AUSTIN - At a legislative oversight committee hearing last week, lawmakers learned that if it were a private insurance company, the Texas Windstorm Insurance Association would not be able to sell policies in Texas because it may not have enough funds to back them up.
The Joint Committee on Oversight of Windstorm Insurance, an eight-member committee of four Representatives, including state Rep. Todd Hunter, R-Corpus Christi, and four Senators, is co-chaired by Sen. John Carona, R-Dallas, and Rep. Larry Taylor, R- League City.
The committee, established in 2009 to keep an eye on the insurance business, heard testimony Nov. 1 from TWIA executives, the Texas Department of Insurance, the state auditor’s office, the Texas Public Finance Authority and several coastal residents.
TWIA is the insurer of last resort for wind and hailstorm insurance along storm-prone areas of the Texas coastline deemed too risky by insurance companies.
At the hearing, Insurance Commissioner Eleanor Kitzman said the windstorm pool will eventually run out of money and will be unable to pay future claims if something isn’t done.
One lawmaker, Rep. John Smithee, R-Amarillo, asked TWIA manager John Polak if policyholders are being told that the windstorm pool may be unable to honor the policies it is selling.
According to the Houston Chronicle, Polak said no.
If a private insurer lacked the capital to pay future claims, it wouldn’t be allowed to sell insurance in Texas.
However, David Durden, vice president of External Affairs for TWIA, said in an email to the Southeast Texas Record that the TWIA Catastrophe Reserve Trust Fund has approximately $177 million to pay for future catastrophic claims. In addition, TWIA has $850 million of reinsurance and $2.5 billion in class 1, 2 and 3 bonds, which are authorized by statute.
Preceding the hearing, Rep. Taylor released a report he obtained from the TDI that showed what he called a “troubling” trend in the Hurricane Ike litigation.
TWIA projects $2.5 billion will be spent to resolve all Hurricane Ike claims. This includes approximately $300 million paid in settlements to clients of attorney Steve Mostyn, which includes payments to claimants and attorney fees.
Mostyn and Beaumont firm Weller Green Toups and Terrell are making last ditch attempts to write more suits before the statute of limitations runs out by mailing packets to Galveston area residents. The mailout includes a contingency fee agreement and a self addressed stamped envelope with a page declaring “Don’t be left out!”
Mostyn has fired back at Taylor, who works as an insurance agent in the Houston area, claiming the state representative has also profited by selling TWIA policies.
Another attorney, Tony Buzbee of Friendswood, filed 628 suits, but has settled them all.
“TWIA came to me and asked to settle all of my client’s cases. For some reason they wanted to get me out of the litigation.
“I carefully screened all of my clients, and only took cases that I believed were legitimate, with real damages. I also led the way on the lifted shingle issue that we were able to resolve for $189 million as well,” Buzbee wrote in an email to YourHoustonNews.com.
“Larry (Taylor) is a good friend of mine, and I know he has issues with Steve Mostyn. However, it is my belief that the reason there was so much litigation is that TWIA wrongfully denied way too many legitimate claims, and the people had no other choice but go to court. So, rather than attack the lawyers, I believe that it is TWIA management who should be looked at very closely,” Buzbee wrote.