State Rep. Larry Taylor (R-Friendswood) made national news late last month when he released a report stating that since Hurricane Ike struck the Texas Gulf Coast more than four years ago, the Texas Windstorm Insurance Association (TWIA) has paid out more than $1.2 billion dollars on individually litigated claims related to the disaster.
Taylor’s report alleged “troubling legal settlement patterns” and detailed what he described as “staggering litigation expenses on the part of TWIA.”
Rep. Taylor requested the information in the report from the Texas Department of Insurance (TDI) in preparation for an upcoming hearing of the TWIA Legislative Oversight Board on November 1, 2012.
The information provided by TDI reveals an additional $1.2 billion dollars spent on Hurricane Ike litigated claims since the previously reported class action settlement for slab claims. This figure represents almost half of the $2.5 billion total estimated loss.
Taylor, co-chair of the Oversight Board, said, “Sept. 13, 2012 marked the four-year anniversary of Hurricane Ike, yet TWIA continues to pay out tens of millions of dollars and plaintiff attorneys continue to solicit additional lawsuits. Coastal residents deserve to know how their dollars are being spent. I intend to get answers at the upcoming hearing because this natural disaster has turned into a man-made disaster with serious repercussions.”
Attorney Steve Mostyn, who represented many of the TWIA policyholders who took the agency to court, took sharp exception to the Taylor Report.
“State Rep. Larry Taylor and I agree on one thing — TWIA has paid out too much money in lawsuits,” said Mostyn, who offered a different explanation for the legal mess described by Taylor.
“As a Texas trial lawyer, I have represented thousands of families, businesses, nonprofits and churches. Hard working folks like Steve Quibodeaux, a small business owner in Bridge City, and Pastor William King III of the Greater Missionary New Hope Baptist Church in Dickinson. Mr. Quibodeaux and Pastor King are Texas Windstorm Insurance Association policyholders who paid their insurance premiums to TWIA diligently for years. In return, they expected that if they needed to file a claim, they would get paid fully and promptly, as the law requires. That was the deal they made with TWIA,” said Mostyn.
Mostyn agreed there was abuse but laid that squarely at TWIA’s doorstep.
“Over the past three years, it has been well-documented that TWIA didn’t pay claims according to the law or its contracts. Instead, TWIA engaged in claims-handling abuses from the top down, devastating the very coastal communities that TWIA is supposed to serve. The Texas Department of Insurance even found TWIA to be ‘in a condition that makes its continuation in business hazardous to the public or to its policyholders,’” observed Mostyn.
Taylor sought to lay the blame elsewhere. His report said there are more than 300 plaintiff law firms with Hurricane Ike litigation claims in Texas, but a small cadre of 10 law firms has handled more than 74 percent of TWIA litigated claims.
Taylor said, “The bleeding of TWIA ratepayers has got to stop, and it’s time TWIA management explains exactly how they’ve been running their business since Hurricane Ike devastated Texas. The payout patterns don’t make sense, the exorbitant costs are atrocious and the abuse of the public trust is at an end.”
Mostyn decries “insurance propagandists (who) continue to blame TWIA’s policyholders for the current financial mess. But the fact is that customers did nothing wrong. They paid insurance premiums for years, and filed claims with TWIA after their lives were turned upside down by Hurricane Ike – and then by TWIA. After filing their claims, these families were dragged through a nightmare of bad-faith claims handling by an insurance company run by inept leadership and corrupt claims management. After years of litigation, TWIA was shown to have underpaid thousands of customers.”
It is clear that Mostyn believes the ““insurance propagandists” include Taylor.
“It is absurd for (Taylor) to feign outrage about TWIA’s recent rate hike and say he doesn’t ‘want to pay for the mistakes of the prior management’ without disclosing his own role in this mess,” said Mostyn. “It was his legislation that allows TWIA to hike its rates 5 percent every year without first getting approval from the insurance commissioner.”
Mostyn wasn’t through with Taylor.
“Curiously missing from Rep. Taylor’s comments on TWIA’s finances is the agent commissions paid on TWIA policies – 16 percent rather than the industry norm of 8 percent. In 2010, TWIA paid its agents commissions totaling $57 million. Taking off the 100 percent bonus to insurance agents would save policyholders around $27 million, year after year. But you won’t hear insurance agent Larry Taylor suggesting this simple solution – reducing his commission down to the industry standard in order to save his constituents millions of dollars.”
One place where these issues were not raised was in the recent campaign. Taylor just won the Texas Senate seat in District 11 vacated by long-time senator Mike Jackson, who gave it up to make an unsuccessful bid for Congress. Taylor faced underfunded Democratic candidate Jacqueline Acquistapace and won easily.
This assumes greater importance because of another obstacle to meaningful reform that doesn’t punish coastal counties – state Insurance Commissioner Eleanor Kitzman, a recent Perry appointee whose TWIA policy prescription consists mainly of huge rate hikes for coastal businesses and residents. When Charlie Zahn, a Port of Corpus Christi commissioner who chairs the Coastal Windstorm Task Force, called on the Texas Senate to reject Kitzman when she comes up for confirmation, even coastal senators were reluctant to commit. Taylor told the Business Journal he had not decided how he would vote on Kitzman. Sen. Tommy Williams was also noncommittal but noted he normally votes to confirm Perry appointees.
James Shannon can be reached at (409) 832-1400, ext. 249, or by e-mail at james [at] beaumontbusinessjournal [dot] com.