in Houston, Texas
Texas windstorm agency TWIA disputes state report saying it failed to report possible fraud
Friday, Apr 22, 2011, 01:43PM CST
By Steve Miller
Galveston home


In a stridently defiant response, management at the Texas Windstorm Insurance Association has disputed a state investigation report that said it failed to promptly report possible fraud at the distressed agency in December.


Mike Gerik, chairman of TWIA’s board of directors, said in a letter to the Texas Department of Insurance, which took over TWIA in February amid allegations of mismanagement, that while the agency disagrees with the findings of the state, staff “has concluded that an appeal of the final report would not constitute a productive use of the association’s resources.”


The contested report issued earlier this month by the Department of Insurance says that TWIA officials, including former General Manager Jim Oliver, failed to follow established policy and state law for reporting fraud allegations.


According to the report, the association was aware that a claims adjuster -- whose brother-in-law was a high-ranking official at the association -- had filed potentially fraudulent claims. Instead of reporting the alleged fraud, Oliver fired the high-ranking official, Bill Knarr, as well as another key claims official, Reggie Warren. The two were given lucrative severances, and Warren was given a truck. Olliver and the board then consulted with a team of lawyers and asked Deloitte & Touche to audit the potentially fraudulent claims.


Oliver also sent a letter March 14 to TDI disputing its findings, according to records released to Texas Watchdog this week.


“I do not agree that the association did not report to the department ‘reasonably suspected fraudulent acts within 30 days,’" Oliver wrote to insurance department examiner John Sedgewick, who completed the investigation. “We did not believe that the information brought to our attention was sufficiently strong to warrant an immediate report of suspected fraud so we determined to first conduct an investigation.


"Once we had a draft of the third-party report, which indicated there was the possibility of fraud, we reported it."


Oliver was dismissed in March, and the TWIA board last week hired Ohio insurance veteran John Polak to replace him on an interim basis.


Gerik left the door open to further action in his April 15 letter to the insurance department: "The association reserves all rights to dispute any matter asserted in the final report in any forum and does not waive any defense or right with regard to matters in the final report."


The board last week approved the hiring of Austin lawyer Burnie Burner to represent board members individually, but declined to explain the reason for the added expenditure. The fraud allegations at the agency are under investigation by the Travis County district attorney's office.


The windstorm agency has been under fire since the aftermath of Hurricane Ike. Last summer, TWIA settled a multimillion-dollar lawsuit brought by policyholders who said they were shortchanged on claims payouts. The agency's transparency and financial oversight have come under question.


Additionally, Texas Watchdog has reported extensively on public officials who have benefited financially from the agency, including lawmakers charged with overseeing it.



Contact Steve Miller at 832-303-9420 or

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Photo of home in Galveston by flickr user, used via a Creative Commons license.

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