BerkeleyLaw Library

"Two years after Hurricane Katrina decimated the homes of thousands of Gulf Coast residents, the American Association for Justice (AAJ) today released a report exposing how insurance companies systematically denied paying policyholders fair and just claims following this and other natural disasters.

"The report...reveals how insurers collected billions in premiums from policyholders and then stiffed them in their time of greatest need. Shockingly, in the two years since the nation's worst natural disaster, insurance companies have reaped more $100 billion in profits.

"The AAJ called on insurance regulators to immediately initiate investigations into companies that continue to unfairly delay and deny thousands of unresolved claims in light of the obscene profits insurers have pocketed over the past two years. A special AAJ website People over Profits will also enable citizens to contact their state officials with the same demand."—Press release (August 28, 2007)

"Hurricane Katrina was an unprecedented physical and administrative disaster. In addition to the loss of life, human suffering and physical debris left in its wake, there was substantial financial and procedural disorganization in the provision of relief services due to fraud, understaffing, unclear guidelines, and general lack of preparation. This paper explores the problem of fraud after Katrina and offers a solution for providing aid more effectively in the event of a future disaster. This can be achieved through use of Electronic Benefits Technology (EBT) and the centralization of beneficiary demographic databases, which would require much broader information sharing among federal, state, and local governments and non-profits in order to provide faster and broader emergency services and safeguards against fraud.

"Problems will doubtlessly arise because vast information sharing decreases the privacy of victims and leaves them open to criminal prosecution and deportation. In addition, reliance on public databases to provide verification of identification for emergency benefits is likely to aggravate the ability of vulnerable populations, such as undocumented aliens, to obtain aid, which could result in the denial of services to actual residents in great need. An emergency system must therefore endeavor to use EBT and information sharing resources to speed intake and prevent fraud, while not neglecting these vulnerable populations by installing strict privacy regulations and providing victims with the assurance that their information will not be used for any adverse purpose. A fully interoperable EBT system together with advanced planning and increased staffing will almost certainly ensure that the next disaster will not be an administrative tragedy."—Abstract.

"The legal system ostensibly plays a central role in disaster prevention, response, and management. Attorneys, members of the judiciary, and decision-makers at every level of government must anticipate and respond to disasters in a coordinated manner. It is increasingly clear, however, that the law is woefully unprepared to handle disasters. A growing community of academics recognizes this problem, and is formulating solutions under the rubric of disaster law. This emerging legal academic field encompasses a wide-ranging, intra- and inter-disciplinary body of thought, research and dialogue which seeks to inform and improve disaster-related decision-making.

"On June 25th, 2007, eighteen law professors and legal practitioners who count disasters among their primary research interests, gathered at U.C. Berkeley Law School to chart disaster law's course for the immediate and long-term future. Appendix A, Workshop Participants and Agenda. Over the course of the day, participants highlighted a wide variety of important intellectual concerns and potential problem-solving strategies regarding disaster management.

"In a series of productive discussions, participants first addressed central normative issues of disaster law, including terminology and the role of the legal academy. The group then addressed four sub-areas of disaster law: international collaboration, social justice, compensation and insurance, and prevention and response. Participants' recommendations for action included the creation of an annual disaster law conference, the integration of disaster law into law teaching, and an increased internet presence.

"This white paper, a record of the milestone June 25th workshop, is intended as a tool for use by disaster law practitioners and academics in mapping the direction and future of the field."—Executive Summary.

"This report by the Congressional Budget Office (CBO) addresses factual questions about the values of properties insured at subsidized rates (hereafter called subsidized properties) under the NFIP. Specifically, it compares the values of the properties covered by subsidized and unsubsidized insurance policies, and it examines in particular the subset of properties that are not primary residences—vacation properties, second homes, or rental properties.

"The analysis uses data on the values of more than 10,000 NFIP-insured properties, sorted into four groups as subsidized or unsubsidized properties in coastal or inland areas."—Summary and Introduction.

An interactive map of the FEMA rebuilding grants in the Gulf Coast summarized by state or parish/county.

"In the two years since Hurricane Katrina, the federal government has provided more than $114 billion in aid. But walk the streets of the Gulf Coast, and you might wonder where all that money has gone."

"In the wake of Hurricane Katrina, Congress temporarily lifted one of the most puzzling limits in the tax Code: the cap that prevents an individual from claiming a charitable deduction greater than 50% of her income, even if she gives more than half her income to charity. Although scholars often criticize the cap in passing for creating unnecessary complexity, few have explored its theoretical underpinnings, and those who have appear hard-pressed to find a satisfactory justification.

"This Article fills that void by proposing two complementary explanations for the AGI limits, one grounded in economic theory and one in political philosophy. The economic explanation proceeds directly from the literature conceptualizing the charitable deduction as a way of overcoming market and government failure for various public goods by spurring non-profits to produce them. It suggests that the AGI limits reflect a bargain between individuals whose preferred public goods are fully funded by the government and those whose projects are only partially subsidized. The philosophical explanation is anchored by the idea of reciprocity inherent in liberal democratic theory. It argues that allowing some individuals to pay no taxes, even if supporting a 'good' cause, is tantamount to allowing them to opt out of a previously agreed-to scheme of cooperation and undermines the stability of our democratic society."—Abstract.

"We investigate determinants of private and public generosity to Katrina victims using an artifactual field experiment. In this experiment, respondents from the general population first viewed a short audiovisual presentation that manipulated respondents' perceptions of the income, race, and deservingness of Katrina victims in one of two small cities. Respondents then decided how to split $100 between themselves and a charity helping Katrina victims in this small city. We also collected survey data on subjective support for government spending to help the Katrina victims in the cities. We find, first, that our income manipulation had a significant effect on giving; respondents gave more when they perceived the victims to be poorer. Second, the race and deservingness manipulations had virtually no effect on average giving. Third, the averages mask substantial racial bias among sub-groups of our sample. For instance, whites who identify with their ethnic or racial group strongly biased their giving against blacks while whites who do not identify with their ethnic or racial group biased their giving in favor of blacks. Finally, subjective support for government spending to help Katrina victims was significantly influenced by both our race and deservingness manipulations, but not by the income manipulation. White respondents supported significantly less public spending for black victims and significantly more for victims who were described in more flattering terms, such as being helpful and law-abiding."—Abstract.

"Economic theory suggests that countries should ignore uncertainty for public investment and behave as if indifferent to risk because they can pool risks to a much greater extent than private investors can. This paper discusses the general economic theory in the case of developing countries. The analysis identifies several cases where the government's risk-neutral assumption does not hold, thus making rational the use of ex ante risk financing instruments, including sovereign insurance. The paper discusses the optimal level of sovereign insurance. It argues that, because sovereign insurance is usually more expensive than post-disaster financing, it should mainly cover immediate needs, while long-term expenditures should be financed through post-disaster financing (including ex post borrowing and tax increases). In other words, sovereign insurance should not aim at financing the long-term resource gap, but only the short-term liquidity need."—Abstract.

The legal publisher BNA makes its Web Watch available for free. This posting includes links to federal government agencies and legislation, GAO reports, and a House committee report.

This article begins with a critical account of what occurred in the aftermath of Hurricane Katrina. This critique serves as the backdrop for a discussion of whether there are international laws or norms that give poor, black Katrina victims the right to return to and resettle in New Orleans. In framing this discussion, this article first briefly explores some of the housing deprivations suffered by Katrina survivors that have led to widespread displacement and dispossession. The article then discusses two of the chief barriers to the return of poor blacks to New Orleans: the broad perception of a race-crime nexus and the general effect of the imposition of outsider status on poor, black people by dominant groups. Finally, the article explores the international law concept of the right of return and its expression as a domestic, internal norm via standards addressing internally displaced persons, and considers how such a domestic right of return might be applicable to the Katrina victims."

"The single largest loss in the history of the insurance industry occurred two years ago this month when Hurricane Katrina struck the Gulf Coast, causing $40.6 billion in insured damage. Nearly two years later, the overwhelming majority of claims have been settled.

"Insurance companies have paid an estimated $40.6 billion to policyholders on 1.7 million claims for damage to homes, businesses and vehicles in six states. By contrast, Hurricane Andrew, the previous record holder, resulted in $15.5 billion in losses in 1992 ($22.2 billion in 2006 dollars) and 790,000 claims."—Press Release

"In our review, we have concluded that the Federal Emergency Management Agency (FEMA) needs to increase oversight over damage claims that involve both wind and water on the same structure. Our limited review of the flood claims indicated that payouts on flood claims were timely and complied to [National Flood Insurance Program] terms. However, there is little evidence in flood claim files to determine whether flood payouts were fair and equitable for damages caused by both wind and water affecting the same structure."

"The allegation that Southwest Charter Lines Inc. intentionally over-billed FEMA is not substantiated. We concluded that the alleged over-billing was unintentional. However, during this review, there were issues of concern regarding internal controls and billing errors for items such as overtime and delivery charges, which were not allowed under the contract."

"In the aftermath of the devastating 2005 hurricane season, three broad policy issues for the 110th Congress have emerged related to post-Katrina economic uncertainties: (1) the massive insured and uninsured property losses and their impact on Gulf Coast property insurance markets and rebuilding after Katrina, (2) assertions that insurers have shifted the cost of damages onto the federal flood program and U.S. taxpayers, and (3) unreliable government flood maps that are used in decision making by homeowners for purchasing insurance."—Summary.

"Your testimony indicates that FEMA distributed $20 million under the Individuals and Households Program to individuals who claimed damages for both Hurricane Katrina and Hurricane Rita. Some press reports have jumped to the conclusion that all of the $20 million was improperly paid. I want to be clear about the facts of your investigation because in some instances FEMA's regulations and policies do permit separate payments for damages resulting from separate disasters. Is it your conclusion that the entire> $20 million was paid improperly or is the $20 million the amount that potentially was paid improperly? Did you investigate each payment comprising the total $20 million?"—Question.

"Prior GAO audit and investigative work on FEMA's controls over IHP [Individuals and Households Program] payments and DHS's controls over purchase cards emphasizes one fundamental concept—that fraud prevention is the most effective and efficient means of minimizing fraud, waste, and abuse. GAO estimates that FEMA made about 16 percent or almost $1 billion dollars in improper and potentially fraudulent IHP payments to registrants who applied using invalid information, illustrating what can happen when fraud prevention controls are ineffective. For example, GAO found that FEMA made payments based on bogus damaged addresses, false identities, and identities belonging to federal and state prisoners. These findings highlight the need for effective controls over all types of recovery disbursements. With effective planning, relief agencies should not have to make a choice between speedy delivery of disaster recovery assistance and effective fraud prevention."—What GAO Found.

"This report presents the most comprehensive record available of the resources that institutional donors have provided in response to the Gulf Coast hurricanes and captures the experience and insights of several leading funders. It offers two distinct views of giving. The first part of the report presents findings from mid-2007 interviews with ten leading independent foundation Gulf Coast response funders to identify the challenges they faced, the role of collaboration in their grantmaking, their assessment of outcomes to date, their lessons learned, the extent to which they remain involved in recovery and rebuilding efforts, and their perspective on the impact of foundations overall in the region. The second part, which is based on giving commitments tracked by the Foundation Center through June 2007 in our Gulf Coast response database, updates our examination of the scope, purposes, and recipients of hurricane response giving by foundations, corporations, and other institutional donors."—Introduction.

"This paper describes how America's National Flood Insurance Program came into existence and seeks to answer the question of why private flood insurance never developed in the United States on a significant scale. It consists of three sections. The first section attempts to provide a brief theoretical framework for thinking about flood insurance. It describes what flood insurance does and presents a theory as to how it ought to work. The second section provides the early history of the flood insurance program. It outlines how the federal government first took on the responsibility of protecting the nation from flooding and how Congress failed in its first effort to offer federal flood insurance. The third section explains how America got the system of flood insurance that it has today. It explains how the Tennessee Valley Authority, U.S. Geological Survey, and a variety of local governments gathered enough risk data to make federal flood insurance palatable to Congress, how Congress implemented a program, and then stripped it of its risk-based character.

The paper reaches a simple conclusion: Flood insurance, in its current form, did not emerge as a result of market failure. While some factors, including the role of state regulation, remain undetermined, the current situation represents an example of what economists call 'government failure.'"—Executive Summary.

"Much of the risk perception literature relies on the important but unstated assumption that manipulating public opinion to conform to scientific assessments of risk could help the public and, in turn, policymakers make better decisions about whether and how to regulate. This paper argues that the assumption fails in the context of certain 'multilayered' risks, or risks that pose tiered policy choices—not just whether to regulate in the first instance, but how to respond to derivative risks arising from the first set of regulatory changes. Examining the debate about the role of nuclear power in the United States' approach to climate change, the paper observes that first- and second-tier risks often differ in character, or require different types of regulatory solution (market-based versus command-and-control). Due to these variations, the public may hold starkly different views about regulation of each tier, and those views may be differently 'sticky'—that is, differently susceptible to persuasion.

"In the context of the nuclear power debate, this tiering of opinion has perverse implications. The first-tier risks of nuclear power are those associated with individual reactors, including the risks of accident or terrorist attack; the second-tier risks are those associated with mining, transport, processing, storage, and disposal of radioactive materials. Recent work asserts that despite entrenched public fear of nuclear power, it may be possible to induce people to support construction of low-emissions reactors as a strategy for mitigating climate change. But even if policymakers could employ the risk education strategies discussed in the literature to shift public opinion in favor of economic incentives for nuclear reactor development, there is no reason to think such strategies would be equally effective at changing attitudes toward second-tier risks and the command-and-control regulations necessary to address them. To the contrary, many people would likely continue to oppose certain types of government action on these latter problems, even assuming the complete success of the hypothesized first-tier education strategy. As a result, the United States could find itself with a thriving nuclear power sector, but without the political will to address the grave collateral risks.

"These observations lead to two conclusions, one related to the nuclear power example, and one to risk regulation more broadly. First, differently sticky public attitudes toward first- and second-tier nuclear risks and their regulatory solutions may defeat any effort to respond to climate change by significantly and safely increasing U.S. reliance on nuclear power. Second, efforts to change public risk perceptions may not advance a regulatory agenda, and may even prove counterproductive. Specifically, where multiple risk layers exist, a successful first-tier education effort and consequent policy changes could create or expose second-tier risks that defy regulatory solution, leaving policymakers stranded at the abrupt and unexpected end of a half-built bridge. Depending on the gravity of the second-tier risks, this regulatory dead end could be one that neither policymakers nor the public would have chosen ex ante."—Abstract.

"As the United States sees more and more property damage result from domestic disasters it quickly becomes apparent that the insurance industry as it exists cannot provide sufficient economic relief from natural disasters. This paper begins with a brief overview of the problem that Katrina has left the Gulf Coast and as a result the rest of the nation. Subsequently Katrina will be compared to other natural catastrophes in terms of economic issues.

"The second main portion of this article discusses the problem of catastrophe insurance. Two possibilities for reform are discussed. These are (1) a change to the tax structure that inhibits insurance companies from maintaining the large cash reserves required for catastrophe coverage and (2) a reformation of the National Flood Insurance Program (NFIP)."—Abstract.

"This testimony updates past work and provides information about ongoing GAO work on issues including (1) [National Flood Insurance Program's] (NFIP)financial structure, (2) the extent of compliance with mandatory requirements, (3) the status of map modernization efforts, and (4) FEMA's oversight of the NFIP."—Why GAO Did This Study

"Hurricane Katrina, the largest disaster in the history of the United States, caused widespread property destruction throughout the Gulf Coast, but particularly in the city of New Orleans. Although the storm created an environment which facilitated increased mortgage defaults in the area, the Article analyzes data from the Orleans Parish Recorder of Mortgages Office and from the Orleans Parish Civil District Court and concludes that foreclosure filing rates in the year after Katrina in fact decreased significantly from the rates for the corresponding period in the year prior to the storm. This result is contrary to what would normally be expected in a usual mortgage lending market, where an increase in the rate of mortgage default would lead to an increase in the rate of foreclosure.

"The Article evaluates in detail the legal and market responses to mortgage default after the storm that contributed to the reduction in foreclosure actions in Orleans Parish in the year after Katrina. Secondary mortgage market initiatives provided the principal means for mortgage relief, because Louisiana debtors received little in the way of formal legal relief. Even though secondary market responses were successful in protecting mortgage debtors after Katrina, their limitations in scope make them inadequate to address the years of financial distress that might likely follow any disaster of the magnitude of Katrina. Thus, while the Katrina experience demonstrates that secondary market interventions can effectively reduce debtor distress after a major disaster, such interventions should not been seen as a substitute for more traditional legal responses to address mortgage debtor distress after disasters or other economic crises." —Abstract.

"This report examines proposals before Congress for the federal government to take on an expanded role in providing insurance to property owners threatened by hurricanes and other coastal storms. Its basic conclusion is that most of the pending proposals are misguided and, to the extent possible, the United States should stay out of the insurance business and allow private companies to provide disaster coverage that reflects its true market cost."—Executive Summary

"The Public Affairs Research Council of Louisiana and the Nelson A. Rockefeller Institute of Government today released a report on federal funding in response to the 2005 hurricanes Katrina and Rita. Spending Federal Disaster Aid is an analysis of two major types of aid being used for reconstruction and economic recovery. This analysis of FEMA Public Assistance (PA) grants and Community Development Block Grants (CDBG) demonstrates many of the intergovernmental challenges and problems federal, state, and local officials face as they navigate through the stops and starts of the two-year-old recovery effort toward long-term stability for the region."—Press release (September 17, 2007)

"This is a book chapter in a forthcoming book, Law, Property, and Society (Ashgate Press). The chapter argues that financing extreme catastrophic loss will become more problematic as catastrophes become more frequent and severe. An effective strategy must increase the level of participation in the spreading of risk and loss. Currently, risk spreading is done largely through insurers and government as they are the default aggregators of private and public capital. An enlargement of participation may mean the disintermediation of the traditional insurance and public compensation functions, thus allowing more direct and efficient participation between those are exposed to risk and those who are willing to bear it. This chapter also argues that tax policy should consider catastrophe risk and compensation as a way to positively influence risk-taking behavior. Currently, tax policy focuses on the equity and fairness of taxation of individual income, but these considerations are also at the heart of public financing of catastrophes."—Abstract.

"Emitters of greenhouse gases externalize the true costs of their contribution to climate change. Efforts to recover these costs, which manifest both through the costs of impacts and the costs of efforts to prevent impacts, can take the form of insurance claims as well as legal remedies. The most widely discussed insurance-related consequences of climate change are the impacts of property damage from extreme weather events. However, there is increasing awareness of the relatively subtle but equally important dimension of liability. Liability insurance risks - risks to insurers from claims of third-parties who allege injury or property damage that may be the fault of the insured - are rising as scientific uncertainty surrounding climate change declines. This Article explores three major dimensions of the issue: (1) sources of climate-change-related legal liability to third parties and their nexus with insurance and law, (2) new liabilities associated with potential technological responses to climate-change, and (3) potential roles for insurers, reinsurers, and other industry actors in proactively managing climate change-related liability insurance risks for themselves and their customers. Because the insurance sector is the world's largest industry, the response of insurers to the broader climate-change challenge will no doubt be key to the ultimate success of society's overall response."—Abstract.

"GAO identified several significant system and logistical challenges that SBA experienced in responding to the Gulf Coast hurricanes that undermined the agency's ability to provide timely disaster assistance to victims. For example, the limited capacity of SBA's automated loan processing system—the Disaster Credit Management System (DCMS)—restricted the number of staff who could access the system at any one time to process disaster loan applications. In addition, SBA staff who could access DCMS initially encountered multiple system outages and slow response times in completing loan processing tasks. SBA also faced challenges training and supervising the thousands of mostly temporary employees the agency hired to process loan applications and obtaining suitable office space for its expanded workforce. As of late May 2006, SBA processed disaster loan applications, on average, in about 74 days compared with its goal of within 21 days."—What GAO Found.

"Little can be done to prevent hurricanes, but their impact on society depends greatly on actions taken before, during, and after the event. The insurance industry is one institution that particularly affects societal vulnerability to and recovery from disasters. Insurance spreads risk across a community and provides households and businesses with resources to recovery after disaster strikes. Although insurance is based on voluntary, contractual private agreements, many states regulate the industry extensively, guaranteeing coverage to high-risk properties at below market rates."—Abstract.

"Results. USACE reporting of obligations related to Hurricane Katrina relief efforts was not always timely and efficient. Specifically, USACE did not make timely updates to the Corps of Engineers Financial Management System or perform timely closeouts of mission assignments. USACE also did not reconcile mission assignments and corresponding amendments with FEMA and did not track all funding from Congress. As a result, USACE increased the risk of not accurately reporting obligations and expenditures. (See the Finding section of the report for the detailed recommendations.)"—Executive Summary.

"The audit is one of several reviews of procurements by the Program Support Center (PSC) and other components of the Department of Health and Human Services (HHS) in response to Hurricanes Katrina and Rita in 2005.

"The Federal Acquisition Regulation (FAR) and the Health and Human Services Acquisition Regulation (HHSAR) provide, among other things, that HHS agencies award each contract to a responsible party and document compliance with requirements for full and open competition and the determination that the price was fair and reasonable.

"As part of HHS's hurricane relief operations, PSC awarded a contract to the Louisiana Department of Health and Hospitals, Bureau of Minority Health Access (Louisiana) to address the State's health and housing needs. Our objective was to determine whether PSC complied with FAR and HHSAR requirements during the award process involving Louisiana. PSC complied with the requirements."—Executive Summary.

"The audit is one of several reviews of procurements by the Program Support Center (PSC) and other components of the Department of Health and Human Services (HHS) in response to Hurricanes Katrina and Rita in 2005.

"The Federal Acquisition Regulation (FAR) and the Health and Human Services Acquisition Regulation (HHSAR) provide, among other things, that HHS agencies award each contract to a responsible party and document compliance with requirements for full and open competition and the determination that the price was fair and reasonable.

"As part of HHS's hurricane relief operations, PSC awarded a contract to the Mississippi Department of Health, Office of Health Disparity Elimination (Mississippi) to address the State's health and housing needs. Our objective was to determine whether PSC complied with FAR and HHSAR requirements during the award process involving Mississippi. PSC complied with the requirements."—Executive Summary.

"We audited public assistance grant fund awards to the City of Richmond, California (City) for FEMA Disaster Number 845-DR-CA. The objective of the audit was to determine whether the City expended and accounted for FEMA funds according to federal regulations and FEMA guidelines."—Memorandum from Matt Jadacki, Deputy Inspector General, Office of Disaster Assistance Oversight, to David Garratt, Acting Director, Recovery Division, FEMA (February 7, 2007)

"At the request of Senators Byron L. Dorgan and Mary L. Landrieu, we reviewed FEMA's award of 36 contracts worth $3.6 billion for the maintenance and deactivation of travel trailers and manufactured housing needed after Hurricanes Katrina and Rita....

"Overall, FEMA contracting officials treated bidders fairly during the bid process. However, to fully realize its goal of maximizing local participation, they should have established better criteria for determining whether a bidder was a local firm. They also should have analyzed prices more thoroughly before awarding the contracts to ensure that costs were reasonable.

"The Senators ask us to provide answers related to the following topics:

• Destruction of bidding material
• Information provided to bidders
• Wide range of cost estimates among winning bidders
• Qualifications of winning bidders
• Public availability of winning bids and post-award meetings
• Adequacy of services provided to travel trailer residents
• Award of four $100 million contracts to a joint venture"

"We audited public assistance funds awarded to the Jasper-Newton Electric Cooperative, Inc. (Co-op)located in Kirbyville, Texas. Our audit objective was to determine whether the Co-op expended and accounted for Federal Emergency Management Agency (FEMA) funds according to federal regulations and FEMA guidelines."

"The attached report presents the results of a review of the Special Transient Accommodations Program for the hotel/motel lodging of evacuees of Hurricane Katrina under FEMA contracts...awarded to the American Red Cross and Corporate Lodging Consultants.... The [four reportable conditions] included non-validation of eligibility, inability to validate occupancy, excessive billing of room rates and inability to ensure billing integrity. The review also noted other matters that impacted the contracts."—Matt Jadacki, Deputy Inspector General, Disaster Assistance Oversight.

"In February 2006, the Deficit Reduction Act of 2005 (DRA) appropriated $2 billion for certain health care costs related to Hurricane Katrina through Medicaid and the State Children's Health Insurance Program (SCHIP). The Centers for Medicare & Medicaid Services (CMS) was charged with allocating the $2 billion in funding to states directly affected by the hurricane or that hosted evacuees.

"GAO performed this work under the Comptroller General's statutory authority to conduct evaluations on his own initiative. In this report, GAO examined: (1) how CMS allocated the DRA funds to states, (2) the extent to which states have used DRA funds, and (3) whether selected states—Alabama, Louisiana, Mississippi, and Texas—anticipate the need for additional funds after DRA funds are expended."—Why GAO Did this Study.

"In our December 6, 2006, testimony, GAO stated that FEMA made tens of millions of dollars of potentially improper and/or fraudulent payments associated with both hurricanes Katrina and Rita. These payments include $17 million in rental assistance paid to individuals to whom FEMA had already provided free housing through trailers or apartments. In one case, FEMA provided free housing to 10 individuals in apartments in Plano, Texas, while at the same time it sent these individuals $46,000 to cover out-of-pocket housing expenses. In addition, several of these individuals certified to FEMA that they needed rental assistance.

"FEMA made nearly $20 million in duplicate payments to thousands of individuals who claimed damages to the same property from both hurricanes Katrina and Rita. FEMA also made millions in potentially improper and/or fraudulent payments to nonqualified aliens who were not eligible for [FEMA's Individuals and Households Program]. For example, FEMA paid at least $3 million to more than 500 ineligible foreign students at four universities in the affected areas. This amount likely understates the total payments to ineligible foreign students because it does not cover all colleges and universities in the area. FEMA also provided potentially improper and/or fraudulent IHP assistance to other ineligible non-U.S. residents, despite having documentation indicating their ineligibility.

"Finally, FEMA's difficulties in identifying and collecting improper payments further emphasized the importance of implementing an effective fraud, waste, and abuse prevention system. For example, GAO previously estimated improper and potentially fraudulent payments related to the IHP application process to be $1 billion through February 2006. As of November 2006, FEMA identified about $290 million in overpayments and collected about $7 million."—What GAO Found.

Solvency of the National Flood Insurance Program

"GAO examined (1) the rationale for and resources of federal and state programs that provide natural catastrophe insurance; (2) the extent to which Americans living in catastrophe-prone areas of the United States are uninsured and underinsured, and the types and amounts of federal payments to such individuals since the 2005 hurricanes; and (3) public policy options for revising the federal role in natural catastrophe insurance markets. To address these questions, GAO analyzed state and federal programs, examined studies of uninsured and underinsured homeowners and federal payments to them, identified and analyzed policy options, and interviewed officials from private and public sectors in both high- and low-risk areas of the United States. GAO also developed a four-goal framework to help analyze the available options.

"This report examines seven public policy options for changing the federal government's role, including establishing an all-perils homeowner insurance policy, providing reinsurance for state catastrophe funds, and creating a mechanism to provide federal loans for state catastrophe funds."—Purpose of study.

"NFIP does not collect and analyze both wind and flood damage claims data in a systematic fashion, which may limit FEMA's ability to assess whether flood payments on hurricane-damaged properties are accurate. Instead, NFIP focuses only on the flood claims data to determine whether the amount actually paid on a claim reflects the damages caused by flooding. Flood claims data, collected by NFIP through the write-your-own (WYO) insurers—including those that sell and service both the wind and flood policies—do not include information on total damages to the property from all perils. That is, NFIP does not systematically collect information on wind damages from the WYO insurer when a flood claim is received. FEMA officials state that they do not have authority to collect wind damage claims data from WYO insurers, even when the insurer services both the wind and flood policies on the same property. As a result, for hurricane-damaged properties, such as those damaged by Hurricanes Katrina and Rita, NFIP does not have all the information it needs to ensure that its claims payments were limited to damage caused by flooding. Concerns over the processing of these flood claims are heightened when the same insurance company serves as both NFIP's WYO insurer and the property-casualty (wind) insurer for a given property. In such cases, the same company is responsible for determining damages and losses to itself and to NFIP, creating a potential conflict of interest."—What GAO Found.