in Houston, Texas
Lawsuits still pouring in to beleaguered Texas windstorm agency as TWIA reform bill kicks in
Tuesday, Oct 11, 2011, 09:19AM CST
By Steve Miller

Hurricane Ike claims and lawsuits continue to dog the Texas Windstorm Insurance Association, with 141 new cases filed in state district courts last month -- more than three years after the storm laid waste to the state’s Gulf Coast.

This year has seen an unraveling of the operation known as the “insurer of last resort,” a place that property owners in flood-prone areas can get coverage at a reasonable rate.

TWIA has been hobbled by a number of problems, which led to the ousting of the agency’s general manager and a fraud investigation that is ongoing by the Travis County district attorney’s office. (See time line.)
A statehouse bill to reform some of TWIA’s claims procedures took effect Sept. 28. The new law is focused on tort reform, creating a mediation and arbitration system for disputed claims, but also pushes the agency toward greater transparency by requiring meetings be broadcast online and archived, making salary and bonus information explicitly public, and requiring its first state audit of the agency.

In a state Senate committee hearing last Tuesday, interim General Manager John Polak vowed a “cultural transformation” at TWIA and “transparency in activities and the approach that we take.”

His promises meant little to Julie Drenner, director of the Texas office of the conservative Heartland Institute’s Center on Finance, Insurance and Real Estate.

“There’s nothing new that he told that committee,” said Drenner, whose group in March issued a paper outlining its own remedies for the troubled TWIA.

“And he hasn’t done much, it appears,” she said. “You could say that’s because he’s only been on the job since April. But on the other hand, he’s been on the job since April. It sounded like he was just part of the TWIA culture.”

A trade group was more optimistic.

“I think [TWIA officials] are getting a handle on things,” Mark Hanna, a spokesman for the Insurance Council of Texas, said. “Lawmakers put some structure in place. [The state Department of Insurance] now has a larger role in working with TWIA, and that will stick around for a while.”

Polak has not had a lot of time to get rid of problems at the agency, a spokesman for state Rep. Larry Taylor, one of the architects of the TWIA legislation, said.

“I don’t get the sense he’s cleaning out the problem yet,” Taylor’s spokesman Matt Welch said. “I think he’s overwhelmed with the culture, and the problem is pretty intense.”

Not least among those problems is that the agency remains under the cloud of a fraud investigation, launched in March by the Texas Department of Insurance and the public integrity unit of the Travis County District Attorney’s office.

Gregg Cox, chief public integrity prosecutor for the Travis County DA’s office, said last week that the investigation is ongoing.

“We’ve got a lot of evidence to go through and have an analysis going on right now,” Cox said. “An investigation of this size and type can take months before any public action is taken. There is a lot of material to wade through.”

At times, TWIA has blatantly disregarded sunshine laws, further undermining public confidence. The agency in April violated the state’s open records act when it refused to release the names of the candidates to succeed former general manager Jim Oliver, and initially blocked a request to listen in on a public meeting held via conference call in January.

TWIA insures 244,000 homes and businesses in 14 counties - approximately 57 percent of the state’s coastal residential market, according to the agency -  and has asked the state for approval to increase prices 5 percent.

“Today's TWIA is a changed organization and will continue to improve in the months and years ahead,” Polak wrote in a Houston Chronicle op-ed last month. Polak, through a spokeswoman, declined to grant a live interview with Texas Watchdog, instead asking for written questions submitted in advance.
Troubles at the Texas Windstorm Insurance Association

May 2010: Republican state Rep. Todd Hunter, receives a $25,000 political donation from the Mostyn Law Firm days after being selected to mediate a multimillion-dollar case involving clients of that firm, which is run by prominent Democratic donor Steve Mostyn.

December 2010: Two high-ranking claims employees leave TWIA with tens of thousands in severance and a pickup truck. One of those employees receives a $22,100 bonus less than three weeks before his firing.

January: TWIA’s legal defense fees hit $39 million, an amount the agency paid out prior to agreeing to a $189 million settlement for disputed claims.

February: A report by Houston CBS affiliate KHOU says Houston-area state Rep. Larry Taylor, R-Friendswood, has pulled in hundreds of thousands of dollars in commissions for insurance sales through the Texas Windstorm Insurance Association while co-chairing a legislative panel charged with oversight of the association.

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

Feb. 28: The Texas Department of Insurance finds that TWIA has become “hazardous to the public” and places the agency under administrative oversight.

March: Galveston Mayor Joe Jaworski is on a list of 10 possible mediators for Galveston County cases stemming from Hurricane Ike. Records show Jaworski has been paid $3,000 for mediating two earlier cases in which Galveston County sued TWIA.

March: The Travis County District Attorney’s public integrity office, together with two state agencies, probes possible fraud stemming from payments following Hurricane Ike.

March: TWIA General Manager Jim Oliver is fired.

April: A state investigation finds that former TWIA General Manager Jim Oliver and board members were aware than an adjuster had filed potentially fraudulent claims but that they failed to report them as they were bound by policy to do. The adjuster’s brother-in-law was a high-ranking official at the association.

April: John Polak, a former vice president at an Ohio transportation insurer, is hired on an interim basis to replace Oliver, with annual pay of $295,000 plus $5,000 monthly to cover commuting expenses for three months.

April: The board of directors of the Texas Windstorm Insurance Association retains Austin attorney Burnie Burner to represent them as individuals. The board refused to divulge why it took the action.

June: The Texas Legislature approves a reform bill, HB3, aimed at stemming lawsuits and requiring greater transparency.

Sept. 28: The bill, HB3, reforming some of TWIA’s claims procedures takes effect. The bill is aimed at keeping cases out of court and making it more difficult to turn to trial lawyers for help collecting a claim, as well as requiring more transparency from the agency.
Contact Steve Miller at 832-303-9420 or

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Dr. Harry J. Maue
Wednesday, 01/18/2012 - 04:51PM

I strongly believe that TWIA should retain the services of a forensic legal and claims auditing company that can provide a comprehensive audit thereby assuring the association that all parties are in compliance with legal billing protocols and the claims are being processed in a timely and thorough manner. The legal fees and expenses should be audited retrospectively back 3 years and the same with the claims files. Simultaneously the law firms should have all there bills and receipted expenses submitted again to ascertain whether or not they comply with standard billing protocols and the TWIA billing guidelines. This type of oversight is a must done project and getting stared sooner then later is the right thing to do from an outside prospective. The current company that has been retained simply cannot provide this service and with a little due diligence of public records one can easily determine the company in merely a web site no more no less. This is not a sour grapes response it is simply wanting TWIA to get the very best this industry has to offer and no a low price bidder.

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