From household mold to insurance gold: How Mostyn made his millions

HOUSTON (Legal Newsline) – Not long after Hurricane Ike pounded the Texas Gulf Coast, trial lawyers mobilized, launching aggressive advertising campaigns with the aim of enticing area residents to sue their insurance provider. 

In the eyes of some Texans, the next biggest litigation boom since mold lawsuits had made landfall. And within months of the storm’s advent, plaintiffs attorney Steve Mostyn, founder of the Mostyn Law Firm in Houston, was already busy marking Southeast Texas highways with billboards.

Motorists passing through Beaumont might recall, unless distracted by screaming children, one of Mostyn’s first billboards – a giant black sign with a satellite picture of Ike stamped on left side and the words: “You tired of delays, excuses, and lies? Call 1-800-TX-LAWYER. IkeAttorney.com.”

Apparently, Mostyn’s advertising dollars were apparently well spent. Their return was a vast fortune that has allowed Mostyn to become a mega-donor to Texas political candidates, sometimes donating as much as $1 million to the candidate of his choice.

The attorney has netted a profit of $150 million from representing thousands of Ike victims in their lawsuits against the Texas Windstorm Insurance Association, said state Sen. Larry Taylor, who served as co-chairman of the Windstorm Insurance Legislative Oversight Board during his previous tenure as a state representative.

“This is a fairly new phenomenon – mass litigation of this type,” said Taylor, a Republican representing parts of Brazoria, Galveston and Harris counties.

More than five years after the storm, Taylor says TWIA has paid out $2.65 billion in claims. Excluding numerous unresolved claims, the agency has dealt with 93,000 claims. Out of that total, 13,000 were litigated, and out the 13,000 litigated – 32.7 percent were handled by Mostyn and his firm.

“Those 13,000 litigated claims got about half of the $2.65 billion,” Taylor said. “TWIA paid out an excessive amount of money.”

Due to the relentless barrage of lawsuits, the future of TWIA, the sole provider of windstorm insurance for Texas Gulf Coast residents, may be in question, one legal reform group believes.

“The hundreds of millions of dollars paid by TWIA to Mostyn and other plaintiff lawyers contribute to TWIA’s insolvency,” said Sherry Sylvester, a spokesperson for TLR PAC.

“TWIA’s insolvency, in turn, will lead to some combination of loss of coverage, reduction of coverage, higher premiums, inability to pay claims in future hurricanes and increased financial burden on Texas taxpayers.”

TLR PAC is the political action committee of Texans for Lawsuit Reform, a group that has targeted Mostyn with criticism in the past.

“We believe that the mass tort model that Mostyn has used in pursuing legal claims — including the advertising to solicit clients, the assembly of a large number of clients, the pursuit of lawsuits in a favorable forum, and the unusual calculation of legal fees – has resulted in legal fees exceptionally higher than what we consider to be fair and reasonable,” Sylvester said.

Taylor said attorneys reaped around 40 percent in attorneys fees from Ike cases.

He added that Mostyn helped spark the trend of mass litigation against insurance companies with the success he experienced litigating mold lawsuits in the early 2000s.

In 2001, Texas accounted for 70 percent of all new mold claims filed in the U.S., according to the Insurance Information Institute.

And Mostyn was apparently considered such an expert on litigating mold claims, in 2002 he spoke on the subject at a Texas Trial Lawyers Association seminar, according to the attorney’s website.

A year after his TTLA speaking engagement, Mosytn was reprimanded by the State Bar of Texas for settling a client’s case against an insurance company without the client’s permission, court records show.

Mostyn signed the agreed judgment of public reprimand on April 10, 2003.

According to the reprimand, on April 20, 1999, Mostyn was retained by an individual, whose name has been blacked out, to represent him in a lawsuit against an insurance company. Mostyn frequently failed to respond to reasonable requests for information and communicate with his client concerning settlement negotiations, it says.

On July 31, 2001, Mostyn agreed to settle the case without consulting his client. Several months later, he represented to the presiding judge that the parties had reached an agreement.

“Because of (Mostyn’s) actions, (his client) was bound by a settlement of his case to which he did not agree,” the reprimand states.

Nonetheless, whether mold or a hurricane, Mostyn does not limit the scope of his practice, as the Houston attorney is seemingly targeting all natural disasters in the state of Texas.

On May 28, a massive hailstorm pounded the Texas panhandle region, resulting in $500 million in insured losses, according to the Texas Insurance Council.

Soon after, Mostyn set up shop in Amarillo, Taylor said.

On his website, Mostyn even dedicated a page for attracting victims affected by the hailstorm.

“After a devastating hail storm in 2013, 75 percent of Amarillo’s residential property was damaged,” Mostyn’s website states. “Months later, the rebuilding process continues, but some people in Amarillo have not even settled claims against their insurance companies. Invest a few seconds to fill-in the form below for your FREE claim and case analysis.”

However, as vast as Texas is, Mostyn has set his sights on natural disasters that transpire beyond the Lone Star state’s borders – catastrophes like 2012’s Superstorm Sandy.

In an American-Statesman article dated March 18, 2013, Mostyn said he plans to move much of his Houston operation to New York City with hopes of landing about 10,000 cases worth more than $1 billion in insurance claims from the storm that pummeled the Northeast in October 2012.

“I’m not going up there on a small scale,” he said in the article.

The article says for Hurricane Ike, Mostyn’s firm collected about $1.4 billion in settlements, around $100,000 per plaintiff.

“I think you’re looking at a larger dollar amount up there,” Mosytn said in the article.

Mostyn’s comments may be a sign of things to come from his firm. But for now, there are certainly no shortages of natural disasters in Texas for attorneys to capitalize on.

From hurricanes to hailstorms, and occasionally tornados too, Texas, geographically speaking, has its fair share of natural disasters every year, which contribute to high insurance premiums.

But the price of insurance doesn’t have to be extreme so long as the litigation that follows a disaster isn’t extreme, Taylor says.

“Our rates are going to be on the higher end (because of natural disasters), but it doesn’t have to be this extreme,” Taylor said. “To keep prices low, we got to keep litigation low.”

The cost of windstorm insurance can be anywhere from a several hundreds to several thousands of dollars a year depending on the worth and size of the home.

Through his media spokesman, Jeff Rotkoff, Mostyn declined to be interviewed.

Rotkoff said Mostyn and his wife Amber, who is also a Mostyn Law Firm shareholder, would not participate in any story written by Legal Newsline because it is owned by the U.S. Chamber Institute for Legal Reform.

From Legal Newsline: Reach David Yates at elections@legalnewsline.com.