Watch CBSN Live

Judge: FEMA Must Resume Katrina Payments

The Bush administration must immediately resume housing payments for thousands of people displaced by Hurricane Katrina, a federal judge said Wednesday, heaping more criticism on the government for its handling of the 2005 disaster.

U.S. District Judge Richard J. Leon's ruling sharply criticized the Federal Emergency Management Agency for illegally cutting housing funding and subjecting storm victims to a convoluted application process he called "Kafkaesque."

It is the second court victory for Katrina victims this week. A federal judge in Louisiana said Monday that many homeowners might be entitled to more insurance money for flood damage.

In the Washington case, Leon said FEMA mishandled the transition from a short-term housing program to a longer-term program this spring and summer.

FEMA, criticized for responding too slowly to the storm, said in a statement Wednesday that it sent letters outlining the program changes, explaining why some people were ineligible and describing the appeals process.

Leon, however, said those letters contained only program codes and agency jargon and did not explain anything. Some evacuees got multiple letters with conflicting information, he said, leaving families unable to understand why their aid was being cut.

Until FEMA explains itself and allows victims to appeal, Leon said the government must keep making housing payments.

"It is unfortunate, if not incredible, that FEMA and its counsel could not devise a sufficient notice system to spare these beleaguered evacuees the added burden of federal litigation to vindicate their constitutional rights," Leon wrote.

In his ruling, Leon cited statements submitted by evacuees describing the ordeal.

"The reasons I have been given for the termination are not what is in the documents and/or the reasons change each time I call," said Carmen Handy, an evacuee whose statement was cited. "Every time I call back, the person answering the call knows nothing about what the previous person told me."

Leon's ruling came in a case brought in August by the Association of Community Organizations for Reform Now, which said more than 11,000 families would be affected. FEMA did not immediately have data on how much the ruling would cost and said it was considering its legal options.

Spokesman Charles D. Jackson of the advocacy group said FEMA was trying to spread word about the ruling through the scattered communities of evacuees, some of whom were left homeless by FEMA's decisions.

"Because the government didn't do their job, we're suffering," said Carolyn Stevens, a Katrina evacuee living in Houston. "We can't just get up and work," she added, snapping her fingers. "We need a place to stay while we're repairing our home because we're on a fixed income."

Other evacuees sided with FEMA and said the program has been going on long enough.

"It's really making them lazy. They need to get back to work," said Lela Logan, a New Orleans native who said she got a job and rebuilt her life in Houston.

In Louisiana, U.S. District Judge Stanwood Duval Jr. sided with New Orleans homeowners who argued that the language in some insurance policies that excluded water damage was ambiguous. He said a suit against The Allstate Corp., The St. Paul Travelers Companies Inc. and other insurers could go forward.

Duval said the policies did not distinguish between floods caused by an act of God — such as excessive rainfall — and floods caused by an act of man, which would include the levee breaches following Katrina's landfall on Aug. 29, 2005.

If successful, this suit could cost insurers $1 billion in Louisiana alone, industry officials said, and could lead to similar suits elsewhere. Insurers pledged to appeal.

The ruling was hailed by Xavier University, a historically black college in New Orleans that was inundated by 6 feet of water when the levees gave way. Xavier sued Travelers after the company only paid for a fraction of more than $50 million in damage to the school.

"When you pay for as much insurance as you can, you never dream that this kind of a catastrophe wouldn't be covered," said school President Norman Francis. "This ruling gives us a glimmer of hope."