TWIA reform bill supported by reformers

By Marilyn Tennissen | Jun 29, 2011


The Texas Legislature has approved a bill that will revamp the state's windstorm insurance program .

The Texas Windstorm Insurance Association is the state's insurer of last resort for residents of coastal counties who otherwise can't buy insurance against hurricanes and other storms.

The new legislation will limit the policyholders from collecting more than actual damages in lawsuits against the agency.

"This TWIA reform bill, which was shepherded brilliantly by Chairman John Smithee (R-Amarillo) in the House and Chairman John Carona (R-Dallas) in the Senate, is important legislation that moves the Texas Windstorm Association toward solvency, improves its transparency, oversight and governance, and provides important consumer protections for TWIA policyholders," said TLR President Richard J. Trabulsi Jr.

TWIA came to lawmakers' attention after the agency was inundated with lawsuits after Hurricanes Rita and Ike. Legislators began to look into the financial stability of the insurer and the effects of around $1.2 billion in payouts to thousands of policyholders and the attorneys who brought their claims to court.

During the regular legislative session ending in May, lawmakers were not able to come to any agreement on the TWIA reforms. Gov. Rick Perry said he wanted the agency reform to be a priority during a special session. With only days left in the session, the lawmakers came up with a compromise.

The new legislation no longer allows policyholders to collect triple damages for an egregious failure of the association to pay off a windstorm claim, and a policyholder may no longer demand an 18 percent penalty for a late claim payment.

In addition, policyholders with a claims dispute must now submit to a third-party appraisal of damages by the Texas Department of Insurance.

The policyholder must also make a case that TWIA intentionally acted in bad faith to receive double damages for the actual damage in the claim and subsequent damages for not attending to the claim in a timely way.

Reforms to the quasi-governmental agency brought out a fight between trial lawyers and tort reformers during the recent regular legislative session. The Texas Trial Lawyers Association opposed the damage caps while Texans for Lawsuit Reform hailed the bill.

"This bill will improve claims processing by TWIA, establishes efficient dispute resolution mechanisms, allows policyholders to be made whole for losses incurred in windstorms, and lessens the risk of ruinous financial consequences to TWIA policyholders caused by enterprising lawyers who advertise heavily after windstorms," Trabulsi said.

But the trial lawyers group objected to several items in the legislation, like applying the new rules to existing customers. Their policies are legal contracts, which the legislature has no right to change, TTLA argued.

They also objected to a provision that requires the insureds to submit to binding arbitration and give up their right to sue.

However both sides agree the new bill is only a quick fix to get TWIA through the current hurricane season and that the agency's finances still need restructuring.

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