By Joshua Partlow
Washington Post Staff Writer
Tuesday, October 19, 2004; Page B03

Maryland's U.S. senators have asked two federal agencies to look into problems with the federal flood insurance program, which has left scores of homeowners without the money they say is needed to rebuild after Hurricane Isabel.

Sens. Barbara A. Mikulski and Paul S. Sarbanes, both Democrats, wrote to Homeland Security Director Tom Ridge last week that they were "deeply concerned" that the National Flood Insurance Program decided to stop an independent review of disputed flood claims and asked him to intervene.

On the same day, Oct. 14, they asked Attorney General John D. Ashcroft to start a probe into "very serious allegations" by Steve Kanstoroom, a Talbot County advocate for flood victims. Kanstoroom said mismanagement of flood insurance claims amounts to fraud and has shortchanged policyholders by hundreds of thousands of dollars in some cases.

Mikulski and Sarbanes noted that more than 160 Maryland families are still living in Federal Emergency Management Agency trailers more than a year after the storm.

"We believe that one open case or one family living in a FEMA trailer this winter is one family too many," the senators wrote to Ridge.

Nearly 24,000 people along the East Coast filed federal flood claims after Isabel went through last September. The hurricane roared up the Chesapeake Bay, hitting particularly hard in Anne Arundel and Baltimore counties, Alexandria and coastal areas of Southern Maryland and the Eastern Shore.

An uproar about insufficient payouts led FEMA to offer to review all claims. Of the roughly 880 Marylanders who asked for the review, 465 received more money, said David Maurstad, acting director of the federal flood program, which is run by FEMA. In Virginia, more than 700 claims were reviewed and less than 300 received more money.

"The review was being conducted by the same adjusters and adjusting firms that originally mishandled the claims," Kanstoroom said. "It is absolutely hopeless for these people to get a fair review."

Sarbanes and Mikulski requested that outside auditors look at the disputed insurance claims. But Maurstad said he canceled the independent review because of a class-action lawsuit against the private insurance companies that administer the flood program for FEMA.

"We needed . . . to be prudent with that potential litigation out there," he said.

Critics of the flood insurance program have blasted it on several fronts. Kanstoroom, who prepared a report at the request of Baltimore County Executive James T. Smith Jr. (D), found that some insurance adjusters calculated repair costs using pricing data for new construction rather than renovation, which shorted some homeowners by tens of thousands of dollars.

There is also disagreement about how much assistance flood insurance should provide. Kanstoroom, who attended insurance agent training sessions, said they are taught to tell customers that their policies will replace damaged property to pre-flood condition. The flood program reauthorization law signed in June also indicates that pre-flood condition is the standard. But Maurstad disagreed in an interview last month.

"I don't believe the program was set up with the intent that insurance could put somebody back after a terrible loss to where they were before that loss. It helps with that process," he said.

Eileen Thaden, 44, had $250,000 in flood insurance on her home in Shady Side. Contractors told her that the damage from Isabel floodwaters would cost more than $300,000, she said, but the flood insurance program identified no more than $145,000 in repairs. She received a letter from FEMA this month that said that $145,000 was the "maximum payment allowable." "This concludes our review of your case," the letter said.

Thaden remains in a trailer with her husband, two daughters, and two cats.

"I'm appalled at this. They're supposed to replace what I have damaged," she said. "Something has to be done. They're not responding to individual complaints and issues, and they're doing the same thing to senators."