in Houston, Texas

Rep. Craig Eiland, who sits on House insurance committee, said he received $620K in legal fees in case against state insurance agency TWIA

Monday, Feb 28, 2011, 07:54AM CST
By Steve Miller
texascapitol

State Rep. Craig Eiland said he was paid more than $620,000 in legal fees in a multimillion-dollar Hurricane Ike settlement between homeowners and a state insurance agency -- an agency he helps oversee as vice chairman of the House Committee on Insurance.

 
Last week the committee questioned the head of that agency, the Texas Windstorm Insurance Association, concerning legal fees in the case, the agency's handling of claims and the abrupt departure of two high-ranking employees. The committee is also in the midst of broader discussions about the structure and future of the agency.
 
Eiland said that his hundreds of thousands of dollars in fees from TWIA-insured homeowners have no effect on his ability to vote fairly and impartially on measures affecting the agency. Eiland says he represented 11 clients and earned $627,914 from the July settlement, worth a reported $189 million and involving some 2,400 claimaints.
 
Eiland is not the only power broker at the Capitol who has benefited from the Ike settlement. State Rep. Todd Hunter, R-Corpus Christi, raked in $60,000 serving as a mediator of the deal. And Democratic megadonor Steve Mostyn was a plaintiff's attorney on the case; it's unclear how much Mostyn made, but TWIA paid out a total of $87 million in plaintiff's attorneys' fees as part of the settlement. Mostyn, together with his wife, was the largest donor to Texas campaigns in 2010.
 
Eiland, D-Galveston, emphasized that he does not sit on the subcommittee that directly sets policy for TWIA, pointing out that state Rep. Larry Taylor, who has made money selling TWIA policies, does. In addition to home insurance, the House Insurance Committee deals with other general insurance issues, setting public policy for auto, health and credit insurance.
 
Eiland said the claims adjustment process at TWIA was to blame for the millions of dollars in lawsuits filed and, in turn, the attorney's fees which some have said were excessive.
 

The reason that I earned attorney fees representing homeowners against TWIA is because TWIA’s handling of claims and their attitude violated the insurance code and industry practice and procedure for many policy holders,” Eiland said via e-mail. He declined an in-person interview because of time constraints.

Craig EilandEILAND

 

Eiland represents a district that falls largely in one of the 14 counties where TWIA is the only insurer for wind damage because of the high risk of loss.
 
"The decisions made in the Legislature regarding TWIA impact my district significantly," he said.
 
The whole thing 'stinks'
 

Eiland’s fees included a single payment of $260,432 from three properties in a condominium neighborhood on Galveston Bay, records obtained by Texas Watchdog show.

 

E-mails show that as lawyers for claimants called TWIA during the mediation process in May and June, they were referred to lawyers that were handling the settlement, including Eiland.
 
Documents obtained by Texas Watchdog cited a higher total fee amount for Eiland -- more than $850,000 -- which he did not comment on.

Taylor, who has been critical of the attorney’s fees, is an insurance agent and has himself made $300,000 over a four-year period selling TWIA policies, according to a KHOU 11 News report. Taylor also sits on the Insurance Committee. Taylor, R-Friendswood, declined to comment.

“The whole thing kind of stinks,” said Russell Longcore, a Georgia-based insurance claims adjuster and frequent commentator on insurance practices. “Given these amounts, it’s doubtful any of them should be involved with forming policy on any of these issues.”
 
Even before Hurricane Ike hit in September 2008,Texas had the highest residential insurance premiums in the U.S., with an average premium of $1,460, according to the National Association of Insurance Commissioners. Florida was second in the rankings at $1,390 annually, and the national average was $791.
 
Eiland doubted the rates could be sent even higher based on the settlement and legal fees paid by TWIA.
 
"No, there is no relation," Eiland said. "Under the current funding scheme of TWIA (different from the one in place for Hurricane Ike) coastal policy holders will share in any surcharges necessary to pay off bonds to pay claims."
 
Changes needed at TWIA
 
TWIA is in need of a change in culture, Eiland said, and the December dismissal of two high-ranking claims employees was a positive move.
 
“Hopefully this has started with the recent firing of Mr. Warren and Mr. Knarr,” Eiland said. “A review of the documents produced during the litigation … clearly revealed that they were a significant part of the claims handling problem."
 
The employees, Reggie Warren, former vice president of claims, and Bill Knarr, former catastrophe office manager, received severance packages including a combined $160,000 in cash and a pickup truck, Texas Watchdog reported. TWIA General Manager Jim Oliver had said they resigned.
 
The packages prompted questions from lawmakers during an insurance committee meeting last week.
 
"I was glad that someone finally realized that it was the treatment of the policy holders in the first place that started all of this mess," Eiland said of the hearing. "And the attorney’s involvement and the fees the attorneys earned, is a result of the attitude and treatment by the TWIA
 
Claims Dept of people who were required to buy their insurance from TWIA in the first place."
 
Warren and Knarr have declined interviews, and the severance agreeements prohibit them from speaking ill of TWIA or of discussing the packages.
 
***

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


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