TWIA Struggle Becomes TLR-Trial Lawyer Proxy War

It didn’t take long for a lawmaker’s request for information to blow up into a bitter battle between two of the state’s longest-feuding and most powerful interest groups: the trial lawyers and the tort reformers.

In a courtroom Monday, Galveston County Judge Susan Criss will decide whether to release details of millions of dollars in fees paid to dozens of attorneys in the largest class-action settlement paid out by the Texas Windstorm Insurance Association to 2,600 homeowners whose properties were obliterated two years ago by Hurricane Ike. TWIA, a quasi-public entity that functions as an insurer of last resort for homeowners in the state's coastal counties, settled for $189 million, from which attorneys took an undoubtedly sizable but undisclosed chunk.

Now some politicians and Texans for Lawsuit Reform, or TLR, which has succeeded in limiting tort damages over the last decade, want to know how much the lawyers got paid and what they did for the money — a disclosure the lawyers are resisting. The firm that ultimately led the negotiations was the Houston-based Mostyn Law Firm, headed by Steve Mostyn, one of the state’s biggest Democratic donors and the money behind the recently formed, Rick Perry-bashing Back to Basics PAC.

The judge is expected to either order the release of the fee information or grant a permanent injunction to keep it private, according to the terms of the original settlement. TWIA’s General Manager, Jim Oliver, says the settlement payout details were first sought by state Rep. Larry Taylor, R-Friendswood, on Sept. 8 and that other lawmakers have since requested the same information. Taylor says he’s doing research as the co-chairman of a board overseeing the windstorm insurance fund, a pool into which all Texas property and casualty insurers pay. “The chairman can get information brought in, and they do it all the time,” Taylor says.

Taylor suspects TWIA pays too much to attorneys who sue on behalf of homeowners. In his September request to the association, he asked for details about how much the fund paid out to homeowners and the 85 or so attorneys who originally filed suit on their behalf. So far, no one has suggested the fees would deviate from the standard cut: about a third of the settlement.

 

To hear Mostyn tell it, Taylor’s request infringes on the homeowners’ privacy rights and represents an abuse of power by the lawmaker, who also sells insurance. Mostyn says releasing the information would include making public some sensitive financial details about homeowners involved in the settlement. But he seems more bothered by what he sees as Taylor using the request to score political points while claiming to have a policy-oriented purpose.

Mostyn — the incoming president of the Texas Trial Lawyers Association — has pledged to give $3 million to Democrats and Democratic causes this year, making his position in Texas real political, real fast. He argues that anti-trial-lawyer, pro-Republican forces are targeting him because of his increasingly high profile. (It’s no stretch to imagine a political ad that might, for instance, accuse Democrats of taking millions in trial lawyer money that should have gone to Ike-affected homeowners.) Mostyn says it’s naïve to think Taylor has sought the information purely out of legislative interest; more likely, he says, Taylor is simply carrying water for TLR, the chief enemy of trial lawyers. He says Taylor’s request came shortly after an informal inquiry from a TLR counsel got shot down. “Suddenly, Taylor woke up just after that and decided he wanted to see the same information?” Mostyn asks.

While there’s nothing illegal about legislators working with interest groups, Mostyn accuses Taylor of misusing his legislative position to seek sensitive information that’s not needed for policy purposes. “The timing … strongly suggests that [Taylor] is using his position on the legislative oversight committee for non-legislative purposes, namely political and partisan purposes,” Mostyn wrote in a letter to Oliver on Sept. 10.

In an interview on Thursday, Oliver first told The Texas Tribune that Mike Hull, the TLR counsel who informally asked about the settlement fees, also sent a letter formally requesting similar payout information from TWIA following Taylor’s initial inquiry. But after TLR spokeswoman Sherry Sylvester denied any formal communication with TWIA, Oliver called back to say he “misspoke” and that Hull in fact did not contact the association. “It was actually a letter from the conservative coalition, which was signed by 12 state representatives,” Oliver said. Taylor also denies any involvement with TLR. “I don’t know what anyone had done before I asked for my information,” Taylor said.

In response to Taylor’s original request for information, Mostyn’s team sent an open records request to Taylor’s office for any communication his staff had with TLR, consultants at the right-leaning political consultanting firm The Patriot Group and other parties. On Friday, he sent a lengthy letter to all the members of the TWIA oversight panel, listing his grievances with Taylor and asking for a public hearing to address "questions about the past failures of TWIA and looming problems on the horizon should other storms hit." He's also made Taylor a public offer to put an end to the hide-and-seek: “I might be able to turn my fee schedule over if Larry Taylor turns over how much he made selling the TWIA policies,” Mostyn says. Taylor told the Tribune his insurance agency takes in about 25 percent of its revenue from selling TWIA coverage.

Ever since his inquiry drew Mostyn’s ire, Taylor has maintained that all the back-and-forth is unwarranted. Mostyn “and the people involved with it are trying to stonewall," he says. "What is it that they’re trying to hide?"

The bitterness has only escalated in the past week, when Taylor hired former state Rep. Joe Nixon, R-Houston — the architect of 2003’s sweeping tort reform law, passed with the assistant of heavy TLR advocacy — to represent him in potential legal challenges from Mostyn. “He called and offered to help,” Taylor says. Mostyn calls it further proof that he’s being targeted politically and that Taylor is working with TLR.

As for the information in question, both sides will get an answer soon. Oliver, the TWIA boss, says that if the judge grants a permanent injunction keeping the fee schedule private, TWIA will go to the attorney general’s office to see that it gets released as a matter of public information. “From our point of view, we’re perfectly willing to release it. It’s ready to go today,” Oliver says. “We believe the information ought to be released under the open records law.” So does TLR. “What is puzzling to us is that the press, which usually stands up for sunshine and transparency, doesn’t appear to be interested in the settlement at all,” Sylvester said in a written statement.

Taylor says that what’s getting lost in the back-and-forth is his larger policy goal: maintaining the solvency of the TWIA fund and getting claims paid to homeowners instead of paying out sizable commissions to attorneys. “This is a statewide issue. This has statewide implications,” Taylor says. “We’ve got to do better next time. We can’t have people waiting two years to get their claims settled and then spend a third or whatever it is on legal fees. If TWIA’s defense counsel is spending millions of dollars, that’s ridiculous as well. I need to reach a reasonable formula.” Taylor says he also worried about the TWIA fund going dry. But Oliver says TWIA has "more than enough money,” and that of the hundreds of thousands of claims paid out, only 5 percent wind up in court.

Trial lawyers argue that had TWIA adjusted claims correctly in the first place, homeowners wouldn’t go the length to sue. Mostyn told the Houston Chronicle last year that internal TWIA e-mails showed that “the game is rigged from the beginning” to save money for the insurer and to “underpay these claims every way they can, not by accident or incompetence but in a systematic effort.”

While he plans to argue for the release of the information, Oliver says he takes no position on the legislative policy behind the fund and wants no part in the two warring groups’ ongoing battles. “We want to stay out of it,” he says. “That’s their fight.” 

 

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