in Houston, Texas

State windstorm agency’s alleged bungling of Hurricane Ike claims detailed for legislators; insurance chairman Rep. John Smithee ponders dismantling TWIA

Wednesday, Mar 16, 2011, 11:13AM CST
By Mark Lisheron
Texas state Capitol

After listening to dozens of stories of people ignored, denied, shortchanged and defrauded, as more than one person alleged, the chairman of the House Insurance Committee wondered aloud if it wasn’t better just to shut down the Texas Windstorm Insurance Association.

Five hours of testimony, much of it provided by people bused in from all over the state, offered lurid substantiation to the claims of the chairman, Rep. John Smithee, who referred to the association at different points as a house of cards, an unworkable system and a fraternity - with apologies to some of the fraternity members Smithee knows.

What’s more, in spite of a complete board shakeup within the past year, the board recommending the general manager be fired, two top managers leaving, the Texas Department of Insurance taking over and a fraud investigation by the Travis County District Attorney’s Office, Smithee said he isn’t sure that anything has improved with the Windstorm Insurance Association.

“What we’re dealing with over there is a house of cards,” an exasperated Smithee said during the Tuesday hearing. “I’m really concerned about this whole deal. We’re dreaming to think we have any funds to pay claims for a major storm.”

John SmitheeSMITHEE
What also became clear, from the the expert witness and committee member statements, including those of Smithee, R- Amarillo, is that no one has an idea what the homeowners in 14 coastal counties would do if the quasi-government agency that is the sole windstorm insurance provider went away.

“I think the state made a significant mistake 40 years ago when it got into the windstorm insurance business,” Bill Peacock, director of the Texas Public Policy Foundation’s Center for Economic Freedom, testified. “You are never going to fix this system.”

Compounding the legislative frustration were the impassioned accounts of homeowners who told the committee they turned to lawsuits as a last resort when the association either ignored or denied their claims.

Rep. Larry Taylor, R-Friendswood, who has for months been looking into TWIA’s conduct, told a full house at the Capitol extension hearing room that in addition to at least $140 million in legal settlements so far, he had been told the association was no longer mediating claims and paying out whatever was being asked for by the attorneys for homeowners.

Taylor and Smithee have both introduced bills to reform TWIA, to curb what they say are unsustainable legal costs and to force the association to make public its management decisions and its salaries.

Larry TaylorTAYLOR
“I’ve been told that right now the mediation process is somewhat of a sham, that TWIA is paying out whatever a lawyer asks for,” Taylor said. “What I want to know, are we still giving away the store? I want to make sure the people who need to be paid are paid, but we don’t need to be paying any more than we are supposed to be paying.”

Steve Mostyn, whose Houston law firm got a substantial piece of the $140 million, organized hundreds of clients, chartered buses for them from Houston, Galveston and elsewhere and outfitted them in red T-shirts that read, “Don’t Help TWIA Commit FRAUD. Reform Them. Don’t Protect Them,” on the back.

Mostyn, whose dispute with Taylor over settlement records was decided by the Texas Attorney General’s office in favor of Taylor, hauled in a cardboard document box out of which he pulled an outline of what he said were 3,823 complaints about TWIA made to the Texas Department of Insurance.

In the slipshod or absence of appraisals, the underpayment or non-payment or outright denial of claims, TWIA carried out “the systematic defrauding of these homeowners,” Mostyn told the committee. “They fought us like nobody ever fought us. They were going to crush us, and they almost did.”

Mostyn objected to the proposals in Taylor and Smithee’s bills to use binding arbitration to settle cases rather than allowing homeowners a state constitutionally guaranteed right to a jury trial.

During the hearing, Taylor said he was willing to consider an alternative to binding arbitration. After the hearing, Smithee, too, said he was no fan of binding arbitration.

“But I know we can’t afford another round of litigation like we just had,” he said.

Steve Quibedeaux of Bridge City, said he had to wait until Hurricane Ike hit before TWIA finally paid him for Hurricane Rita damage.

Quibedeaux, who testified before the committee, said he came to think that TWIA wasn’t in the business of settling claims and making him whole, but in the business of beating him up over the terms. At first reluctantly and, finally, gratefully, Quibedeaux turned to Mostyn for help.

“I’d rather give my money to a lawyer,” Quibedeaux said, “than to have somebody steal it from me.”
Contact Mark Lisheron at 512-299-2318 or

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Photo of Texas state Capitol by flickr user The Brit_2, used via a Creative Commons license.
john cobarruvias
Wednesday, 03/16/2011 - 07:30PM

Larry Taylor is the State Representative of the insurance industry. He will say anything. Do anything to protect his business interests.

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