Impassioned and expert testimony about two bills in the Texas Legislature, HB 272 and HB2818, attempting to solve problems with the Texas Windstorm Insurance Association (TWIA) lasted hours in hearing by the House Committee on Insurance today. The committee discussed the claims of the authors, Representatives Smithee, and Taylor respectively, to improve the psuedo-governmental agency and allow better efficiently and effectively pay out on claims.
Discussion focused upon ways to solve the failures of the organization that covers 14 coastal counties including Houston’s Harris County. The bills attempt to provide better efficiency to processing claims–that proved to be painfully sluggish after Ike, and greater transparency, including publishing the salaries of board and other employees of TWIA. The most controversial section of the bill is a clause that requires arbitration for a disputed or inefficiently processed claim rather than a law suit. One member of the panel argued that the Texas State Constitution provides the right of all citizens due process of the courts for remedy. The packed audience applauded.
One bill also requires additional mandated flood insurance, noting that the majority of structures within A or B geographical areas suffer from flood damage, not wind damage, even though mortgage companies only require the latter in coastal regions.
All committee members agreed with the assessment that the payout process with Hurricane Ike and other disasters was not successful, efficient, or effective. But they differed on the methods of resolving the problem within seasonable budgetary guidelines. The bills assume a loss of income to the fund by law suits is the culprit in draining funds, and thus attempts to remedy that expense through arbitration instead. But the hearing soon revealed deep seeded problems with the system itself. Telling their individual experiences with TWIA, all citizens testified against the two bills primarily on the basis of a right to sue. They revealed horrific details about an organization that was unwilling to pay on legitimate and fair claims, which is what lead to the suits.
One witness testified that the appraiser showed repair of the roof of his non-profit oranization that serves 30 special needs children would be $300,000. TWIA gave them $15,000. He gave the committee a list of runaround processes that provided a method for TWIA to ignore the claim. He said that TWIA then notified him that they were going to cancel the organization’s insurance because their roof was not in satisfactory condition even though it was because TWIA would not payout on the claim. Another testified, who lost the shingles, and tarpaper on his roof, that his claim was denied because the plywood was still in tact. He was only able to get his claim processed after litigation. Yet another said the assessor told him he needed to file for a tarp to cover what remained of his home, which had no roof at all. When the insured filed a claim for a tarp it was denied because he was required to have a roof in order to qualify for the tarp.
A resident of Galveston, whose home also sustained damage from Ike, said TWIA told him there were no tornadoes from Ike but “meso-cyclones and vortexes”. And another brought up the point that TWIA is forced upon homeowners who pay “exorbitant” premiums, and are entitled to a fair process to have legitimate claims with a right to sue for those claims if needed. He is against both bills and would like to see private insurance take over windstorm coverage competitively.
Weir Wyndall, representing Texas Watch, an organization protecting consumer affairs agreed with the section of HB272 that provides transparency. He agrees with HB2818 requirement for higher standards of codes. But with both bills, as with those ahead of him, he is opposed to the removal of a citizen’s right to court action. Wyndall also quoted current Texas code (ch. 54, Civil Justice Code), which already provides alternate remedies before trial, which, he demonstrated made the requirement for arbitration, not just restrictive, but redundant. He is against both bills and recommends
Steve Mosden, an attorney, who noted that his past clients were a cross-section of all citizens and who is, arguably, the foremost attorney in suits against TWIA for Hurricane Ike, testified against the two bills, stating TWIA is “the largest defrauding of Texans in history.” He referred to a prior year’s bill, HB449, stipulating that the board for TWIA in control of the association split profits from the insurance payments. He testified that, according to emails, there was complete disorganization, as well as incomplete claims, and that TWIA refused claims to payees who faithfully paid into the system.
Mosden pointed out that internal memorandum by insurance companies instructed employees not to pay out except as a last resort. “TWIA hired every attorney they could…TWIA hired appraisers, and chose those appraisers with the record of low-ball appraisals,” he said. Mosden also said blaming the coastal counties for the states total rise in insurance premiums was not true, noting that because of Japan’s catastrophe, which has nothing to do with most of the world’s insurance. Premiums were expected to rise. He testified that he spent $300,000 dollars for an investigation into TWIA insurance and TDI. He has emails from TWIA to TDI telling them to stay out of the claim process for Ike. TDI is required to provide oversight of TWIA.
3820 people received virtually no payout from TWIA, Mosden said. TWIA has twelve times the litigation rate compared to for profit insurance organizations. Mosden brought with him a petition with a thousand names on it with complaints about TWIA. Mosden said that for every issue TWIA came upon that would cause the organization to pay out, they would modify policies to manipulate claim requirements. He illustrated his point with documents that he brought showing, for example, that when there was a dispute about the value of an assessment, TWIA created a policy where if an assessor had to make another review assessment, he was fired if the second assessment was not in TWIA favor. If the assessor’s re-evaluation showed no difference or increase in value, the assessor was given a bonus. He spoke against Section 541 that the new bills strike and remove. This section provides the right of relief, reasonable assessment, and reimbursement for additional losses, including work, transportation and so forth that the new bills remove. HB 272 provides coverage of the structures directly affected by a catastrophe only. Mosden supports the bill that removes TWIA altogether.
Into testimony four hours about abuses and corruption attributed to TWIA, the Committee noted that the head of TWIA was not present to defend or address the testimony of scores of witnesses. According to one committee member, TWIA declined to come because no one from the organization was invited. Another noticed that there were representatives from TDI and OSHA present, neither of whom were invited, as well as individuals who testified all afternoon. Testimony went nearly six hours.
Among the many organizations that weighed in on the pros and cons of both bills were the American Insurance Association, Texas Coalition for Affordable Insurance Solutions, Texas Public Policy Association, Property Casualty Association of America, Independent Insurance Agents of Texas, and the Texas Department of Insurance (TDI).
The Texas Windstorm Insurance Association has been in existence for 40 years, since 1971. Houston and cities in neighboring counties below it, from the border of Louisiana to Mexico are covered with windstorm insurance through TWIA. All homeowners with a mortgage on a home along the coast and inland along Galveston Bay where Houston lies are required to purchase TWIA.
Representative Smithee said after much of the testimony he had great concerns about TWIA. He said, “this is the biggest fraud to those people on the cost there is, because right now, [TWIA] has nothing. We’re broke. I’ve got more money than TWIA, and I’m broke.” The Commissioner on Insurance said there is approximately $2 billion, which when gone,” it’s done.” Discussion evolved into the idea of a “CAPCO” and assigned risk pools.
Both bills are pending in committee.