. We plan to report to Congress
later this year on the final results of that work.
Today, we provide some preliminary information on policy
coverage and limitations, the structure of the program, the
views of some insurance company managers on the program's
operation, and FEMA's progress in implementing mandates on the
2004 Flood Reform Act.
Under the National Flood Insurance Act of 1968, Congress
established the NFIP to provide an insurance alternative to
disaster assistance in response to the escalating cost of
repairing flood damage. The NFIP was designed to be self-
supporting and actuarially sound. Thus a challenge for FEMA is
to strike a balance between coverage and premiums that are
sufficiently affordable to encourage participation in the
program.
Policyholders may choose to insure their home and the
personal property inside their home or the home only. The NFIP
is not designed to cover all flood losses. For example, the
policy does not cover the replacement costs of personal
property, and the coverage of basements excludes finished
walls, floors, furniture, and other personal property. In
addition, preexisting damage not caused by the flood is not
covered.
Replacement coverage for damage to a primary residence is
limited to those homeowners who have purchased coverage equal
to 80 percent of the home's full placement cost or the maximum
available coverage of $250,000. The work of selling, servicing,
and adjusting claims on NFIP policies is carried out by
thousands of private insurance agents, and adjusters who work
independently are employed by insurance companies or vendors
who are under contract to insurance companies to handle their
flood business. According to FEMA, about 95 percent of all
policies are underwritten by 95 private insurance companies who
are paid about one-third of the policy premiums for their
service. About 40 FEMA employees assisted by about 170 contract
employees are responsible for regulating, managing, and
overseeing the program, which is expected to include about 4.7
million policies by the end of this year.
Independent insurance agents are the main points of contact
for policyholders and those who wish to purchase flood
insurance. Other than requiring that agents meet basic State
insurance licensing requirements, neither FEMA nor the four
insurance companies we visited have historically required that
agents complete training or demonstrate a basic level of
knowledge of the NFIP to sell policies. When losses occur,
flood claims adjusters employed by the insurance companies or
independent contractors become the eyes and ears of the NFIP.
The adjusters are assigned to policyholders after they have
notified their insurance agents of a flood loss and the agent
has written a loss report.
Adjustors are responsible for evaluating the damage and
submitting claims to the insurance company which reviews the
claim and processes payment. Unlike agents who sell the
policies, adjusters must be certified by FEMA to work on NFIP
claims.
FEMA's primary method of overseeing the work of the
insurance companies who write the policies and process claims
is to conduct an operational review of each company once every
3 years, more frequently if problems are found during the
review. FEMA also uses about 10 general adjusters to check the
work of claims adjusters through re-inspections of a sample of
about 4 percent of claims done after ever flood event.
We interviewed four insurance managers in the larger
insurance companies who write flood insurance. According to
these managers, the knowledge of the agents who sell NFIP
policies varies, in part depending on the frequency with which
they write policies. Three of the four managers thought FEMA
staff who conducted operational reviews were knowledgeable and
that such reviews were an effective way for FEMA to ensure that
the NFIP is administered in accordance with the established
legislation and regulation. All four managers also said that
FEMA should examine ways to make the program less complex and
less document intensive.
FEMA noted that some documentation, such as elevation
certificates, are required because the NFIP is part of FEMA's
broader flood plain management strategy that combines insurance
with hazard mitigation to reduce future flood damage to homes.
The Flood Insurance Reform Act of last year had three major
mandates for FEMA related to policy sales and service. FEMA is
working to implement all three, but none are complete. Working
with State insurance commissions and commissioners, FEMA is
still in the planning stages of how to establish and implement
insurance agent education and training requirements. FEMA has
drafted new materials to be provided to policyholders at the
time of purchase or renewal for flood insurance which it
expects to have finalized by October of this year.
FEMA is developing a formal appeals process for
policyholders in the event of a grievance about a claim. That
also is expected to be completed by October of this year.
That concludes my statement, Mr. Chairman. I would be
pleased to answer questions you or other members of the
committee may have.
[The prepared statement of William O. Jenkins Jr. can be
found on page 131 in the appendix.]
Mr. Fitzpatrick. Thank you, Mr. Jenkins.
The next witness is Mr. Alfred W. Redmer, Jr. Mr. Redmer
was appointed insurance commissioner for the Maryland Insurance
Administration in June 2003 by Governor Robert Erhlich. Prior
to his appointment, Mr. Redmer had served as the House minority
leader in the Maryland General Assembly where he had
represented the Eighth District in Baltimore County. Mr. Redmer
is a licensed insurance and stock broker.
Mr. Redmer, you have 5 minutes.
STATEMENT OF ALFRED W. REDMER, JR., MARYLAND INSURANCE
COMMISSIONER, MARYLAND INSURANCE ADMINISTRATION
Mr. Redmer. Thank you, Mr. Chairman and members of the
committee. It is a pleasure to be here. I would like to first
thank you for your work and the changes you have made to the
flood program during the re-authorization of last year. With me
today is Jeff Getek, our director of external affairs, and Joy
Hatchette, who is associate commissioner of consumer education
and advocacy, and it is my pleasure to be here to testify on
behalf of the citizens of Maryland about their experiences with
the National Flood Insurance Program following Hurricane Isabel
in September of 2003.
At your request, my testimony will focus on the problems
with the program; however, I do need to recognize the efforts
and our appreciation of the those hardworking dedicated
employees at FEMA and the flood program that responded to the
citizens of Maryland in the aftermath of Hurricane Isabel. The
devastating effect Isabel had on property along the Chesapeake
Bay was unprecedented. Eighteen months after Isabel, we still
have 100 families still living in FEMA trailers. On a related
note, as recently as this week, some are being threatened with
the loss of those trailers and being left literally homeless,
which is unconscionable.
A few statistics: Under the direction of Governor Robert
Erhlich, we staffed 15 disaster recovery centers, held dozens
of community meetings, collaborated with our Congressional
delegation, and handled over 1400 intakes, 500 formal
complaints, and we generally assisted and advocated for the
citizens in coordinating and communicating with carriers,
adjusters, and the flood program, which resulted in hundreds of
thousands if not over a million dollars of additional funds.
Many of these residents have made the trip to Washington today,
and if the citizens of Maryland would just wave their hands,
and I know we have numerous people in an overflow room as well.
First, what you have with you today is a report that we did
in 2004 and another report that we just recently completed. We
would appreciate it if you would look at that. We have also
worked with citizen groups led by Bernice Myer, who is here
today as well as consumer advocate Steve Kanstoroom, who will
speak a little bit later. Steve has spent thousands of hours
and thousands of dollars of his own money traveling the country
inspecting losses, advocating for consumers, and has developed
an incredible level of expertise. Additionally, the National
Association of Insurance Commissioners has a Catastrophe
Working Group and a new work group dedicated to advocating for
an additional review of the flood insurance program.
At your question request, I am going to address four areas
of concern in my limited time. I have pretty detailed testimony
in writing.
First, the delays in assistance and the lack of trained
agents and adjusters. Some agents were not familiar with the
claims process or the coverages available under the program. We
also have a shortage of trained experienced adjusters. Some
took weeks to contact the claimants. The program has a lack of
an official claim or an appeal process. Folks also had to deal
with multiple adjusters. They had to deal with the adjustor
from the flood program, a different adjustor from the
homeowners company, a different adjustor from FEMA, another
adjustor from the Small Business Administration, a very
burdensome and complicated process.
Some of the adjusters didn't know what the standard policy
covered. They either did not get or they ignored important
directives that came from the National Flood Insurance Program.
We also had issues where adjusters inappropriately pressured
citizens to sign proof of loss statements in spite of
inadequate reimbursements.
Number two, the lack of uniformity in claim estimates and
confusion with the pricing guidelines, a lot of instances of
conflicting information from carriers, the flood program, and
adjusters. Everybody had a different answer as to what was
covered, incorrect usage of the pricing guidelines by the
adjusters as well as adjusters using old outdated pricing
guides. There were coverage questions and conflicts regarding
outside heating oil tanks, the removal of contaminated soil
underneath the homes, mold and mildew remediation. There were
questions regarding direct physical versus direct physical
contact. This is just to name a few.
In some instances, the flood program actually reversed its
own decisions, but that information was slow to reach the
adjusters. Some adjusters went out with the pricing guideline,
period. Instead of price hikes due to supply, demand, and
shortages, they are stuck with only the pricing guidelines with
no modifications.
I was asked to comment on lender requirements. In short,
lenders require you buy an amount of coverage to cover the
loan. As we all know, particularly with waterfront property,
the structure is a small part of the total value. In these
instances, the consumer is forced to buy an amount of coverage
they could never, ever collect, even in the event of a total
loss.
Number four, failure of NFIP to implement the program as
Congress intended, Congresswoman Davis did an excellent job of
articulating that. I will move on.
We have a significant number of conclusions and
recommendations in our written report. Many factors caused
these problems: Inadequate consumer, producer, and adjustor
information; inconsistencies and errors in pricing guidelines
and claim estimates; a confusing and complicated bureaucracy,
the result, citizens with inadequate settlements and their only
option is to go to Federal Court. We have people living in
trailers. We would appreciate another review.
For future disasters, please consider the thorough
recommendations that we have made and that will come out of the
GAO. We would appreciate Congress looking at it again. I know
others, including Mr. Kanstoroom, have significant
recommendations on consumer education, the comprehensive claim
and appeal process. We need assurances that payments are
adequate. We need to strengthen the relationship and
coordination between private insurers, the flood program, and
FEMA, enhanced agent and adjustor training. We need to add a
meaningful role for State regulation regulators.
And in closing, on behalf of the citizens of Maryland,
thank you for your willingness to listen to our experiences. We
would appreciate an additional review of the entire program,
and on behalf of the National Association of Insurance
Commissioners, we collectively stand willing to assist and
provide expertise through our Catastrophe Working Group and the
Government Affairs Task Force in any review, Congressional
review, of this program.
[The prepared statement of Alfred W. Redmer Jr. can be
found on page 181 in the appendix.]
Mr. Fitzpatrick. Thank you, Mr. Redmer, for your testimony.
I appreciate that.
Next we recognize Mr. Donald L. Griffin. Mr. Griffin is
vice president, Personal Lines at the Property Casualty
Insurers Association of America, which is a trade association
representing over 1,000 property and casualty insurers who
write almost 40 percent of all insurance policies sold in the
United States.
You have 5 minutes.
STATEMENT OF DONALD L. GRIFFIN, VICE PRESIDENT, PERSONAL LINES
FOR THE PROPERTY CASUALTY INSURERS ASSOCIATION OF AMERICA
Mr. Griffin. Thank you. I appreciate the opportunity to
appear before you today and present information to the
committee regarding the effectiveness of the National Flood
Insurance Program. We have heard testimony from a lot of the
individuals, and you will hear some shortly from some victims.
While there are certainly problems maybe that are
associated with the National Flood Insurance Program, I want to
say that overall the program works very well. The program was
established in 1968, and I would reiterate the comments of
Director Maurstad in that it was not established to put people
back into pre-loss condition. That is not the policy wording.
That is not the program. The idea that Mr. Jenkins talked about
from the GAO was that there is a balance that has to be
maintained between what is provided and keeping it affordable,
and they have struck that balance, and it may need to be
changed, but that is the current system we have now.
We would also say that the insurance industry has no
particular say over the wording in the contract, but that it is
a legal contract, and when we are called upon to adjust all the
thousands of losses that you have heard about recently, we are
called upon to do that based on the rules and regulations out
by FEMA. So that is how we adjust those losses.
It is a very complex program. The insurance industry finds
it complex. The agents find it complex. The adjusters find it
complex. I would say that that is one particular area where we
would be very happy to work with this committee, Congress,
FEMA, and policyholders to try and make it better and easier to
understand.
The claims and appeals process is very difficult. There
wasn't a formal process set in place. The Title II provisions
of the bill passed last year along with many of the other
reforms actually will do lots of good things, hopefully, to
make this process better going forward.
While I can't focus and I can't address individual claim
situations that you may hear about today, what I can tell you
as an industry is we are committed. As you know, we write 95
percent of the business through the National Flood Insurance
Program through the write-your-own programs with insurers, and
our company represents probably 40 percent of that market. What
we can tell you is we are very committed to making the program
work better.
We believe that there are ways to do that, and many of the
ways include doing things like simplifying the determination of
where the flood property actually is on a flood map. That is
probably one of the most difficult things for an agent to do.
It is also difficult to try and figure out what coverage is
actually there.
On the process of the purchaser, one of the other things
that they are typically required to do is buy flood insurance
to meet the demands of the mortgagee. As you heard from Mr.
Redmer, there is a problem with mortgagees requiring the amount
of insurance to be too high and not cover just the structure,
but to cover the entire mortgage. There are State laws in many
States that prevent that from occurring, but probably not in
Maryland.
There could be many improvements to the program. We find
it, as we said, very complex. PCI and the IBHS, which is the
Institute for Business and Home Safety Flood Committee, are
very willing to work with everyone to try and come up with
solutions to fix these problems as well as implement the
provisions of Title II. We have actually been working and have
had several meetings with FEMA and the NFIP on the
implementation process of Title II based on the public law
passed last year.
There is one particular provision of that Act, though, that
causes us grave concern with the insurance industry, and that
is a requirement that you have to have a signature saying the
insured understands what they bought. Because of the way the
process is administered, as you know, there is a 30-day waiting
period for people before their coverage becomes effective. So
signing a form that is saying that they got all of these
documents at the time they actually purchased the policy is not
practical. That means that policy form and that document
requiring the signature must be mailed later. The return or the
compliance with that return could be very problematic for both
the industry as well as FEMA, and it could be problematic later
at claim settlement time.
The other thing that we would support is you very wisely
put in some very helpful mitigation issues, the ability to deal
with repetitive losses. We would hope and we would work with
you and Congress to fund those mitigation repetitive losses. We
think that is very important for both the program as well as
the industry as well as policyholders.
As I mentioned before, but it should be reinforced, the
program works. There may be ways to improve it, some of which
were discussed in my testimony and in the written testimony I
submitted, but overall, it provides a very important
catastrophic protection for the policyholders, for the Nation,
and for our members.
Thank you.
[The prepared statement of Donald L. Griffin can be found
on page 125 in the appendix.]
Mr. Fitzpatrick. Thank you, Mr. Griffin.
Our next witness is an American who is on the other side of
the contract process, the person who paid the premium
faithfully year in and year out, who expected to be covered,
who is harmed, and still has a loss yet to be reimbursed for.
And for introduction of our next witness, I call on the
gentlelady from Pennsylvania, Ms. Hart, to introduce her
constituent.
Ms. Hart. Thank you, Mr. Chairman. I appreciate the
opportunity to be here again and the opportunity to introduce
my constituent, Beth Beam. I want to thank Beth. She has taken
a lot of time with my staff and with me to have us understand
the gravity of the situation that she and her family face,
which, unfortunately, is more common than we would like to
think as a result of some of this miscommunication and really
misinformation surrounding the National Flood Insurance
Program.
Beth and her husband, Mike, live in Ellwood City,
Pennsylvania, which is a lovely town where I actually have one
of my district offices, and Ellwood City was hit very hard by,
unfortunately, two of the hurricanes of last fall or last late
summer.
Mrs. Beam is a credit analyst, and she took off some time
to be home with her kids and fully intended to return to work,
but hasn't been able to do so, basically, because of the
challenges that her family faces as a result of basically their
homelessness as a result of the flooding and ineffectiveness of
the programs that she and her husband have been trying to
navigate. The promises made, the contracts, again, as the
chairman referred to, have really placed them in a difficult
situation.
They were flooded twice, as I mentioned, last September and
have still not been able to move back in their home. She is
going to give testimony about the details.
But I just want to thank you, Beth, for being here. I want
to thank you for bringing your information to us and your
patience, really, for dealing with this.
And I yield back, Mr. Chair.
STATEMENT OF BETH BEAM, ELLWOOD CITY, PENNSYLVANIA
Ms. Beam. Chairman Ney, Ranking Member Waters, members of
the committee, thank you for providing me the opportunity to
discuss my experience with the NFIP.
My husband and I purchased a house in Ellwood City along
the Connoquenessing Creek. We spent 8 years remodeling the
entire house ourselves. We purchased over $93,000 in flood
insurance, being told it would cover any damages in the event
of a flood. Instead, the insurance industry has taken our
premiums and gave nothing in return.
During this nightmare, we have been left to fend for
ourselves. Our first floor was flooded with 1 foot of water on
September 9, 2004 by Hurricane Francis and then with 5 feet
from Ivan just days later. Although we suffered such a
catastrophic loss, that experience pales in comparison to the
nightmare we have endured fighting for our settlement with
FEMA, its contractor, Computer Sciences Corporation, Liberty
Mutual, and Countrywide. Watching the destruction of my family
through the settlement process has been far more painful than
the flood.
Because FEMA failed to honor its contract with us, we were
forced to live with my parents. Our 19-month-old toddler is a
light sleeper. To accommodate her, my 4-year-old sleeps on the
floor in the family room, my husband on the couch, and me in a
chair, for 7 months.
It breaks my heart to see how this is affecting my 4-year-
old daughter. She cries because she has been separated from her
friends at home for so long. She misses her bedroom and her
toys. She wants to sell lemonade to make money to fix our home.
She calls it the flood house.
The endless stress has left me physically and emotionally
exhausted. As a result, I have been constantly ill.
After the flood, I immediately filed an insurance claim.
Bellmon Adjustors, a third-party firm, informed me that their
records indicated we only had $5,800 in coverage, not the
$93,000 we paid for. We were shocked. This was the first we
learned of this problem.
I immediately contacted Liberty Mutual's flood processing
center and was told, unbeknownst to me, FEMA redesignated our
flood zone. Liberty Mutual confirmed that a notice regarding
the policy change had not been sent to me. Likewise, my agent
stated he never received a notice, nor did my lender, as
required by law.
Liberty Mutual's vendor told me not to worry; the policy
would be reinstated with proper coverage, and we would receive
a retroactive bill. The next day, Liberty Mutual's vendor left
a message stating they discovered an unsigned computer-
generated copy of the letter regarding the redesignation that I
should have received.
I learned Federal law required my lender to maintain
adequate coverage on the loan. I next contacted a FEMA
underwriter, Mr. Van Dyke, who denied the existence of the
Federal requirement imposed upon the lender. After many calls,
FEMA's Van Dyke reluctantly admitted the law existed and
questioned why I wasn't suing my lender and insurance company
for errors.
Despite our 8 years of faithfully paying premiums, neither
Countrywide, Liberty Mutual, nor FEMA would accept
responsibility for the failed notification process. Clearly,
one or more of these entities is at fault, and FEMA has
oversight of Countrywide and Liberty Mutual.
It is common knowledge the NFIP is virtually suit-proof in
that unless fraud is proven, attorney's fees and punitive
damages are not recoverable. We will be fortunate to receive 60
percent of what we are owed years from now. In the meantime,
FEMA and our insurance company are taunting us to sue them.
I eventually went round and round with FEMA. First, they
said they would reform my policy to provide the coverage that
appeared on the original declarations page. Then they reneged.
Then they lost my case and said my case was closed. All the
while, my 4-year-old sleeps on the floor and my husband and I
sleep on the couch and a chair.
From the beginning, we should have received clear
information rather than four-way finger-pointing between FEMA,
CSC, Liberty Mutual, and Countrywide. Had it not been for the
victims web site, femainfo.us, we never would have known that
history repeats itself in regard to the NFIP, its contractors,
and business partners.
A Federal program should be capable of handling the
American public. Instead, a citizens group is carrying FEMA's
load. Something is terribly wrong here. I cannot believe that
Congress ever intended to set up a premium-funded program where
the policyholders have no rights, a program that has no
oversight and no accountability to the very people that fund
it--the policyholders.
Liberty Mutual reluctantly filed an E and O claim and
offered us 50 cents on the dollar. Just like the Isabel
victims, we are now trapped in limbo 7 months later along with
many of my neighbors. They too are flood insurance victims,
each with their own claims adjusting horror story.
We want our lives back. We want to go home. We want to be
happy again. Isabel is being replayed in Pennsylvania. Clearly,
FEMA's NFIP is broken.
Please use your power to right this dreadful situation. The
information is now readily available, and I urge you to set
aside the several days of testimony it will take to expose the
NFIP disaster. Thousands of us are desperately depending on
each of you to help us regain our homes and our lives.
Again, thank you for the opportunity to testify today, and
I look forward to answering questions.
[The prepared statement of Beth Beam can be found on page
64 in the appendix.]
Mr. Fitzpatrick. Thank you, Ms. Beam, for bringing your
family's story to Congress.
Our next witness is Larry Bearekman, and, Larry, you have
already been introduced by Congresswoman Davis. You have 5
minutes.
STATEMENT OF LARRY BEAREKMAN, POQUOSON, VIRGINIA
Mr. Bearekman. Thank you, Chairman and subcommittee
members. I want to especially thank Joanne Davis for giving me
the opportunity to come up here and witness to what has
happened to us.
I live in the City of Poquoson. It is a small, quaint city
on the Chesapeake Bay near Hampton, Virginia, about 11,000
people. It has good schools. It is a great place to raise your
children. Unfortunately, the highest ground in the whole city
is about 11 and a half feet.
September 18, 2003, my wife and youngest son went to
Richmond to stay with my parents. I stayed at the house with my
two teenage sons, and Hurricane Isabel arrives. We were able to
stay in the house until 10 a.m. That morning, we grabbed what
keepsakes and things we valued and hit the road.
September 19th, I can see it like it was yesterday. Myself
and my two teenage sons tried to get back to the house. It took
us 3 hours to get within a couple of miles of the house because
of all the rubbish, debris, trees, telephone poles that were
all over the roads. It looked like a war zone. We had to
abandon the car. It was just unbelievable, the amount of
debris.
We were walking down the road and we were walking on 12
inches of seaweed, lawn chairs, buoys, everything you can think
of. The smell, the smell of fuel oil, sewage, swamp mud, and on
top of that, when we got to the house, my door is wide open. I
didn't realize what the force of the water could do.
We went into the house. The furniture, all of our
belongings are all over the place. I went back outside, and you
could see the mud packed on the side of the house, how high the
water got to. It got to the bottom of the window sills. The
fuel oil tank in the back of my yard actually was dislodged,
and I know that it was half-filled and probably weighed in the
proximity of about a thousand pounds.
That evening, my wife came back from Richmond, and all we
could do was hug and cry. After a minute, I just had to take
deep breath, and I told her, I said, Honey everything will be
fine. I said we are insured. If I would have known then what I
know now, I couldn't have said that statement.
I have a lot to say, a lot of things to cover, and not
enough time, but I would like to point out that I am one
person, we are one family, we are five victims. There are
thousands and thousands of other victims who have been damaged,
taken advantage of, and not given their rights. Of all my
neighbors, there is not a one that has told me that they had
everything paid for. Just recently, I talked to and was aware
of two of my neighbors that did finally settle for the full
amount of damage to their houses. They were paid the same
damages that I had put a claim in for through the outreach
program and they got fully covered, and then my file was ready
to be reviewed about August 13th, as in my written statement.
At that time, Charley hit the next day and you could not find a
FEMA representative up in their offices. I think it is up in
New Jersey.
At that time, I had been put off, run around, and I hired a
consultant, insurance consultant, licensed insurance
consultant, who was trying to help me with my situation.
Mr. Griffin says that it is their intent to follow the
rules and regulations. Well, if you look explicitly at my
written testimony, which I cannot cover everything, you will
see that there are a lot of discrepancies. One that I would
like to place emphasis on is on the next day. On March 1st, I
basically had gotten an engineering company to do a report on
some damage of the house. The insurance agent said we cannot
use your engineering consultant, which he told me that I
needed, and it ended up costing me $400.
So they hired their own engineering company, Rimkus Group.
If you will notice on Exhibit P, this is a letter that was
written from David Maurstad to Governor George Allen. He took
this copy and sent it to Joanne Davis. That was her reply from
him on the same issue. In the third paragraph, he basically
misrepresents the language and creates an untrue statement in
reference to my engineering report.
He says a report from Norman Davis, architect, a firm hired
by Mr. Bearekman, was submitted to the engineer for review in
conjunction with this inspection. He says, ``It identified a
construction defect of undersized foundations.'' If you look at
that exhibit in the written testimony, you will see that there
was no mention of a defect. It basically said that the
foundation would not meet today's codes and that is why it
would have to be upgraded. When the house was built in 1970, it
met code.
So what he has done is, also if you look at the next day,
March 1st, they had my engineering report and said that they
could not use it. They had to go to and do their own
engineering report. And now he is trying to use my engineering
report to substantiate his denial of my insurance when, in
fact, through the outreach program, he paid other homeowners
for this exact same damage, same type of construction, and then
turns around and denies everybody else from August 13th on.
I know I have run over my time. I appreciate the slight
extension, if you have got any questions, and I really do
appreciate this opportunity.
Thank you.
[The prepared statement of Larry Bearekman can be found on
page 69 in the appendix.]
Mr. Fitzpatrick. Thank you, Mr. Bearekman, and you should
know that your testimony and the testimony Ms. Beam and others,
the written testimony, are all made part of the record. We
appreciate that.
Our next witness is Steve Kanstoroom, who is a resident of
Ashton, Maryland. He began examining the National Flood
Insurance Program 2 years ago in response to a neighbor's
problems following a flood event.
Steve, you have 5 minutes.
STATEMENT OF STEVEN J. KANSTOROOM, OXFORD, MARYLAND
Mr. Kanstoroom. Thank you, Mr. Chairman, for inviting me
here to testify today.
My home is in Oxford, Maryland. It is on Maryland's eastern
shore, and over the past 15 months, I have spent more than
6,000 hours investigating the National Flood Insurance Program
and its problems. Prior to Isabel, I retired as a pattern
recognition and fraud detection expert. I was responsible for
programs with millions of customers, billions of dollars, and
making certain that those programs operated consistently with
Federal regulations. That was my job.
I gained my experience in processing these multibillion
dollar bank portfolios and corporate portfolios from leading
experts in some of the largest banks in the country, MasterCard
International, Visa USA, U.S. Secret Service, Postal
Inspectors. Prior to that, I processed for the Department of
Justice and others.
I have got solutions. I'm so troubled to sit here. I heard
what Congressman Ney said. I heard Congresswoman Melissa Hart.
I have got the answers. I have got all the answers. I can't
explain something larger than Enron in 5 minutes. I have got
them. I can do it in 15. I can't do it in 5.
But what I would ask, is ask me questions. I will give the
answers, and I will just do the best that I can to speak to
these points. What I would ask is, ask me about the prior
administrations. I lined up the appointees to testify here
today, the Presidential appointees, the folks who ran the
program for Mr. Maurstad. What they will tell you and if you
look at the record, of course, the program is to restore people
to their pre-loss condition. This nonsense about it never did
is just that. It is total poppycock.
The fact of the matter is what they are doing is spinning
this and saying, Well, we are talking contents. We are not
talking contents. We are talking the four corners of your home
and, of course, replacement cost value means you restore it to
the pre-loss condition. The industry knows what replacement
cost value means.
Well, regardless of what Congress said, it is how they
trained these people. The fact is I received very significant
press when I learned of the pricing disparity, this wrong set
of numbers that was being used. I took it to the Senate. The
Senate hearing largely turned on that finding. Look at my
testimony. You will see the published data says it is a
fraudulent use of that data. That is what he is saying to the
insurance industry. That is what he's saying to Florida
officials. That is what he said to Jeb Bush. That is what he
said to Charley Crist. That is what he said to Tom Gallager,
fraudulent use of the numbers. Look in the testimony.
The fact of the matter is the four corners of your house,
if it is properly insured, of course it is replacement cost
value. Look in the policy. It just pains me to see these people
sleeping on the floor and to have officials come in here and
try to spin this into something that it is not.
Once I received the positive press, I started having
whistle-blowers call late at night. I had them from FEMA. I had
them from Computer Sciences Corporation. I had them from
insurance industry officials.
I shared that information with former fellow insurance
administrator Robert Hunter, and what he said was history seems
to be repeating itself. The fact of the matter is these
problems are coming from the industry's desire to hold their
claims payments down. FEMA will say and then the industry will
say, well, but it is not coming of our pocket; it is not coming
out of the carrier's pocket; there should be no problem here.
Well, but there is. The same adjustor adjusts that the flood
loss is upstairs, and that adjustor is working for the carrier,
and the carrier doesn't want to pay $2 a square foot for sheet
rock on the first floor coming out of the NFIP budget. They
want to pay $1.46, for example. When the tree falls through the
roof upstairs from the same storm, that is what they want to
pay.
Clearly, if one pays $2 on the flood, another pays $1.46,
it is going to jump off the page. That is a big part of the
problem. That is where it is coming from.
Another place that it is coming from is Computer Sciences
Corporation. I found the training problem disparity whereby
FEMA trains its sales agents to tell customers that they will
be restored to the pre-loss condition. I was there. An industry
person was with me. He wanted to testify today. He is sitting
right over there. He will tell you this is how they train us.
This is what FEMA says. That is what Bill Griffin's testimony
says. We pay for the unbroken chain of events flowing from the
loss; that is what they say.
CSC then turns around and trains the claims adjusters very
differently, narrowly defined coverage, in limited amounts.
That is a problem. It is not a question of the agents don't
know what they are doing. It is a question of the same
companies training the agents that you have coverage and
turning around and training the adjusters that you don't. I
have got the adjustor training on video tape. We have got the
witnesses in the room that can attest to the agent training.
Regarding Mr. Maurstad's surprise that the marketing
materials say that it is restored to the pre-loss condition, it
is not just that one piece that I sent to Congresswoman Davis.
I have got numerous examples where the industry says they will
restore people to their pre-loss condition. Again, I can't go
through that in a couple of minutes.
Lastly, the publisher of the data cites WINK TV's videos in
Florida. You need to look at those. They are available on the
web site. You need to look at those.
What I would ask is, ask me the questions. Ask me about the
training disparity, how I know. Ask me about the underlying
reasons for low-balling. Ask me about what CSC's private
contractor knew and when they knew it. It is not just words. I
have got the documents. We have got the witnesses, and they
very much wanted to testify here today.
I appreciate the opportunity to be here. I appreciate the
opportunity to answer any questions.
[The prepared statement of Steven J. Kanstoroom can be
found on page 150 in the appendix.]
Mr. Fitzpatrick. Thank you, Mr. Kanstoroom.
Our final witness is Ms. Georgette Stelyn, who has been
introduced by Congresswoman Davis previously.
Georgette, you have 5 minutes.
STATEMENT OF GEORGETTE J. STELYN, SEAFORD, VIRGINIA
Ms. Stelyn. First, I would like to thank you, the
subcommittee and chairman, for my letting me testify today.
I would like to start by telling you what I was doing
actually on September 17th, the day before the storm. I had
called my insurance agent to make sure that all of my insurance
papers were in order. He reassured me that I was plenty
insured. I had $225,000 on my dwelling and $52,000 on my
contents. He said you should be fine with what you own and
where you are.
So I started to prepare for the storm. I lifted everything
in my house off the floor 2 to 3 feet in hopes not to lose as
much, and then we had a mandatory evacuation. So I packed up my
minivan with my four children and my dog, everything that I
felt was important, which was my home videos and my photo
albums, and said happy anniversary to my husband.
Then I woke up on September 18th. There was a phone call
from two friends of mine. They had just cut through the trees
and gotten to my house. They told me everything I own is gone,
two walls of my house are missing, and the roof collapsed. I
dropped to my knees crying. I didn't know what to say to my
four kids. I didn't know where to go or even what to do.
So I packed my minivan back up from the hotel that we
stayed in that night and headed back home to I don't know what.
On the way home, I called my insurance agent and told him my
situation and to please immediately put my claim in, which he
did so. Then it was September 22nd. I had an insurance adjustor
come out to my house. He was at my house for about 30 minutes,
took a few measurements and I would say approximately 12
photos. I never saw the man again. He never came out to my
residence again, and he is going to tell me what my house is
worth.
So before he left, I had asked him what do I do; what do I
need to do? He asked if I needed any money. He gave me a check
for $5,000, and then he just told me to start itemizing
everything that is damaged. I said I will do that, which I did.
I itemized 2,603 things that were damaged. There was a lot
more, but that is as far as I itemized, which came to a total
of $193,968, which he depreciated 71 percent of.
After several weeks going by, I had numerous conversations
with my insurance adjustor from Travellers asking when I can
receive more money. He had said my claim is actually a very
large claim; it is going to take some time to get to. I
immediately started construction. I went through my savings, I
cashed out stocks, and I had borrowed money. I was now 40,000
out of my pocket waiting for my settlement.
Then my adjustor came to me with a copy of a settlement and
the grand total of $49,200. I had asked him, no one can build a
house on this price, not me or anyone else. So I am looking
over the papers with him, and I started pointing out things
that were missing in my settlement, doors, walls fixtures,
numerous things, and then I questioned his prices, why am I
paying this much for 2 by 4s and sheet rock when my builder is
charging me this much for 2 by 4s and sheet rock; why are your
prices so much lower than what the store is charging me?
So he had said this is a rough draft. What I will do is we
will go over it, and if you can get me any receipts on any of
your newly renovations I have done on the house, do so. So I
started hunting down receipts, a receipt for my new carpet, a
receipt that my refrigerator was 2 months old, all the receipts
I can receive. He went over it and he gave me his new revised
draft, which was $124,923, which the house was only going to
cost me 210,000 to replace. So I am still being cheated by the
adjustor and still short.
Within this process, I had to stop my construction and wait
2 months, stopped construction waiting for my settlement from
the adjustor.
Every year, I am forced by law to pay my insurance and I
have to pay it on time. I am not allowed to be late, and when
it came time for the NFIP and FEMA to help me, they instead
cheated me. They stalled my claim, drug it out as long as they
could; it was such a big claim. They used a software program
which did not pay for the materials that I was paying for down
at the store, and when it comes to taxes, I never saw any
taxes. My 2 by 4s, I had to pay taxes on. My contents, I had to
pay taxes on them. There was nothing in there with the taxes.
So where am I today, you may ask. I am now a year and a
half down the road. I have moved into my house. I don't own a
couch yet. Contents money went structure. ICC money, they were
4,000 short. So I am now single, actually getting a divorce,
with my four children. I have thousands of dollars in debt. My
builders are putting a mechanical lien against my house for
$38,000 because I don't have the money to pay.
The sad part is what has happened to me has happened to
thousands and thousands of families. I have eight neighbors.
Three of us are back. Five are not even there yet. This has
happened to thousands, and all I can say is I plead, I beg, I
ask for someone to please get the NFIP, FEMA; everyone needs to
get everything straight and stop cheating us who are the people
that are paying on their policies.
And I thank you.
[The prepared statement of Georgette J. Stelyn can be found
on page 244 in the appendix.]
Mr. Fitzpatrick. Thank you, Ms. Stelyn.
The committee appreciates the personal testimony of
everybody, especially those who have been victimized by
flooding in your individual communities and those who stand in
the position of administration of the flood insurance program.
Mr. Jenkins, I was wondering if you could from the
industry's point of view address a couple of things. One is
regular everyday citizens who purchase flood insurance and
believe mistakenly or otherwise that--you have heard the
testimony here that they have been told pretty clearly that the
four corners of their structure, just talk about the structure
itself, their home, is covered in the event of a flood, and
then they find out while they are faithfully and dutifully
paying those premiums each and every year that there is no
coverage, or if there is coverage, there is inadequate
coverage, or even if there is inadequate coverage, that you
have got to fight with your own insurance company for months
subsequent to a flood with no place to live unless you are
fortunate enough to have family in the area.
What is the industry doing to address that concern, first,
and also 7 months since Ms. Beam has had her incident in
Ellwood City, Pennsylvania, you know, while I am sure companies
are watching and companies wanting to address that particular
situation, what are the companies doing to rectify the
situation, to change industry standards so that families like
the Stelyns and the Beams who are here today are not going to
have to endure the problems that they have endured in the past?
Mr. Jenkins. I think that question might be better directed
to Mr. Griffin who represents the insurance companies because
we have not done any work looking specifically at that.
Mr. Griffin. I would be happy to try and address that
issue. Certainly in any program with the thousands of claims
that are going on, there are problems that arise. No system is
perfect. We understand that there are people that have been and
still are out of their homes and have problems.
I will tell you that the industry works very hard to try
and settle all the claims they can as fairly as possible. I
will also say that you heard testimony from Director Maurstad.
Of the 24,000 claims that were given the opportunity to be
reviewed, in the end there were 2,000, a little over 2,000 that
requested a review and a little over a thousand of them that
ended up with a different settlement. Certainly, that is not an
entirely acceptable amount, but as far as percentage concern,
that still means that roughly 96 percent of the people got the
amount of insurance under the program that is paid for by the
contract or called for by the contract.
With regard to going forward, we are hoping that many of
the provisions that were put in under Title II will help and do
things that will make things better for people to better
understand what they are actually purchasing, for us to be
better able to help them with the claims process, and we are
working very closely or more closely than we have with FEMA in
the past to try and rectify some of these problems.
I will say that prior administrations and prior directors
at FEMA were not as supportive of the public-private
partnership that needs to exist for this program to work, and
we certainly are happy to see Director Maurstad in this
position because he does seem to understand the importance, but
it is a public-private partnership. It involves the government.
It involves the policyholders. It involves the insurers.
We certainly want to do anything we can to make it better.
Again, I can't say that--no system is perfect. We can't always
make everyone happy, but we are trying to do our best to
improve it.
Mr. Fitzpatrick. We have heard testimony here today that
victims were forced to negotiate with, deal with, a whole line
of adjusters. FEMA has an adjustor. The insurance company has
an adjustor. I heard someone say the Small Business
Administration, if you are going for a low-interest loan, they
have an adjustor. The adjusters may or may not communicate with
each other, probably don't, may or may not agree with or be
talking about the same programs.
When you talk about a public-private partnership between
the government and the industry, what steps are you taking to
agree to a single point of contact, a single adjustor, they can
deal with so they can get an answer? They can live with an
answer. What they can't live with is no answer or conflicting
answers.
Mr. Griffin. Very much understood. Many of our larger
companies and many of the write-your-own companies that are
involved in this have gone to a single adjustor process. So
that means they would have the same adjustor for both the wind
storm or the flood or the regular home damage. Now, what we
can't do is change the way that FEMA works, and sometimes when
you get involved with something that is to be done on an
appeals process, there is a FEMA adjustor that needs to get
involved secondarily.
So that process has to be streamlined, and there is some
way that we can work that better. I will say that based on what
we saw in Isabel and what we are seeing coming out of Florida,
there has been improvement in the program and how that works.
It isn't flawless, but there has been improvement.
Mr. Fitzpatrick. I would like to recognize Mr. Scott of
Georgia.
Mr. Scott. Thank you very much, Mr. Chairman.
I would just first to like to say to Mrs. Stelyn, is it?
Ms. Stelyn. Yes, sir.
Mr. Scott. That I certainly was moved by your testimony and
my heart certainly goes out for what you and others have gone
through, and we hope that with this hearing today as a result
of your testimony and others that we can make sure that this
program runs much smoother.
Can I ask you just for a moment if you could describe your
interaction with FEMA's review task force? I represent in my
district FEMA relocated at Fort Gill for their operations in
this whole southeastern United States.
Ms. Stelyn. You are talking about the form they sent and
they had mailed it back with all the information that they
wanted, and they called me and they asked me a few more
questions, which I had spoke to them maybe a little later than
that, and I don't know who I spoke to, but I will never forget
my response: I am sorry, I probably could get you a few
thousand dollars more, but we will be leaving this office,
wherever they were, in 2 weeks to go down to Florida for that
hurricane that was just hit.
Mr. Scott. Okay.
Ms. Stelyn. So, basically, he could not help me. They were
going to Florida in 2 weeks. So that is how the review process
worked for me.
Mr. Scott. So you really don't think you got the
professional quality that you desired?
Ms. Stelyn. I was basically told, sorry, you know, we are
leaving in 2 weeks; there is another hurricane. I am now on the
back burner.
Mr. Scott. Okay.
Ms. Stelyn. I mean, I remember Ms. Hart there saying she is
hoping her review process goes quickly, and I was thinking to
the back of myself, good luck.
Mr. Scott. Okay. Thank you.
Mr. Kanstoroom, you are a medical doctor; is that correct?
Mr. Kanstoroom. No. Pattern recognition and fraud detection
expert.
Mr. Scott. Okay. What do you recommend that FEMA do to
better educate and monitor insurance agents?
Mr. Kanstoroom. Actually, what I saw in large part was not
a problem with the education of the agents. It is the problem
with the education of adjusters. If the claimants, the
policyholders, had the same materials that the sales agents
have and if the adjusters had the same materials that the sales
agents have, then we wouldn't be here today, I believe. It is
just that simple.
I mean, as far as the review process goes, it was a sham.
What first got these folks calling me was it was people on the
review team who called me. My phone rang at 10 o'clock one
night. It was someone from inside of CSC. It was a victim just
like Ms. Stelyn who had sent a letter, heart-felt letter--I
know you are busy, a big hurricane; I am desperate; I have got
a little granddaughter; I take care of my granddaughter--and
signs it, please do what you can, including Sammy the kitten.
Well, that turned into the office joke at the task force. That
is what pushed the person over the edge at the task force to
reach out and call me at 10 o'clock at night.
The task force wasn't independent as the Senate directed.
One of the early documents they gave me was the roster. Darned
if it wasn't the same adjusters and adjusting firms in large
part that low-balled the people in the first place in all of
the management, identical management. So this review was a
farce. There was no review.
As far as the numbers that they cite, good grief. One of
the things that they say is less than half the notices went. I
have got victims telling me I never received a notice, and when
they call, you know what they would say? Well, you know if we
review it, you might end up with less; you are going to have to
pay some money back.
Now, in this woman's case, there is no way she is going to
ask for a review. More over, when the reviewer would come out,
they would just misinterpret the policy once again. So it is
really one of--I mean this works. It works for the industry for
the reason I said before. It is an education issue for the
adjusters, not the agents. Sure, some agents didn't tell the
victims that they have to elect contents coverage, but buy and
large, that is not what we are here for, contents coverage.
Sure, that is a problem, but they need to be speaking from the
same book, not one training manual for adjusters, what it
covers, and a different disparate manual for agents.
Mr. Scott. So your response is it is not a matter of a
number of adjusters; it is a matter of adequate training and
education for the adjusters? You don't sense any purposefulness
here, do you?
Mr. Kanstoroom. Absolutely there is purposefulness. Yes,
absolutely. Absolutely without a doubt.
Let me give you an example. We have got--let me think. I
think the man's name is Jeff Akin. A letter went to the Senate,
to the Senate Banking Committee. Two primary issues turned that
hearing. Number one was this wrong set of prices; number two,
this letter, and I remember it. It says--actually, I may have a
copy. It says the man has, let us say, $107,000 loss. His
adjustor comes out and says he covered. CSC's Rodney Cross
comes out and out, the letter says, and he told the man he is
not covered, zero. FEMA made a mistake; you don't really have
coverage although you have been paying all these years.
The man enlisted the help of Senator Dole. Anthony Lowee
sends a letter, of course, you have coverage. The victim calls
the adjustor back, gee, Mr. Valentine, I thought you would like
to know I really do have coverage so the same thing doesn't
happen to my neighbor, to which the letter reads, well, I knew
that, but CSC's Rodney Cross told me not to tell you.
Of course, it is purposeful. I could give you a thousand
such examples. The problem is this purposefulness is destroying
these people's lives. It is not a matter of it hurts them. They
can't recover. It is no different than somebody getting
evicted. They cannot recover from the situation. Look at her.
They are separated. She says she is going to be divorced. This
is a disaster and so easily fixed. I have got the
recommendations. I have worked with the folks inside FEMA. I
have worked with the people inside CSC. We have got the
recommendations right now. We don't need another audit, with
all due respect. What we need is to look at what I have got. I
have got 6,000 hours here.
Mr. Scott. Let me just ask it generally. I am sure you have
got them here, but could you share with us specifically what
the priority of your recommendations would be to fix this
problem?
Mr. Kanstoroom. I do. There are 20 areas of low-balling and
they are in any written. I can flip to it. I can give you some
right off the top of my head, actually all of them, most
likely.
The number one issue is somehow somebody put into the FEMA
training manual that direct physical loss equates with direct
physical contact. That is incorrect. I brought that to FEMA's
attention last year. They issued a claims guidance memo on May
7th, and the point was what the adjusters were saying was
unless water touched it, there is no coverage. Well, it makes
perfect sense to the layperson, but wait a minute. What if it
wicks up your wall? What if your insulation gets wet and it
goes up your wall and now you have mold on your ceiling? Of
course, that is covered, but what these adjusters were saying
is water didn't touch the inside of your ceiling; there is no
coverage.
That one mistake that FEMA has since removed from their
manual after I brought it to their attention, just like I
brought to their attention about the press release on Monday,
that one mistake easily accounts for a 50 percent difference in
these claims payments, and there are 20 of them. That is one,
and they are in my testimony.
Mr. Scott. Okay. I don't want to take up much more time on
that.
Mr. Fitzpatrick. The gentleman's time has expired.
Mr. Scott. Thank you.
Mr. Fitzpatrick. Thank you, Mr. Scott.
I recognize Chairman Ney.
Chairman Ney. Thank you, Mr. Chairman.
Ironically, two of our caseworkers from Ohio happen to be
here, Joy Dillon and Jody Treadway. They are here for another
reason. If we knew they would have gotten finished earlier, I
would have probably put them up here on the witness table
because they have dealt for a decade with issues. And I was
saying earlier I am seeing more complaints in the last few
years than I saw in previous years. So therefore, you know, I
know something is amiss.
There is not enough time, Mr. Chairman, today for all the
questions I could ask, but I would actually like at some point
in time to make some time, Mr. Kanstoroom, to take time to look
over everything you have, you know, to take the hour or two or
whatever to be able to do that.
I did have a question I wanted to ask Ms. Stelyn. Do you
have a copy of your original policy? Do you?
Ms. Stelyn. Not on me.
Chairman Ney. But you do have a copy?
Ms. Stelyn. Yes. In my car.
Chairman Ney. Okay. Because I would like to also look at
that policy, and when you countered back, I assume to the
agent, and you said, look, my policy says replacement--and I
saw the pictures of, obviously, the damage that occurred, did
it occur above the basement level?
Ms. Stelyn. This house is on a slab.
Chairman Ney. Oh.
Ms. Stelyn. I am on the Chesapeake Bay. I had 5 feet of
water.
Chairman Ney. Okay. The way I looked at it, I am sorry. I
guess I was looking at the picture wrong.
So it was on a slab. So it came in through one floor and
got everything?
Ms. Stelyn. I lost two walls and the roof collapsed.
Chairman Ney. So, obviously, it was definite replacement
value because the house is gone.
Ms. Stelyn. I don't think I would say I got replacement
value.
Chairman Ney. No, no, no. I mean it was to be replacement
value because it is gone.
Ms. Stelyn. Yes. It should have been, yes.
Chairman Ney. Not 10 percent damage or 20 percent damage,
it is gone.
Ms. Stelyn. Yes.
Chairman Ney. Now, when you confronted them, what year was
this?
Ms. Stelyn. When I confronted them what?
Chairman Ney. What year?
Ms. Stelyn. This is Isabel's storm, which was September 18,
2003.
Chairman Ney. And when you confronted them about why aren't
you getting the replacement value, what was then their answer
to that? Because if it is in the policy, it is in that policy.
Ms. Stelyn. I was told by him this is the most I can get
you; I am, in fact, giving you more than what I probably should
be writing. I thought I was getting a gift, you know, and he
kept pushing to me this computer program. He plugged in the
number, whatever came out is what I got unless I could provide
a receipt, and that is how the whole thing went down. I could
not get a receipt. I got whatever that computer told him.
Chairman Ney. Could someone, anybody, on the panel answer
me one thing? I have heard this twice today. What is this issue
where for sheet rock, it has got to be a certain price? I mean,
if my house, you know--I am lucky. I have never had damage, but
if something is damaged, let us say my kitchen, by a fire or
something, I would assume I would be paid a certain price for
the worth of the appliances, and then it would be up to me to
go shopping if I want to by a used refrigerator or I want to
buy a new refrigerator. I don't understand how the policy is
coming back and saying the bedrock has got to be ``X'' dollars
and 46 cents.
If they cut you a check to say, here, this is for your
damage, you should be free, then, I assume, to just buy what
you would want to buy whether it is cheaper or more expensive.
Let us say they did the perfect thing and gave you replacement
value and said here, $200,000, it is yours. Why do you have to
start, from what I am hearing, messing around with here is how
much sheet rock costs?
Mr. Kanstoroom. I can explain that.
Chairman Ney. Okay.
Mr. Kanstoroom. They started with what they deemed a price
guide, they FEMA, and as it was explained to me, Computer
Sciences Corporation developed the price guide, and on the
price guide, which I have copies of, it clearly states the
source is the National Construction Estimator. The publisher of
the data of the National Construction Estimator who wished to
be here today, but due to the constraints the committee
wouldn't permit, he submitted written testimony.
What he says is quote, leading the consumer to believe that
new construction pricing represents a fair and complete
valuation of their damages is, in my expert opinion,
fraudulent.
And so the problem was CSC had these price guides and
clearly printed on the bottom on some States--I believe I have
Maryland, North Carolina, and Virginia. Some States, it said
only to be used as a guide or words to that effect. Others, it
didn't, and that led to these claims adjusters coming out and
saying, believe it or not, Federal law requires that I do not
exceed these guidelines.
Now, I brought that to FEMA's attention several days before
the Senate hearing. It took them 2 months to issue a bulletin,
and, again, that is a May 7th claims guidance memo, where they
say that is not how it needs to run and they can use contractor
bids and estimates, words to that effect; however, they never
told anybody. When you talk to the people on the task force,
they said I am not aware of such a memo.
Chairman Ney. Now, let us assume----
Mr. Redmer. Mr. Chairman, if I could interrupt, the issue
is not if the claim reimbursement should be a thousand dollars
and they actually give you a thousand dollars, at that point,
you can go out and take that thousand dollars and buy whatever
you want, whether it is $800 or whether it is $1200. The issue
is, based on the system, instead of the claim reimbursement
being a thousand dollars, you are getting a check for $400,
$500 or $600 at best, and that is where the friction is.
The adjudication of the claim typically is for pennies on
the dollar so that you don't get the amount that you could get
to go out and buy what you need to buy.
Chairman Ney. As commissioner, do you get people that
obviously are coming to the Department of Insurance and saying,
wait a minute, this isn't fair, and they file with you?
Mr. Redmer. Yes.
Chairman Ney. Do you have the ability under how we have
things set up to intervene at all?
Mr. Redmer. Before Hurricane Isabel, if you presented
yourself to Maryland, you received a letter and the letter said
we can't help you; it is a Federal program; here is the 800
number. Under Joy Hatchette, we set up a program where they
came to us and we facilitated communication and information and
we got inspections and those kinds of things, but we do not
have the ability as State regulators to regulate the claim
adjudication process like we do with a homeowner's claim. It is
completely pre-empted by Federal law.
And I need to stress that we have heard from victims this
afternoon that are young, educated, and articulate consumers.
Go to eastern Baltimore County in Congressman Ruppersberger's
district where you are dealing with folks that are in their
seventies or their eighties and older, and the frustration and
the bureaucracy is such that they don't call because they can't
navigate that bureaucratic system.
Chairman Ney. I am out of time. I apologize. I just think--
I understand. I am trying to estimate if it is partial damage.
You know, you can start to debate some of this, the prices. For
example, the total damage, I know with the homeowner's
insurance it says the replacement value for my home is blank.
It is already preset today. Now, if I upgrade my house, I tell
my agent. So that, in my mind, is the replacement value if it
burns down to the ground and there is no walls left or it is 95
percent gone. That is why in her case, if she has the policy,
it is puzzling.
Mr. Kanstoroom. I don't agree. What that is, that gives you
a right to sue.
Chairman Ney. What is that?
Mr. Kanstoroom. That policy. That is not a guarantee you
are going to paid.
Chairman Ney. It is in my mind.
Mr. Kanstoroom. No.
Chairman Ney. Before we get into a debate here, hear me
out. I think you will agree with me. In my mind, which as I am
sure was in her mind or his, this gentleman's mind, that is
what you get if it was gone. That is what I would think.
Mr. Kanstoroom. That is what they sell you, but that is not
what you get. What you get is a difficult negotiation with
people that are told these are the prices I can't deviate from,
and the question is, well, why would that be, and my answer is,
because it works for the property insurance side of their
business.
When Allstate sells you the flood policy, in most cases,
Allstate is selling you the wind policy. Allstate does not want
to pay, and this is from their adjusters and the documents. I
am not saying anything that is not easily verifiable. They
don't want to pay at $2 a foot for sheet rock upstairs. They
want to pay $1.46 upstairs, and so when their flood adjustor
comes out, he is going to tell you my book says it is $1.46.
Chairman Ney. And I will conclude. I am just saying this
needs cleared up because this goes beyond a misunderstanding.
This is going into turning someone's world upside down.
Now, if it says to you or to me in my policy, you know, by
the way, here is your replacement value, but we might have to
talk about this, then I go into it knowing, okay, there might
be a problem. But I, myself, when I read my policy, I assume
replacement means replacement. So we have got to clarify that
because it is a terrible problem for people.
I am sorry for running over.
Mr. Kanstoroom. When you read it, it says replacement cost
value. It is not a defined term in the policy. It is the
industry standard, and that is the meaning people take out of
it, and unfortunately that is not what they mean.
Chairman Ney. We want to work with you. I appreciate it.
Mr. Chairman, I appreciate it. I am sorry for running over.
I don't normally do that. I apologize to the other members.
Mr. Fitzpatrick. Thank you, Mr. Chairman.
The chair recognizes Mr. Ruppersberger.
Mr. Ruppersberger. Thank you.
We only have a short period of time, and I am going to ask
Mr. Redmer a question and Mr. Kanstoroom a question. What I am
really interested in, we have been working on this issue for a
long time with your office, Mr. Redmer, and, Mr. Kanstoroom,
you have been working with us and have done a lot of research.
What I am interested in and my questions are going to be to
results and recommendations that you have for this committee on
how we can try to fix the problem.
We have identified some of the issues, the industry
standards, and I think that is very relevant, because just
because it is the insurance industry standard doesn't mean that
their clients who they are selling policies to are being served
correctly. If we have another incident, we are going to have
the same problem again.
So, Mr. Redmer, we worked closely together when you were a
member of the House of Delegates. You did a great job there.
You know what constituent service is about. You also now as
insurance commissioner know what these issues are.
Based on what you have seen from the time we had Isabel
until now, from those two perspectives, what do you think needs
to be done as far as fixing the problem? I mean, a different
type of standard in the industry? A law by Congress to force
that we do something differently? FEMA being more responsive
about changing laws so they have the authority to do what they
need to do?
Remember, we don't have a lot of time. I have asked the
chairman to give me some more time if we could.
Mr. Redmer. And I appreciate that. In the spirit of time,
we have two reports that literally have dozens of
recommendations, and I could rattle on forever, but there needs
to be a clear claim adjudication process. There needs to be an
appeal process.
Mr. Ruppersberger. An appeal process where?
Mr. Redmer. With the Federal program. There is not a
clear----
Mr. Ruppersberger. How would you recommend it work so we
don't get caught up in a bureaucracy?
Mr. Redmer. Well, the easiest way to do it is to make it
consistent with what happens with other forms of insurance. One
of the problems that we have is that the Federal flood program
is different than homeowners insurance. The expectations are
that they are the same. Clearly, they are not. So the more that
we can make them similar, the more that we reduce the gaps that
are in the program.
Mr. Ruppersberger. How about a requirement or a system that
will require the people selling the insurance that part of that
requirement to sell is an education and then a verification so
that the person who might not have the sophistication feels
that they know what they are getting? That way, the
expectations are there.
Mr. Redmer. Certainly having enhanced education, training,
and disclosure is good.
Mr. Ruppersberger. That is part of the sale of the policy?
Mr. Redmer. Absolutely, but the problem is even with
adequate disclosure, you have gaps in the program. So you are
still only going to get 50 cents on the dollar.
Mr. Ruppersberger. So then what would you recommend to get
to the next level to get what the appropriate compensation is?
Money?
Mr. Redmer. Well, certainly there needs to be money, but
one of the things we have to do is make sure, number one, that
we close the gaps where we don't have coverage that we should
have coverage. We need to do a better job of training and
educating the adjusters so that they use the software
correctly.
There is an ability, and we have investigated the software
packages. You can take the plywood and throw in a modifier
because it is a renovation instead of new construction, but
either the adjusters are not trained how to do it or there are
financial incentives for them not to do it.
But again, there are dozens of recommendations.
Mr. Ruppersberger. Well, that is something that really is
important because we are talking about end gain, and I know
this is not my committee, but I would like you to get that.
Mr. Kanstoroom, you have done a lot of work. You have
worked with our office. You have represented or you have
advocated for a lot of people in my district as far as your
research and expertise. We have had conversations. I am
interested to know what you feel and if you have some
specifics--again, we have time issues--about the problems that
exist. Again, I am more interested in your recommendation on
what we need to do with respect to either do we need Congress
to pass a law. What do we need to do to deal with the issue of
insurance standards?
It shouldn't be industry standards. It should be standards
that we--because the Federal Government is involved and State
and local issues, it should be a system that works, and give me
your recommendations about problems that you see that are very
blatant. And is it an issue of problems or symptoms? I mean
where are we going here to solve it? I would really like to
hear recommendations because, in the end, this committee is
going to take what we do here today and attempt to resolve it
either through a law or whatever. So this is your chance, if
you can, to give me what you know.
Mr. Kanstoroom. Number one, these are symptoms that you are
hearing about today. There are much greater problems here that
have not even come out on the table. These are the symptoms.
As far as what you do in the short term, in my testimony,
written, there is a proposed bulletin to the industry that
details the 20 points of low-balling; here is the problem; here
is solution. I will gladly sit with whoever you want me to sit
with. After talking a couple of days, everyone is going to say,
oh, wow.
Mr. Ruppersberger. Well, we will talk to the chairman who
is very interested that we talk to the staff here and who will
meet with you and do the research.
Mr. Kanstoroom. The point is these people need help today.
So the short term is this bulletin goes today with instructions
that these claims have to be looked at to be in compliance with
what should have been done in the first place. That will get
people like Georgette back on her feet quickly because she
doesn't have time. She doesn't have time for hearings or
investigations. She doesn't have time. So if I could explain
that and show people how that works, that is number one.
As far as going forward in the medium term, there needs to
be oversight. The States, as you heard, really have very, very
little they can do other than bring this to people's attention.
In fact, in the Federal Government, there is no oversight
either.
The oversight comes from FEMA and that is really where the
problem is at. If there was an independent body not affiliated
with FEMA that had authority to approve these claims that come
up for review, that would be a giant step.
Mr. Ruppersberger. You are talking about an appeal process.
Mr. Kanstoroom. An appeal process. That is right, but not
affiliated with FEMA, not affiliated with these adjusting
firms, and there are plenty of independent experts that have no
affiliation, but that is a medium term solution that is easily
managed if people want to get it done. Longer term, quite
frankly, the regulations in large part are there. It is the
business of the way FEMA is interpreting them, and someone has
got to clunk them on the head to say here is really what is
supposed to happen.
Mr. Ruppersberger. There is also a problem with the
policies where people think they have flood insurance and they
don't. Is it the homeowners policy? How would you recommend
that we make sure that everyone understands what they have? I
mean what type of system would you put into effect?
Mr. Kanstoroom. It is quite simple. I actually drafted one
for FEMA a year ago. It is not that complicated. They have to
have the same play book. That is what it is. The victims have
one. The adjusters have another one. The agents have another
one. If they all have the same play book, they are all going to
see what they get. It is not that complicated.
Mr. Ruppersberger. By the way, I mean, you do a lot of
work. Why don't you tell the staff and the committee some of
your background, how you have had past experience in the area
of insurance adjusting.
Mr. Kanstoroom. Twenty-two years experience of pattern
recognition and fraud detection for some of the largest
corporations in the world, and what my job was to do was to
spot patterns of fraud, quite frankly. While it was on a much
larger scale than this is, that is my background.
Mr. Ruppersberger. Are you alleging that there has been
fraud here?
Mr. Kanstoroom. Absolutely.
Mr. Ruppersberger. Where? You don't have to name names
because we are a Congressional committee, not a grand jury, but
where have you seen fraud that we can look at to see where
there are problems?
Mr. Kanstoroom. I have seen fraud in the adjusting
practice. I have seen fraud where----
Mr. Ruppersberger. What kind of fraud?
Mr. Kanstoroom. Flat-out wrongful denial of a claim.
Mr. Ruppersberger. I am talking about actual fraud.
Mr. Kanstoroom. Fraud in using the wrong set of prices that
the publisher said is fraudulent.
Mr. Ruppersberger. In order to help the company?
Mr. Kanstoroom. Absolutely. In order to lower their costs,
in order to tell these people that these are the prices that
you are entitled to. That is wrong. It is wrong. They are
entitled to replacement cost value, not a synthetic new
construction price.
Mr. Ruppersberger. Are you saying that maybe there is a
policy within certain insurance companies to attempt to----
Mr. Kanstoroom. The whistle-blowers that wanted to testify
here today would tell you the way they keep their claims
adjusting practice is to keep the payments low. That is what
they would tell you.
Mr. Ruppersberger. You mean there is an incentive for
adjusters to--I want to hear it from you--an incentive for
adjusters to have a lower cost and that would be to their
benefit?
Mr. Kanstoroom. Absolutely. They make it up in volume. In
other words, when you look at a hundred adjusters--this is a
risk management perspective--it is who has got the lowest
payout and who has got the highest payout. You can have a
hundred adjusters you can invite to the storm. All things being
equal, one of them is going to have the lowest payout.
Mr. Ruppersberger. But isn't a part of being an adjustor
having certain independence to evaluate a claim and make
adjustments?
Mr. Kanstoroom. Absolutely, but not to knowingly use a
wrong set of numbers.
Mr. Ruppersberger. Well, that is what I want to get to,
because fraud is a very strong allegation. If it is there, we
want to deal with it, and I would really like to know more
about allegations of specifics, but because this is a
Congressional hearing, our rules don't allow us to do it
publicly, but we can talk to you about it.
Mr. Kanstoroom. Maybe if I could hit a high note here, I
worked with WINK TV in Fort Myers on putting a story together.
I had a phone call from Homeland Security, the Inspector
General's Office, counsel, and the bottom line was the
documents that I had uncovered, they told me, that incriminated
both FEMA and Homeland Security, the Inspector General's
Office, they told me and CBS recorded it--they actually aired
part of the story--it is unlawful for me to have anything that
incriminates FEMA or DHS, give them what I have got, destroy my
copies. And notwithstanding Senator Mikulski's request for an
IG investigation, they have no interest in investigating. They
said they have a small staff. They only have 450 people.
So there is a lot here. It is not going to go away. It is
going to get bigger.
Mr. Ruppersberger. Well, the reason we are having the
hearing is to try to look at a new system and we are trying to
get information to make sure that we take these victims here
today and to make sure that we understand what their problems
were so we can set up a new system. If there are issues of
fraud, we need to deal with it. I mean right away. Remember,
you have to prove it. So let us just not use the word loosely.
Mr. Kanstoroom. Of course not. The best way to prove it I
know is have the people that allege it sit here. Bob Hunter,
what he says is if the training disparity exists, as Mr.
Griffin will testify to and I will testify to it right now,
fraud has likely occurred on a massive scale, I think is the
quote. It is in my testimony, written.
You have got the former Presidential appointee Joanne
Howard. Her document is in my testimony. She says it is not the
way the program worked under her administration, or her tenure,
or was intended to. What she says is of course you restore the
people to the pre-loss condition. Again, it is in the written.
You can go with what it says.
As far as the publisher of the data, he wanted to be here
today. He had reservations to be here today. He will sit here
and tell you just as it is written this is a fraudulent use of
his data to tell this woman that this is a fair valuation based
on a number that they know is not right.
Mr. Ruppersberger. Well, let us get to this. The time is
almost up. Give me some basic recommendations on the system
itself, the industry standard, how you would from a legislative
point of view, how we would change this system that does not
seem to work, very quickly because we are way over my time. We
are supposed to only have 5 minutes. I don't know how we do
this, but that is our rules.
Mr. Kanstoroom. God is working. Number one, there is no
oversight.
Mr. Ruppersberger. Thank you, Mr. Chairman, for allowing
him to go over.
Mr. Kanstoroom. Thank you very much.
I don't contend that the system is that broken as much as
there is no management of it.
Mr. Ruppersberger. Accountability at the top.
Mr. Kanstoroom. That is right. And so there is an incentive
for the carriers to not overpay a claim. There is a penalty
that the carrier will pay if they overpay a claim. There is not
a penalty if they underpay. They could care less.
Mr. Ruppersberger. Mr. Redmer, do you basically agree with
some of the statements being made by Mr. Kanstoroom?
Mr. Redmer. As I mentioned, we have got two reports of
observations and recommendations and certainly accountability,
consistency of information, communication. I mean, we can go
down the list. As I mentioned earlier, there is no formal claim
process, no formal appeal process.
Mr. Ruppersberger. Okay. I would like to work on that, and
would I suggest that maybe you two get together. If there are
some allegations of fraud in our State, I would hope that you
can at least look at that and get the facts and data.
Mr. Redmer. We have been. Thank you.
Mr. Ruppersberger. Thank you.
Mr. Fitzpatrick. Thank you. The chair recognizes the
ranking member, Ms. Waters from California.
Ms. Waters. Thank you very much, Mr. Chairman and members.
I am sorry that I could not be here earlier for this most
important hearing. Our committees are overlapping and we have a
big important bankruptcy bill that is on the House floor today.
Again, we have very important legislation that is winding its
way through Congress this session, and we want to make sure
that we pay attention to all of it, but I have been briefed
about the hearing that has taken place today, and I am more
than concerned about policyholders who have been misled, who
have been cheated, who have been disrespected, who have not
been paid attention to, who have been left holding the bag, and
I tell you I am sick and tired of consumers who are being
exploited in America by too many entities.
Even as we work on the bankruptcy bill, there are problems
where the average American working family is just being done
in, and I want to tell you I am always having problems with
insurance, because we get too many complaints in our office
about folks who have been paying policies for years, and at the
point that they have a claim, then all of a sudden they are
told what was not covered and how they cannot be made whole,
and I think that if the Congress of the United States does not
act very aggressively to protect the consumers, then none of us
should be re-elected and sent back to office. This is
outrageous.
I take seriously that you have indicated, some of you, that
there are some recommendations that can easily be adopted by
the Congress of the United States. I am going to work with my
colleagues to see what those recommendations are, but I want to
ask one question that my staff as has directed me to, and it
has been identified that Mr. Kanstoroom may be able to explain
to us that very task force that was formed to re-examine the
Hurricane Isabel claims consisted of the very same adjusters
who denied the claims of policyholders in the first place. Is
that true?
Mr. Kanstoroom. Yes, it is true. Yes, it is true in that
the identical management was in charge of that task force, not
some of it, not most of it. All of it was identical. As far as
the adjusters, if you have a third-party adjusting firm that
worked the storm, while maybe Fred and Mary worked the storm,
that same firm had different people sitting on that task force,
and as it was explained to me, they literally turned around in
their chair and said, wait a minute; I have got Georgette's
claim here; you worked on this one, didn't you; oh, yeah, she
is, isn't due any more money. Okay. Boom, case closed. That was
the task force.
As far as this review business, the insider's report was
stacks of returned mail. Realize, her mailbox was gone. Where
is the mail going to go? So many of these people didn't get a
notice.
As far as the numbers that they are citing, when FEMA first
published the numbers of claims, and I want to say it was a
couple million dollars, the point was North Carolina Advocate
Beth Midget and myself, between the two of us, had claims that
we had worked that totaled the numbers of dollars that FEMA was
saying they had already approved on the task force. In other
words, just two people working had their numbers. The numbers
are garbage.
Ms. Waters. Well, again, my attention is being drawn to the
fact that Federal preemption may be causing some of the
problems that we are experiencing here, that one of the
byproducts of this Federal preemption is that if you have a
disinterested or hostile Federal regulator, the States are
powerless to act, that the insurance Commissioner Redmer should
be revisiting the issue of preemption and giving States a role
if they want to protect consumers.
Is that kind of the consensus here?
Mr. Kanstoroom. Yes.
Ms. Waters. Yes. All right. I will just promise you I will
do everything that I possibly can to correct what is wrong.
Again, what has been described here today causes me to feel
even stronger in my views about the problems of the insurance.
So thank you very much for coming. I do appreciate it.
Mr. Fitzpatrick. Thank you, Ms. Waters.
I just have one final question before we adjourn this
hearing for Commissioner Redmer and/or Mr. Griffin for the
industry. I think it was testified that the Beam family of
Pennsylvania purchased a home; I think it was about 8 years
ago. Like most young families, they had to get a mortgage. The
mortgage company required a flood insurance policy. The flood
insurance policy is probably paid for at settlement. The policy
itself is put in the settlement package in a lock box
somewhere, and for 8 years, this policy was paid on.
And then the first nightmare for the Beam family was they
were flooded twice in a week, and the second nightmare came in
the phone call that the flood coverage that the family thought
they had had been reduced from a number down to about 10
percent of what was originally sold, and I think that the
testimony was that the Federal Emergency Management Agency had
reworked, perhaps, the flood plain. Nobody told the Beam
family. Nobody told the mortgage company. As a result of that
reworking of the flood plain, the insurance company reduced the
amount of flood insurance coverage that that family would have
and would need not too distant in the future. Nobody notified
the Beam family and nobody notified the mortgage company.
Then after two floods in a week, somebody finds an unsigned
computer-generated letter in a file saying your coverage was
reduced from, I think it was 80-some thousand to about $8,000.
I am wondering what the industry standard is before you
change, a company changes, an industry changes, the insurance
that a family needs and relies on. What kind of notification is
required of this family before that happens so that what
happened to the Beam family of Pennsylvania does not happen to
another family?
Mr. Redmer. I can tell you the standard in Maryland as it
relates to insurance other than the flood insurance program
because, again, we don't regulate that, but in the instance of
an individual in Maryland filing a complaint, as a routine, we
go back to the carrier and we make them document to us that
their action complied with Maryland law, and we make them prove
to us that they mailed certain things and what have you.
Failing their ability to prove that their actions were
justified, we have the ability to make them pay the claim. We
don't have that ability with respect to the flood insurance
program.
Mr. Griffin. Let me, if I could, make a couple of
responses. First of all, I would not agree, with all due
respect, Ms. Waters, that we want this regulated at the State
level. This should stay a Federal program that is more commonly
administered that way.
Just to go back, I think, as I recall, it was $93,000 was
the amount that she originally had, and it was reduced to
somewhere around $7,800.
Ms. Beam. $5,800.
Mr. Griffin. Thank you. Typically, hopefully, the policy
that you get doesn't go in a lock box somewhere. Hopefully, a
copy of it may go in a lock box, but, hopefully, a policy you
get for a flood insurance policy, just like a homeowners
policy, just like an automobile policy, finds its way into a
file somewhere in your home so you can reference it when you
need it.
Every year, a policy, probably on flood insurance as well
as many other policies, probably 60 days ahead of when that
policy renews, a new declarations page is mailed out, and it
says on it how much coverage is provided and how much the
premium is. Now, that doesn't mean in this particular case that
there weren't problems with the system, but what it does tell
me is that there was a notice sent, not a notice that there was
a change, which maybe should have occurred. It probably should
have occurred based on what we saw and what has been reported,
but there was a declarations page sent out that showed the
difference and a lower number prior to the policy being
renewed.
Mr. Redmer. Mr. Chairman, I can tell you that there were
also too many instances in Maryland where somebody was living
in their home. They had their mortgage. They bought their flood
insurance. The flood insurance was paid through the escrow
account. And as the mortgage got sold from lender to lender to
lender, at some point in the process, it fell through the
cracks. The lender did not pay the premium. The policy
terminated because of a lapse of premium. The individual, for
whatever reason, didn't get notified, and there was no coverage
in force because of it falling through the cracks.
Ms. Waters. Mr. Chairman.
Mr. Fitzpatrick. Ms. Waters.
Ms. Waters. To the gentleman whose name I can't see on his
card because you are too far away, I understand that you are
the casualty insurance trade rep?
Mr. Griffin. Yes, ma'am.
Ms. Waters. And I respect that you disagree with me on
Federal preemption; however, let me take issue with you in your
explanation which basically says if people get their notices,
they ought to read them and it is not our fault that they
don't. Let me submit to you that when you purchase flood
insurance and you agree to pay a certain premium, the average
person believes that that is how much the premium is, and they
don't know about changes in the flood plain and other kinds of
things, and if the notice comes even a year or two later, they
trust the person who came out and sold them that this was the
best thing since popcorn, that it is going to be all right.
And no, we don't always read the notices because we think
we have been paying our premiums. We paid them on time, and we
expect that we have a relationship with the insurance company
that continues unless somehow somebody is going to make it
known in a very, very understandable way that we either
cancelled or there is going to be a big increase or premium or
something, and God knows even a reduction, which we never get.
So let me just say this, that no average working Americans
who are dealing with a lot of issues, don't always read the
fine print, but that is unacceptable when you have your biggest
life investment at stake. It just seems to me that there would
be a little bit more respect for the American homeowner and
taxpayer from our insurance companies that would engage us in
ways that we understand what it is they are doing to us, and I
don't think that is too much to ask.
Mr. Griffin. I don't think it is too much to ask that you
read the dec page when the bill comes. You read your bill when
your MasterCard bill comes. You look it over. You look at the
charges. You want to make sure that nothing in there that you
are charged is erroneous. It is not too much, to use your
words, to protect the largest investment you have to ask you to
look at the amount on there and make sure that it is the same
as it was previously or more or at least when you check the
premium to see if it has gone up or done down, and then that
will give you some indication of whether there has been a
change in the amount insurance.
Ms. Waters. Well, if I may, Mr. Chairman, yeah, we do
usually notice the numbers. What we don't always notice is the
fine print. We don't know when you sell us that policy that
should there be some change in government policy or work that
is going on to deal with the flood plain, that somehow the
policy that we agreed to is no longer in effect. We don't know
that, and we don't always read that fine print, and sometimes
we don't really know what people are saying to us, and the
agents never explain that.
I want to tell you I will just stand up for the average
person in that because I know it happens in too many families
over and over again, and I defend American families who don't
always read the fine print because I find that most of it is
constructed in ways that you don't want us to read it. The
print is fine. It is worded in ways that the average American
person reading it doesn't always understand.
So there are a lot of tricks to the trade, and if I can
close by telling you it is kind of like the ads that we see on
television that are selling you prescription drugs. They tell
you how wonderful the drug is and then they bring on flowers
and somebody running through the meadows looking very beautiful
when they tell you all of the side effects so that you are
distracted, looking at this beautiful person running through
the meadows, and you forget to concentrate on the side effects
because that is the tricks of the trade. Insurance companies
have a lot of them.
Thank you, sir.
Mr. Fitzpatrick. Thank you, Ms. Waters.
The chair notes that some members may have additional
questions for this panel which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 30 days for members to submit written questions to these
witnesses and to place their responses in the record.
We appreciate the attendance of all those who gave
testimony today.
This hearing is adjourned. Thank you.
[Whereupon, at 3:04 p.m., the subcommittee was adjourned.]
A P P E N D I X
April 14, 2005
[GRAPHIC] [TIFF OMITTED] T5513.001
[GRAPHIC] [TIFF OMITTED] T5513.002
[GRAPHIC] [TIFF OMITTED] T5513.003
[GRAPHIC] [TIFF OMITTED] T5513.004
[GRAPHIC] [TIFF OMITTED] T5513.005
[GRAPHIC] [TIFF OMITTED] T5513.006
[GRAPHIC] [TIFF OMITTED] T5513.007
[GRAPHIC] [TIFF OMITTED] T5513.008
[GRAPHIC] [TIFF OMITTED] T5513.009
[GRAPHIC] [TIFF OMITTED] T5513.010
[GRAPHIC] [TIFF OMITTED] T5513.011
[GRAPHIC] [TIFF OMITTED] T5513.012
[GRAPHIC] [TIFF OMITTED] T5513.013
[GRAPHIC] [TIFF OMITTED] T5513.014
[GRAPHIC] [TIFF OMITTED] T5513.015
[GRAPHIC] [TIFF OMITTED] T5513.016
[GRAPHIC] [TIFF OMITTED] T5513.017
[GRAPHIC] [TIFF OMITTED] T5513.018
[GRAPHIC] [TIFF OMITTED] T5513.019
[GRAPHIC] [TIFF OMITTED] T5513.020
[GRAPHIC] [TIFF OMITTED] T5513.021
[GRAPHIC] [TIFF OMITTED] T5513.022
[GRAPHIC] [TIFF OMITTED] T5513.023
[GRAPHIC] [TIFF OMITTED] T5513.024
[GRAPHIC] [TIFF OMITTED] T5513.025
[GRAPHIC] [TIFF OMITTED] T5513.026
[GRAPHIC] [TIFF OMITTED] T5513.027
[GRAPHIC] [TIFF OMITTED] T5513.028
[GRAPHIC] [TIFF OMITTED] T5513.029
[GRAPHIC] [TIFF OMITTED] T5513.030
[GRAPHIC] [TIFF OMITTED] T5513.031
[GRAPHIC] [TIFF OMITTED] T5513.032
[GRAPHIC] [TIFF OMITTED] T5513.033
[GRAPHIC] [TIFF OMITTED] T5513.034
[GRAPHIC] [TIFF OMITTED] T5513.035
[GRAPHIC] [TIFF OMITTED] T5513.036
[GRAPHIC] [TIFF OMITTED] T5513.037
[GRAPHIC] [TIFF OMITTED] T5513.038
[GRAPHIC] [TIFF OMITTED] T5513.039
[GRAPHIC] [TIFF OMITTED] T5513.040
[GRAPHIC] [TIFF OMITTED] T5513.041
[GRAPHIC] [TIFF OMITTED] T5513.042
[GRAPHIC] [TIFF OMITTED] T5513.043
[GRAPHIC] [TIFF OMITTED] T5513.044
[GRAPHIC] [TIFF OMITTED] T5513.045
[GRAPHIC] [TIFF OMITTED] T5513.046
[GRAPHIC] [TIFF OMITTED] T5513.047
[GRAPHIC] [TIFF OMITTED] T5513.048
[GRAPHIC] [TIFF OMITTED] T5513.049
[GRAPHIC] [TIFF OMITTED] T5513.050
[GRAPHIC] [TIFF OMITTED] T5513.051
[GRAPHIC] [TIFF OMITTED] T5513.052
[GRAPHIC] [TIFF OMITTED] T5513.053
[GRAPHIC] [TIFF OMITTED] T5513.054
[GRAPHIC] [TIFF OMITTED] T5513.055
[GRAPHIC] [TIFF OMITTED] T5513.056
[GRAPHIC] [TIFF OMITTED] T5513.057
[GRAPHIC] [TIFF OMITTED] T5513.058
[GRAPHIC] [TIFF OMITTED] T5513.059
[GRAPHIC] [TIFF OMITTED] T5513.060
[GRAPHIC] [TIFF OMITTED] T5513.061
[GRAPHIC] [TIFF OMITTED] T5513.062
[GRAPHIC] [TIFF OMITTED] T5513.063
[GRAPHIC] [TIFF OMITTED] T5513.064
[GRAPHIC] [TIFF OMITTED] T5513.065
[GRAPHIC] [TIFF OMITTED] T5513.066
[GRAPHIC] [TIFF OMITTED] T5513.067
[GRAPHIC] [TIFF OMITTED] T5513.068
[GRAPHIC] [TIFF OMITTED] T5513.069
[GRAPHIC] [TIFF OMITTED] T5513.070
[GRAPHIC] [TIFF OMITTED] T5513.071
[GRAPHIC] [TIFF OMITTED] T5513.072
[GRAPHIC] [TIFF OMITTED] T5513.073
[GRAPHIC] [TIFF OMITTED] T5513.074
[GRAPHIC] [TIFF OMITTED] T5513.075
[GRAPHIC] [TIFF OMITTED] T5513.076
[GRAPHIC] [TIFF OMITTED] T5513.077
[GRAPHIC] [TIFF OMITTED] T5513.078
[GRAPHIC] [TIFF OMITTED] T5513.079
[GRAPHIC] [TIFF OMITTED] T5513.080
[GRAPHIC] [TIFF OMITTED] T5513.081
[GRAPHIC] [TIFF OMITTED] T5513.082
[GRAPHIC] [TIFF OMITTED] T5513.083
[GRAPHIC] [TIFF OMITTED] T5513.084
[GRAPHIC] [TIFF OMITTED] T5513.085
[GRAPHIC] [TIFF OMITTED] T5513.086
[GRAPHIC] [TIFF OMITTED] T5513.087
[GRAPHIC] [TIFF OMITTED] T5513.088
[GRAPHIC] [TIFF OMITTED] T5513.089
[GRAPHIC] [TIFF OMITTED] T5513.090
[GRAPHIC] [TIFF OMITTED] T5513.091
[GRAPHIC] [TIFF OMITTED] T5513.092
[GRAPHIC] [TIFF OMITTED] T5513.093
[GRAPHIC] [TIFF OMITTED] T5513.094
[GRAPHIC] [TIFF OMITTED] T5513.095
[GRAPHIC] [TIFF OMITTED] T5513.096
[GRAPHIC] [TIFF OMITTED] T5513.097
[GRAPHIC] [TIFF OMITTED] T5513.098
[GRAPHIC] [TIFF OMITTED] T5513.099
[GRAPHIC] [TIFF OMITTED] T5513.100
[GRAPHIC] [TIFF OMITTED] T5513.101
[GRAPHIC] [TIFF OMITTED] T5513.102
[GRAPHIC] [TIFF OMITTED] T5513.103
[GRAPHIC] [TIFF OMITTED] T5513.104
[GRAPHIC] [TIFF OMITTED] T5513.105
[GRAPHIC] [TIFF OMITTED] T5513.106
[GRAPHIC] [TIFF OMITTED] T5513.107
[GRAPHIC] [TIFF OMITTED] T5513.108
[GRAPHIC] [TIFF OMITTED] T5513.109
[GRAPHIC] [TIFF OMITTED] T5513.110
[GRAPHIC] [TIFF OMITTED] T5513.111
[GRAPHIC] [TIFF OMITTED] T5513.112
[GRAPHIC] [TIFF OMITTED] T5513.113
[GRAPHIC] [TIFF OMITTED] T5513.114
[GRAPHIC] [TIFF OMITTED] T5513.115
[GRAPHIC] [TIFF OMITTED] T5513.116
[GRAPHIC] [TIFF OMITTED] T5513.117
[GRAPHIC] [TIFF OMITTED] T5513.118
[GRAPHIC] [TIFF OMITTED] T5513.119
[GRAPHIC] [TIFF OMITTED] T5513.120
[GRAPHIC] [TIFF OMITTED] T5513.121
[GRAPHIC] [TIFF OMITTED] T5513.122
[GRAPHIC] [TIFF OMITTED] T5513.123
[GRAPHIC] [TIFF OMITTED] T5513.124
[GRAPHIC] [TIFF OMITTED] T5513.125
[GRAPHIC] [TIFF OMITTED] T5513.126
[GRAPHIC] [TIFF OMITTED] T5513.127
[GRAPHIC] [TIFF OMITTED] T5513.128
[GRAPHIC] [TIFF OMITTED] T5513.129
[GRAPHIC] [TIFF OMITTED] T5513.130
[GRAPHIC] [TIFF OMITTED] T5513.131
[GRAPHIC] [TIFF OMITTED] T5513.132
[GRAPHIC] [TIFF OMITTED] T5513.133
[GRAPHIC] [TIFF OMITTED] T5513.134
[GRAPHIC] [TIFF OMITTED] T5513.135
[GRAPHIC] [TIFF OMITTED] T5513.136
[GRAPHIC] [TIFF OMITTED] T5513.137
[GRAPHIC] [TIFF OMITTED] T5513.138
[GRAPHIC] [TIFF OMITTED] T5513.139
[GRAPHIC] [TIFF OMITTED] T5513.140
[GRAPHIC] [TIFF OMITTED] T5513.141
[GRAPHIC] [TIFF OMITTED] T5513.142
[GRAPHIC] [TIFF OMITTED] T5513.143
[GRAPHIC] [TIFF OMITTED] T5513.144
[GRAPHIC] [TIFF OMITTED] T5513.145
[GRAPHIC] [TIFF OMITTED] T5513.146
[GRAPHIC] [TIFF OMITTED] T5513.147
[GRAPHIC] [TIFF OMITTED] T5513.148
[GRAPHIC] [TIFF OMITTED] T5513.149
[GRAPHIC] [TIFF OMITTED] T5513.150
[GRAPHIC] [TIFF OMITTED] T5513.151
[GRAPHIC] [TIFF OMITTED] T5513.152
[GRAPHIC] [TIFF OMITTED] T5513.153
[GRAPHIC] [TIFF OMITTED] T5513.154
[GRAPHIC] [TIFF OMITTED] T5513.155
[GRAPHIC] [TIFF OMITTED] T5513.156
[GRAPHIC] [TIFF OMITTED] T5513.157
[GRAPHIC] [TIFF OMITTED] T5513.158
[GRAPHIC] [TIFF OMITTED] T5513.159
[GRAPHIC] [TIFF OMITTED] T5513.160
[GRAPHIC] [TIFF OMITTED] T5513.161
[GRAPHIC] [TIFF OMITTED] T5513.162
[GRAPHIC] [TIFF OMITTED] T5513.163
[GRAPHIC] [TIFF OMITTED] T5513.164
[GRAPHIC] [TIFF OMITTED] T5513.165
[GRAPHIC] [TIFF OMITTED] T5513.166
[GRAPHIC] [TIFF OMITTED] T5513.167
[GRAPHIC] [TIFF OMITTED] T5513.168
[GRAPHIC] [TIFF OMITTED] T5513.169
[GRAPHIC] [TIFF OMITTED] T5513.170
[GRAPHIC] [TIFF OMITTED] T5513.171
[GRAPHIC] [TIFF OMITTED] T5513.172
[GRAPHIC] [TIFF OMITTED] T5513.173
[GRAPHIC] [TIFF OMITTED] T5513.174
[GRAPHIC] [TIFF OMITTED] T5513.175
[GRAPHIC] [TIFF OMITTED] T5513.176
[GRAPHIC] [TIFF OMITTED] T5513.177
[GRAPHIC] [TIFF OMITTED] T5513.178
[GRAPHIC] [TIFF OMITTED] T5513.179
[GRAPHIC] [TIFF OMITTED] T5513.180
[GRAPHIC] [TIFF OMITTED] T5513.181
[GRAPHIC] [TIFF OMITTED] T5513.182
[GRAPHIC] [TIFF OMITTED] T5513.183
[GRAPHIC] [TIFF OMITTED] T5513.184
[GRAPHIC] [TIFF OMITTED] T5513.185
[GRAPHIC] [TIFF OMITTED] T5513.186
[GRAPHIC] [TIFF OMITTED] T5513.187
[GRAPHIC] [TIFF OMITTED] T5513.188
[GRAPHIC] [TIFF OMITTED] T5513.189
[GRAPHIC] [TIFF OMITTED] T5513.190
[GRAPHIC] [TIFF OMITTED] T5513.191
[GRAPHIC] [TIFF OMITTED] T5513.192
[GRAPHIC] [TIFF OMITTED] T5513.193
[GRAPHIC] [TIFF OMITTED] T5513.194
[GRAPHIC] [TIFF OMITTED] T5513.195
[GRAPHIC] [TIFF OMITTED] T5513.196
[GRAPHIC] [TIFF OMITTED] T5513.197
[GRAPHIC] [TIFF OMITTED] T5513.198
[GRAPHIC] [TIFF OMITTED] T5513.199
[GRAPHIC] [TIFF OMITTED] T5513.200
[GRAPHIC] [TIFF OMITTED] T5513.201
[GRAPHIC] [TIFF OMITTED] T5513.202
[GRAPHIC] [TIFF OMITTED] T5513.203
[GRAPHIC] [TIFF OMITTED] T5513.204
[GRAPHIC] [TIFF OMITTED] T5513.205
[GRAPHIC] [TIFF OMITTED] T5513.206
[GRAPHIC] [TIFF OMITTED] T5513.207
[GRAPHIC] [TIFF OMITTED] T5513.208
[GRAPHIC] [TIFF OMITTED] T5513.209
[GRAPHIC] [TIFF OMITTED] T5513.210
[GRAPHIC] [TIFF OMITTED] T5513.211
[GRAPHIC] [TIFF OMITTED] T5513.212
[GRAPHIC] [TIFF OMITTED] T5513.213
[GRAPHIC] [TIFF OMITTED] T5513.214
[GRAPHIC] [TIFF OMITTED] T5513.215
[GRAPHIC] [TIFF OMITTED] T5513.216
[GRAPHIC] [TIFF OMITTED] T5513.217
[GRAPHIC] [TIFF OMITTED] T5513.218
[GRAPHIC] [TIFF OMITTED] T5513.219
[GRAPHIC] [TIFF OMITTED] T5513.220
[GRAPHIC] [TIFF OMITTED] T5513.221
[GRAPHIC] [TIFF OMITTED] T5513.222
[GRAPHIC] [TIFF OMITTED] T5513.223
[GRAPHIC] [TIFF OMITTED] T5513.224
[GRAPHIC] [TIFF OMITTED] T5513.225
[GRAPHIC] [TIFF OMITTED] T5513.226
[GRAPHIC] [TIFF OMITTED] T5513.227
[GRAPHIC] [TIFF OMITTED] T5513.228
[GRAPHIC] [TIFF OMITTED] T5513.229
[GRAPHIC] [TIFF OMITTED] T5513.230
[GRAPHIC] [TIFF OMITTED] T5513.231
[GRAPHIC] [TIFF OMITTED] T5513.232
[GRAPHIC] [TIFF OMITTED] T5513.233
[GRAPHIC] [TIFF OMITTED] T5513.234
[GRAPHIC] [TIFF OMITTED] T5513.235
[GRAPHIC] [TIFF OMITTED] T5513.236
[GRAPHIC] [TIFF OMITTED] T5513.237
[GRAPHIC] [TIFF OMITTED] T5513.238
[GRAPHIC] [TIFF OMITTED] T5513.239
[GRAPHIC] [TIFF OMITTED] T5513.240
[GRAPHIC] [TIFF OMITTED] T5513.241
[GRAPHIC] [TIFF OMITTED] T5513.242