Right after Hurricane Sandy clobbered his bungalow in Long Beach, New York, Thomas Marlow headed for Manhattan, to tackle another area of flood damage: the Hugh Carey Brooklyn-Battery Tunnel. Marlow, a civil engineer, had to come up with a plan to pump 65 million gallons of water out of the underground highway. Working with the U.S. Army Corps of Engineers and the Coast Guard, he got the job done in about two weeks.

Three years after the infamous superstorm struck the Eastern Seaboard on Oct. 29, 2012, Marlow’s own property on Long Island remains an empty sand lot. He demolished the house last year. He’s managed major infrastructure projects for airports, the Verrazano-Narrows Bridge and ground zero. “I’m used to red tape,” he says. But the task of rebuilding his own home, after receiving a low damage estimate from his insurance carrier, has proved tougher than anything he’s done during his career.

“Nobody wants to be living out of a suitcase,” says Marlow, who has stayed with family and friends while continuing to pay the mortgage on the bungalow. “It just takes a toll on everything – your job, your kids, your relationship with your family. I’m definitely tired, but I’m not ready to give up.”

Marlow is one of thousands of Sandy victims who believe the Federal Emergency Management Agency's National Flood Insurance Program underpaid them for damages to their homes. Following allegations of fraud by insurers and their subcontractors, these homeowners have decided to take up FEMA on a historic offer to reassess claims. In May, FEMA said 142,000 policyholders could request to reopen their Sandy insurance claims, and see if they were entitled to more money to fix their homes. For some homeowners, it’s a last chance to recoup funds after insurance struggles that drained their personal finances and uprooted their lives. For FEMA, the review is a critical test of the credibility of a program that is the primary source of flood insurance for homeowners nationwide.

“The No. 1 reason why we are behind in our recovery is the underpayments from NFIP,” says Sue Marticek, executive director of the Ocean County Long Term Recovery Group, a nonprofit that is assisting nearly 300 New Jersey homeowners who applied for the review process. Homeowners, she says, "can’t start a rebuilding budget when the first and major part of it has been underpaid.”

In Thomas Marlow’s case, in neighboring New York, he estimates that it will cost him $350,000 to replace his home. His house was insured for the maximum value of a flood policy -- $250,000. His insurance carrier offered him just $117,000, and he was approved for an additional $30,000 to fortify the property against future damage. “My question to them was, if you’re telling me the home is only worth $117,000, why am I paying a $250,000 policy?”

Linda Lippolt gutted home Linda Lippolt, a resident of Amity Harbor, New York, spent $80,000 to remodel her home right before Hurricane Sandy hit in 2012. Then she had to gut it. Photo: Courtesy Linda Lippolt

The National Flood Insurance Program operates as a partnership between FEMA and private insurance companies. In return for administering claims, private insurers get a cut of policyholders’ premiums, while FEMA is on the hook for the losses. After Sandy, homeowners who took their insurance carriers to court cast a glaring light on evidence of fraudulently low payments – prompting FEMA to agree to a new settlement process for homeowners who sued, and, eventually, to the invitation to reopen claims for everyone who didn’t file a lawsuit.

Among 1,689 homeowners in the court settlement process, 747 had reached deals with FEMA as of Oct. 14, according to the agency’s most recent data. The flood insurance program has issued $81.2 million in those settlements, a spokesman said. Private attorneys for policyholders typically get paid one-third of what their clients recover.

Marticek and other advocates for policyholders say they’re glad FEMA agreed to open the review in the first place – especially since many homeowners didn’t have the wherewithal to take their insurance carrier to court.

But five months into the review, attorneys and advocates have also had to find ways to reassure homeowners through a challenging start of delays and lost paperwork. FEMA initially established a 90-day timeline to evaluate a given claim. As of this week, 17,078 claims had entered the pipeline, yet only 1,378 homeowners had been notified of a result, and FEMA had issued checks to only 190 people.

In the pool of claims it has reviewed, FEMA has found about 60 percent of homeowners were underpaid. The average underpayment comes to $15,000.

Marticek’s nonprofit held multiple workshops for homeowners, and also hired two insurance experts to help residents make their cases to FEMA. Some of the most obvious areas of underpayment, she says, include missing sales tax on replacement items that insurance pays for (a 7 percent rate in New Jersey), and the amount of depreciation on home goods being subtracted twice. She has seen discrepancies in estimates neighbors received for the exact same item, such as sheetrock.

At this stage of the review, “We should have pictures every week of people with checks being happy,” says Marticek, “and that’s not what we’re seeing.” Of all the claimants in her group, only four people had received offers as of this week.

“It’s important for us to get this done as quickly as possible, but it’s also important to us to get this right,” says FEMA spokesman Rafael Lemaitre. The agency has doubled the number of insurance adjusters who are reviewing the claims, and they are working seven days a week. “We agree that policyholders have already been through enough already, and our job is to work to restore confidence in this important program.”

At Touro Law Center’s disaster relief clinic on Long Island, lawyers are assisting homeowners pro bono on about 50 requests to reopen claims. They’ve received a tentative offer for one client so far.

Her name is Linda Lippolt.

Lippolt, a mother of three grown children, lives in a waterfront house in Amity Harbor, New York, that she inherited from her grandparents. Just before Sandy, she put $80,000 into the house, investing in a brand-new kitchen, new full bathroom and new gas heating system. “And then” – after Sandy – “we ripped it out and started over,” she says.

IMG_0251 The view from Linda Lippolt's home in Amity Harbor, New York. Photo: Courtesy Linda Lippolt

Lippolt, who holds one job as a realtor and another as a receptionist at Stony Brook University, decided to reopen her claim largely out of concern for her front steps. She believes the ground underneath was compromised by flooding, causing gaps to appear in the steps. The two people her insurance company sent to take a look told her it was “normal wear and tear,” Lippolt says.

She says she’s now not sure whether the people who inspected her steps were, indeed, licensed engineers. After her attorney at Touro Law Center reviewed her file, he discovered that the engineering report on her home did not carry an official stamp, as required by law.

As a result of the claims review, FEMA made Lippolt a tentative offer of $8,700, based on underpayments in other areas of her home. But, says attorney Dan Strafer, reviewers are still ignoring her original concern. “There’s a complete denial on the front steps,” Strafer says. So Lippolt plans to appeal the amount.

Strafer has another client who was denied in the review for an engineering issue, and he is appealing that one, too. In that case, Strafer found a pro bono engineer to assess the damage.

“I think people are going to have issues with engineering coverage,” Strafer says. “Underpayment, missing sales tax – the adjusters are looking for those kinds of things. But with engineering issues, I think people are going to have trouble unless they hire their own engineer.”

Marticek, in New Jersey, says damaged foundations will be the “big-ticket item” for many people. “That could be the make or break on whether they can rebuild their home or not.”