in Houston, Texas
Windstorm association spent almost $39 million defending against disputed Hurricane Ike claims
Friday, Jan 07, 2011, 05:39PM CST
By Steve Miller
money

Before agreeing to pay out $189 million in previously disputed claims, the Texas Windstorm Insurance Association (TWIA) spent close to $39 million on defense lawyers, according to documents recently released by TWIA to state Rep. Larry Taylor.

Coupled with the $87 million in attorney rewards paid as part of the settlement, the amount spent on legal fees in these cases comes to $126 million.

The records were released to Taylor last month after an attorney general’s opinion refuted an injunction on the records that had been granted by state District Judge Susan Criss. That injunction was granted at the request of Steve Mostyn, who led the plaintiff legal team in a mediated settlement finalized in July. Taylor sought the records in his role as co-chair of a legislative panel overseeing TWIA.

Mostyn declined to comment.

What Taylor landed were various spreadsheets that included the names and claims of TWIA policyholders, people who could not get insurance from any other agency because their property was situated in places vulnerable to weather or other dangers.

Also included was a list of plaintiffs' attorneys and the money they received as part of their payout

The $87 million in legal fees came from an agreed upon figure of 40 percent of the policyholders' recovery, plus an $11.5 million fee as part of ending a class action suit that was part of the overall settlement.

Joe Nixon, a former Republican state lawmaker who represented Taylor in his quest for the records, said the records show a troubled system that needs reform.

“Now you can either handle claims properly and pay them out or deny them improperly and incur attorney fees on the other end,” said Nixon, who is an outspoken proponent of tort reform. “Now what we need to figure out is how can we reform the role TWIA plays in the state and how do we reform it in a way that protects the policyholder and also the state of Texas?”

He denied that Taylor’s public information request was an attempt to portray plaintiff’s lawyers in a bad light – which Mostyn alleged – but rather an earnest stab at learning what kind of reform might be needed. That question needs to be answered before the next disaster strikes Texas, he said.

Nixon also questioned the change of heart from Jim Oliver, TWIA's general manager. In December 2009, Oliver wrote a 9-page letter to members of the Windstorm Insurance Legislative Oversight Committee, outlining the legal tactics of Mostyn on behalf of an Ike plaintiff. Specifically, he called a petition Mostyn filed "hysteric" and noted that law firms such as Mostyn's "are using every means to influence public opinion."

The letter defended TWIA's practices as thoughtful and measured, and noted that when Hurricane Ike struck in 2008, he brought in 64 claims supervisors, managers and support personnel.

Oliver did not respond to questions regarding the $39 million in legal fees or the decision to settle the claims but offered a statement that said, in part, that TWIA attempted to handle the legal disputes "fairly, but strategically."

Contact Steve Miller at 832-303-9420 or stevemiller@texaswatchdog.org.

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Photo of money by flickr user construct, used via a Creative Commons license.

Comments
mm
Friday, 01/07/2011 - 07:45PM

Why is the government in the business of providing insurance in the first place? If private insurance companies say we won't insure you because the risk is too high, why should the taxpayers foot the bill? Many TWIA properties are not average people's primary homes but rich people's second (or third) home or homes held as commercial investments by out of state corporations and individuals.

TWIA, like the NFIP, is just a big taxpayer ripp-off from the get go.

What is so ironic that the NFIP and FAIR plans (TWIA is a type of FAIR plan) were originally passed into law in the '60s as part of the Housing and Urban Development Act which was supposed to bring insurance to poor racial minority urbanites when inner cites couldn't get insurance because of race riots! What a pervision of a government program's original intent.

Meg Meo
Saturday, 01/08/2011 - 06:49PM

The following is the complete statement provided to Texas Watchdog by Jim Oliver of TWIA:

Hurricane Ike was a unique and significant hurricane that caused tremendous

damage to the Texas coast. The Texas Windstorm Insurance Association has

worked diligently since the storm to ensure that our policyholders were paid

to the fullest extent based on the terms of their policies.

We have also been very mindful of the responsibility we have to the State of

Texas to be careful stewards of monies available to TWIA to pay claims. To

that end, we have been extremely careful every step of the way to handle

legal disputes fairly, but strategically, for the benefit of all Texans whom we serve.

Ron Myers
Thursday, 02/10/2011 - 04:45PM

Because, MM, in years with no catstrophic events, insurance is EXTREMELY profitable; the fact that management at TWIA spent a dime trying to save a penny does not reflect on the fact that they are inddeed in the right business. It reflects, rather, on their inability to mange with any certitude

Dr. Harry J.Maue
Sunday, 12/11/2011 - 10:44PM

as a former executive with a large public service company and the recognized founder of the legal auditing industry 26 years ago it always amazes me the some public avenues still choose the legal bidder. When in fact the it be the lowest most responsive bidder who has the reputation and means to provide the very best services. We were informed that TWIA choose a low bidder to provide them with legal cost control services however it appears they did not do a very good job of due diligence as the company they choose needs to be vetted a little better just by checking public records they may have made a different decision. Even if they would have goggled maps and saw the little shared office building their chosen vendor operated out of they may have went in a different direction. I have reason to believe their chosen vendor subcontracts most if not all the work out to independent contractors. It is hard to believe they even checked out any references which again could have resulted in a different decision. This is not a sour grapes rant because we did not get this job it's because I'm very passionate about the industry I founded and I want all clients to get he very best services available. I wish TWIA the very best because they are going to need it just check with your 60 insurers and they will give you their independent assessment as to rather vendor of choice.

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