Windstorm insurance reform will benefit public

During the recently completed special session, the Texas Legislature overwhelmingly passed House Bill 3, the Texas Windstorm Insurance Association Reform Bill ... and not a moment too soon.

As we enter another hurricane storm season, it is imperative Texas has an insurance program to properly handle the devastating impact of natural disasters along the Texas Gulf Coast.

To take the necessary steps to prepare for the future, we need to carefully evaluate our past practices and procedures. About 6 percent of the over 93,000 claims from Hurricane Ike are or have been litigated. These claims have taken more than two years to be resolved and have proved to be very expensive in terms of the legal costs. This became obvious when I finally received the information I had requested from TWIA in an open records request last year as the newly appointed chair of the Legislative Oversight Committee for TWIA.

After a costly and contentious four-month legal battle with some of the plaintiff attorneys, I finally was given access to the information of how these claims were litigated. Upon receipt of the information, it was obvious why they would have preferred the details not have been made public. There was a class action settlement that included plaintiff’s attorney fees of 36 percent. Even more appalling was the global settlement, where TWIA paid plaintiff attorney fees of 63 percent.

Some of these same attorneys testified at our legislative hearings that the folks whose properties were damaged received only what they were owed in the beginning. So after two years, the policyholders were made whole with payments totaling $101.3 million, but their attorneys were paid $55.5 million. That’s more than 55 percent for claims that were not handled individually and never went to court.

I recently received updated information on the mediated settlements that have been completed since my earlier request. TWIA has paid out another $100.7 million on these settlements. If you estimate the attorney fees at 30 percent, which apparently is low when dealing with TWIA, that’s another $30 million in attorney fees.

On top of that, we find that TWIA has paid its attorneys $48 million for defense costs.

Real quick summary — for TWIA to pay $202 million for property claims, it paid out an additional $133.5 million in legal costs.

For every claims dollar that was paid to restore someone’s property, an additional 66 cents was spent in litigation costs, and it took more than two years. In fact, there still are more than 1,900 claims pending more than 21/2 years after Hurricane Ike struck our area.

No one should want to repeat this terribly inefficient and expensive process, except maybe the attorneys.

TWIA is not an insurance company. It is a quasi-state agency established to provide property owners, in the first tier counties, the ability to purchase windstorm, hurricane and hail coverage. It is basically a co-op. There is no profit motive, and all of the costs are borne by the policyholders, with the exception of a catastrophic event when coastal policyholders and insurers all over the state help to pay claims.

TWIA’s sole purpose is to issue policies and pay claims promptly and fairly. When they don’t do that, you fire the people responsible. You don’t penalize other policyholders by increasing the premiums they pay to pay “the penalty.”

Our efforts to reform TWIA were all about changing the people in charge, increasing public transparency, streamlining the renewal process, designing a process that will ensure people are treated fairly and quickly when they have a claim, reducing unnecessary litigation costs and trying to keep the premiums we pay into TWIA affordable.

That last point needs to be emphasized. There were many, and there continue to be efforts, to greatly increase the rates we pay for our TWIA policies. If we did nothing to show that we significantly changed how TWIA operated, we had very little to offer in defense.

We simply cannot afford to repeat the same process many suffered through and that we all will pay for due to Hurricane Ike and the storm of litigation that followed.

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State Rep. Larry Taylor lives in Friendswood.