Sullivan 400 million in profit. How do you explain that . While we were providing oversight, it was not enough. Narrator tonight, a frontland npr special report. People are profiting unfairly on other peoples misery. Narrator business of disaster. Frontline is made possible by contributions to your pbs station from viewers like you. Thank you. And by the corporation for public broadcasting. Major support is provided by the john d. And catherine t. Macarthur foundation. Committed to building a more just, verdant, and peaceful world. More information is available at macfound. Org. Additional support is provided by the ford foundation. Working with visionaries on the frontlines of social change worldwide. At fordfoundation. Org. The park foundation, dedicated to heightening Public Awareness of critical issues. The john and Helen Glessner family trust. Supporting trustworthy journalism that informs and inspires. The heisingsimons foundation. Unlocking knowledge, opportunity, and possibilities. More at hsfoundation. Org. And by the frontline journalism fund. With major support from jon and jo ann hagler. And Additional Support from Laura Debonis and scott nathan. Corporate support is provided by us lives here. Where we can be surprised by others. And ourselves. The y. For a better us. We looked around and tried to find the perfect spot between brooklyn, where i grew up, and she grew up from jersey, so Staten Island was the medium. We said, this is the place we want to live. He loves fishing, its right off the water, and it just fit into our life. There was a lot of joy and happiness that this ocean brought to us. The ocean can be joyful. And the ocean could also swallow you up at any given time. You know, its unpredictable. Clear and present danger. Sandy swirls along the east coast. The time for evacuation is over. Get back behind the building. Fishing Staten Island for 20 years, you pretty much know what the tides are. The tide was the highest tide id ever seen on Staten Island. I ran up the whole entire block and i said, this is the storm. We have to leave, or theres a good chance youre gonna die. Seven subway tunnels under the east river are flooded. The entire system is shut down. There was an explosion at a transformer. We are essentially in a blackout. The island of manhattan all but shut off. I just couldnt understand, when i saw water coming out from my sons bedroom underneath the door and im like, what the heck is that . We went to the window, and the car was being washed down the block already. Theres no escape now. Now the thing is were stuck in this house. Were all upstairs and were watching the water level rise. As its coming closer to the top step, im wondering, where are we all going to go . As the sun rises on the devastation, Staten Island badly affected by flooding. The real tragedy from sandy is the number of people who have died, and that number grows, it seems, by the hour. The morning after the storm, i traveled down father capodanno boulevard, which is the main thoroughfare right on the shoreline. I saw boats and cars up on peoples property. I saw holes in homes. And when its your home community, you are instantly numb. I was beginning to understand the ferocity of mother nature, but really had no idea just how difficult recovery would be. They were hit as hard as anyone. President obama will see for himself the damage inflicted on the folks and homes of Staten Island. So to have the president come was a big moment for us. Well, were going to do everything we can to help. I think a lot of Staten Islanders, whether they like president obama or not, thought, all right, well get the help that we need. Good to see you guys. You doing okay . And i never expected the president to just walk into the crowd and put his arms around my wife and i. I was like, wow so some of this is going to be tough. But here, my commitment to you is im going to stay on it. He promised that he would cut all the red tape. He was going to make it right. He was gonna make it right. Not to worry. Dont forget about us. Thats my point. Thats why i came here. God bless you. Its always good when a politician comes after the election. laughter god bless you. God bless you, nice to see you. Economic damage from Hurricane Sandy could go. Superstorm sandy could cost 20 billion. Our requests are about 78 billion. My instructions to the federal agency has been, i want you to cut through red tape, bureaucracy, make sure that we are getting the resources where they are needed as quickly as possible. All the sandy survivors, can everybody get over here . Were going to be shoulder to shoulder. Are we standing together until were all home . Yes are we Standing Shoulder to shoulder until were all home . Yes Laura Sullivan as a reporter for npr, ive covered quite a few disasters and the slow process of recovery. Test, test. From katrina to haiti, ive investigated problems with disaster aid and looked closely at efforts to rebuild. For the past year, ive been hearing stories about Superstorm Sandy victims. A group of them gathered last fall, here at the State Capitol in trenton. Id like to bring up one of the families that really can use help. applause good morning. My name is nancy wertz. Me and my daughter samantha are still, three years later, without a home, facing foreclosure, and we still need help. Thank you. applause sullivan i was surprised to learn just how many homeowners were still struggling. Its important that the people across the street understand that thousands of us are still not home yet. We got billions of dollars from the federal government, and those billions still havent reached the people who need help. This is where our house was. Sullivan as i talked to sandy survivors, they told me about problems with insurance. So the Insurance Company said, oh, no, no, that was preexisting. Everything thats wrong, it was there before the storm. Sullivan and nightmares of government bureaucracy. If i sent them an email, id probably get a response within, you know, about a month later or two months later. Sullivan and there was one story i heard over and over from so many homeowners, like doug quinn. You know, i was optimistic. Its going to be okay. Everythings going to be okay. Ive been in worse spots than this, im sure ill work it out. Sullivan is that what happened . Its three years and im still not anywhere close. I should be at home in my house and part of my community, and instead, im here doing this. Sullivan as a country, we spend billions of dollars every year to help people like doug quinn money thats supposed to get them back on their feet and protect them from the next storm. Over the past year, weve been investigating where those billions are actually going and why, more than three years r sandy, storm survivors are still not home. That question took me to a dirt lot in toms river, new jersey, where i met up again with doug quinn. Wow. Hey doug, how are you . Quinn moved to this waterfront neighborhood in 2011. Nice to see you again. Sullivan hed always dreamed of living on the water. Yeah, this is it. Sullivan holy cow. This is whats left of it, at least. My house was over this way. My front door would have been right over here. It was nothing fancy. It was a comfortable, cozy, middleclass home. Soon as i came here, i just was. It definitely spoke to my heart that this was home. Sullivan what remained from that home was still on his lot. So this is the stuff that stayed dry . Yeah. Sullivan and it all fits into a box, huh . This is everything. This is all youve got. You get weird with stuff after the storm, because everything in my house was destroyed. So the process of just pushing all of my possessions out of the front door into a big pile on the lawn was really difficult. Sullivan he had no idea that the really difficult part was still ahead. I just assumed theres gonna be a small period where life will be a little topsyturvy, and then well work our way back to normal. I did buy Flood Insurance as a contingency, and thats what its for. Sullivan hes right. His situation is what Flood Insurance was designed for. But most Flood Insurance is different from other homeowners insurance. Its run by a Government Program created after a series of massive floods in the 1950s and 60s. newsreel music along 400 miles of the kansas and missouri rivers, the worst floods in u. S. History inundate thousands of square miles of land. The u. S. Was growing rapidly at that time, and increasingly, homes were being built in vulnerable areas. So time after time, the federal government was being called upon to provide disaster aid, and people had very few options even to purchase insurance at that point in time. Sullivan the Insurance Industry had said floods were too risky to cover, so congress set up the national Flood Insurance program in 1968. The program paid private Insurance Companies a fee to sell policies and settle claims, especially in floodprone areas. The premiums from those policies would be used to cover all losses unless the disaster got too costly. Then taxpayers would make up the difference. The Insurance Companies dont have any risk in the program. The risk is all the taxpayers. Sullivan bob hunter ran the Flood Program in the 1970s, and he says he had problems with the Insurance Companies from the beginning. We developed information that showed that they were charging us too much and the taxpayers were paying them too much money. At the same time, they were also refusing to pay what we thought were some legitimate claims. And ultimately, we kicked them out of the program. Sullivan howd they take that . They didnt like it. They went to congress and tried to fight it, but congress stood with us and they left. Sullivan but they werent out of the program for long. The 1980s brought a new president and renewed faith in the private sector. A flood is coming. You try to keep it from destroying everything. Sullivan the Insurance Industry was brought back into the Flood Program to sell and service policies, and expand its reach. Ask your Insurance Agent about national Flood Insurance now. Sullivan by the early 2000s, fema was overseeing the program, and four and a half million homeowners had governmentbacked Flood Insurance. Now, that number goes up and down depending on the frequency of floods that exist. Nothing sells Flood Insurance like a flood. Sullivan and the floods kept coming. Incredible pictures show the ferocity of hurricane wilma. Sullivan in 2005, a series of devastating hurricanes put the National Flood program deeply in debt. We see neighborhoods that have been flooded. We see the front of churches just ripped off. Sullivan none more than katrina. The city, absolutely devastated by katrina. For all intents and purposes, it immediately bankrupted the national Flood Insurance program, which had to resort on borrowing from the u. S. Treasury. Sullivan by the time sandy came around, the Flood Program was nearly 18 billion in debt, and that debt was going to have a big impact on thousands of homeowners like doug quinn. So this is it. This is it. This is the rental that ive been in since the month after sandy. I pay for this, plus in my sandydamaged property, i pay for the mortgage, and particularly insulting, i pay the Flood Insurance on a house thats a dirt lot. Sullivan you have to pay Flood Insurance on a house that doesnt exist . How are you affording this . Im not. Im going broke. Sullivan but he had an even bigger problem. So how much insurance did you have on this house . I had a 250,000 Flood Insurance policy. I bought the maximum amount that i was legally allowed to buy. Sullivan what did you get . 90,000. Sullivan can you build your home again for 90,000 . Not even close. Sullivan he was convinced hed been underpaid. He hired his own experts, who said it would cost 252,000 to rebuild his home. So he filed an appeal with fema, and then he waited for nearly five months. So finally, i get this letter from fema. Fema concurs with selectives final decision, and no further administrative review can be provided through this appeal process. They sided with the Insurance Company. Sullivan what did you do . I hired an attorney. There was nothing to do. Like i say, im 51 years old. Ive never sued anyone in my life, and my back was against the wall because i knew something was wrong here. Sullivan to understand quinns fight with the Insurance Company, i had to journey deep into the complex world of flood coverage. The search took me to new orleans, and a highstakes legal battle. Hi, are you john . Hello. Sullivan Laura Sullivan. Nice to meet you. Very nice to meet you as well. Sullivan John Houghtaling is a bit of a new orleans legend, a plaintiffs attorney with a taste for french antiques. So its restored just like at the time. Sullivan he made millions for his clients and for himself, taking on the Insurance Companies after katrina. Insurance policies, even for a lawyer thats been doing this for a long time, theyre very complicated. I mean, theyre thick. If youve ever tried to read an insurance policy, its very difficult to read. Its not written in plain language. Theres lots of loopholes in it, lots of exclusions. So everybody here is working on sandy, and these are the clients that we represent. Sullivan after sandy, houghtaling focused his law firms attention on problems developing with flood claims in new york and new jersey. I looked at some of the cases, and i had never seen anything worse in my entire career. Sullivan he eventually signed on to represent about 600 sandy victims in lawsuits against 20 Insurance Companies, and he says the Companies Used a variety of ways to systematically underpay homeowners. If you look at this, all of these neighborhoods were all underpaid uniformly. They used the same process to underpay everybody. Sullivan as the lawyers dug into the sandy cases, they made a shocking discovery. The femarun national Flood Insurance program appears riddled with widespread cheating. Thousands say they have become victims again. Sullivan evidence that several engineering firms the Insurance Companies were using may have committed fraud. A bigtime texas attorney, steve mostyn, had joined houghtaling in the fight. These are notebooks that were used at some of the hearings that we had, and this one here. Sullivan the lawyers found engineers who said their managers changed their reports without them knowing about it. This is the original first report. Sullivan this is the original report. This is what the engineer tells him out at the house. The physical evidence observed at the property indicated that the subject building was structurally damaged by hydrodynamic forces associated with the flood. And then we go over here, and it says, the physical evidence observed at the property indicated that the subject building was not structurally damaged by hydrodynamic forces. Sullivan not flood. Right. Sullivan same report. Same report, same engineer, supposedly. Im talking about a process where a person who never went to the house, never saw the house, never discussed with the original engineer, changed the report. Sullivan the Engineering Companies accused of fraud wouldnt talk to us, and neither would Insurance Companies involved in the lawsuits. This here, it says. Sullivan but both argued in court that they used a standard peer review process to change reports. I cant comment on any individual engineering report or whether or not there had been changes or what the reason for those changes were. But what i will say is that in a peer review process, can two engineers potentially disagree as to the cause and to the amount of damage that occurred . That can happen. Sullivan but as the lawyers dug deeper, they uncovered another a suspicious pattern. This is the conclusion, but the observations, right, its as if. Sullivan observations are what they see at the house. Are identical, okay . In report after report after report. And every one of them says, longterm differential movement, not structurally damaged. Longterm differential movement, not structurally damaged. Sullivan the lawsuits focused attention on what would become the most controversial exclusion in Flood Insurance. The result of longterm differential movement. Sullivan it was the same exclusion quinns Insurance Company used to deny coverage for his foundation. That was caused by longterm differential movement. Sullivan its known as Earth Movement, and its considered a preexisting condition. They said that it was longterm Earth Movement, it was damage, those big cracks in my foundation, that was all there before the storm. Sullivan and they said the earth had moved. Longterm Earth Movement. Longterm