After learning some hard lessons from Superstorm Sandy, the Federal Emergency Management Agency says it is reforming the way it handles appeals from disgruntled policyholders in the National Flood Insurance Program.

Jersey Shore Continues Sandy Recovery Efforts In Preparation For Summer Season
Homes in Ortley Beach, New Jersey after Superstorm Sandy hit. (Photo by Mark Wilson/Getty Images)

The October 2012 storm, spawned when Hurricane Sandy merged with two other weather systems, killed people in several states but hit New York and New Jersey the hardest and is New Jersey's worst natural disaster. It devastated the oceanfront coastline and caused catastrophic flooding in New York and cities in New Jersey, including Hoboken and Jersey City, causing tens of billions of dollars in damage.

Thousands of homeowners hit by the storm complained that they were shortchanged by the companies that process flood insurance claims for the federal government. Many wound up waging protracted legal battles to get the money needed to repair their flooded homes. In some cases, lawyers representing the insurers spent more money fighting claims than it would have cost to settle them.

FEMA announced Monday that it is overhauling its claims appeals process so homeowners can take disputes about payment directly to FEMA officials rather than having to go through the insurance companies they are fighting for repair dollars.

The agency also will work to make its appeals process more "transparent" to homeowners, said Roy Wright, FEMA's deputy associate administrator for insurance.

"We need something that consistently produces a fair resolution for the policyholder," Wright said.

FEMA also will create an oversight team to scrutinize how much the insurance companies spend fighting customers in court.

Lawyers for thousands of New York and New Jersey policyholders who sued over their insurance payouts had argued that the private lawyers representing FEMA and the insurers were dragging out cases unnecessarily and inflating their own legal fees.

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