News from the "Buttheads" at FEMA

Is this our disaster recovery agency or is FEMA just a disaster? OK fellow slabbers pray another storm doesn’t hit because FEMA is already figuring out how not to pay for governmental reconstruction. Becky Mowbray filed this story with the Times Picayune:

The Federal Emergency Management Agency says that local governments, schools and hospitals in Louisiana won’t get as much help from the government in paying for pricey deductibles on insurance policies in future storms as they did during Hurricane Katrina.

In a May 29 memo to disaster assistance directors around the country, FEMA says that it will reduce payment of a future insurance deductible in a storm by whatever amount of money it paid toward an insurance deductible after Katrina or Rita.

For example, if FEMA reimbursed a museum for a $5 million insurance deductible after Katrina, and the museum now has an insurance policy with a $7 million insurance deductible, the maximum the agency would pay in a future storm is $2 million.

“What we won’t pay for is the amount of deductible that we’ve paid in the past,” said James Walke, director of public assistance at FEMA.

The policy means that local governmental bodies such as water districts, school systems and police departments or non-profits such as museums, hospitals and universities could be on the hook for millions of dollars extra in a future storm.

But the Louisiana Department of Insurance said it wasn’t aware of the memo or that FEMA had settled on rules for handling deductibles in this way. “If that’s their position, we’re certainly going to have to have discussions with them about it,” said Warren Byrd, executive counsel at the insurance department.

FEMA’s position is totally out of step with the reality of today’s insurance market, Byrd said. Before the storm, the non-profit or local governmental body would have been able to choose the size of its insurance deductible, and those deductibles would have been small, such as $10,000 for a building. But when the market froze after the storm, institutions essentially had to take whatever coverage was offered to them, which often included deductibles that are 5 percent of the value of a policy or more.

On a $20 million school, a deductible might be $1 million. For a $500 million hospital campus, a 5 percent deductible would be $25 million in out-of-pocket costs.

“I can appreciate their position, but the deductibles have totally changed in the post-Katrina world,” Byrd said.

— Similar dispute last year —

The insurance department thought that it had already dealt with the issue. The exact same dispute played out last summer, during hurricane season.

In June 2007, FEMA issued a little noticed memo that said that “a deductible is not eligible (for reimbursement) for the same facility in a subsequent disaster of the same type.”

A New Orleans insurance agent, Hartwig Moss, discovered the memo and organized meetings for local governments and non-profits to raise a stink about it. FEMA pulled the memo last August, saying that it didn’t intend to cause such a furor, and promised to revisit its insurance rules in concert with local leaders.

Most people in the New Orleans area interpreted that to mean that FEMA would go back to paying insurance deductibles if another storm hit.

Walke said that’s not the case. The agency rescinded the memo because it was badly worded and previous memos on the subject didn’t spell things out clearly, but he said FEMA’s rules on insurance deductibles never actually changed. If the agency wanted to change the rules enacting the Robert T. Stafford Disaster Assistance and Emergency Relief Act, it would have had to notify the public through the Federal Register.

I’m wondering if FEMA will ever figure out people are paying attention to how it conducts business?

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One thought on “News from the "Buttheads" at FEMA”

  1. Some of the ideas they put out must really take a long time to think up…

    just need to add a little more so they can think them through and get the hang of providing assistance –

    this idea needs to go on ice – they probably have plenty stored somewhere!

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