Texas House bill would prevent collection of punitive damages from TWIA lawsuits

Marilyn Tennissen Jun. 16, 2011, 7:37am


The Texas House of Representatives on Wednesday passed a bill that would cap the amount of damages plaintiffs can receive from litigation against the Texas Windstorm Insurance Association.

House Bill 3, authored by Rep. John Smithee, R-Amarillo, would stop TWIA policyholders from collecting treble or punitive damages. Under the bill, plaintiffs could still sue to recover losses and attorneys' fees.

An overhaul of the non-profit TWIA, a quasi-governmental insurer of last resort for property owners in 14 coastal counties, stalled in the regular legislative session, but Gov. Rick Perry made it a priority for the special session he called May 31.

"TWIA ... has been inundated with lawsuits resulting from Hurricanes Dolly and Ike, imposing significant additional expense to the overall losses required to be paid by the association that could result in higher costs not only to consumers in the association but also to property insurance consumers statewide," Smithee wrote in the bill's analysis.

Smithee said attorneys' fees are driving up the cost of insurance.

"We are going to have to change our tort system," Smithee told the Houston Chronicle. "We turned a $1.5 billion storm into a $2 billion storm because of the tort system."

One of the changes would prohibit the filing of lawsuits claiming unfair or deceptive trade practices against TWIA or its agents and would make the Unfair Claim Settlement Practices Act inapplicable to claims by the association.

"The bill prohibits the association or an agent or representative of the association from being held liable for any amount on a claim other than amounts payable under the terms of the association policy for loss to an insured structure, loss to contents of an insured structure, and additional living expenses and any costs and fees awarded under the bill's provisions relating to judicial review," the bill states.

"The bill prohibits the association or an agent or representative of the association from being held liable for damages under state deceptive trade practices law or under any provision of any law providing for trebling of damages or a penalty."

In addition, the legislation would create a committee of state judges who would assign judges to hear lawsuits against the agency, instead of local judges.

Smithee also proposes a name change for the agency, from TWIA to the Texas Coastal Insurance Plan Association, and the bill would require a legislative committee to study alternative ways to provide insurance to the coastal counties of Texas.

The Senate is working on its own version of a TWIA reform bill, driven by Business and Commerce Committee Chairman John Carona, R-Dallas. The Senate version does not propose eliminating punitive damages.

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