Lawmakers writing one of the most contentious bills of the legislative session say special interests need to butt out of the battle over the Texas Windstorm Insurance Association.
"We have got to have an agreement to get the outside lobby groups out of this," said state Rep. John Smithee, R-Amarillo, chairman of the House Insurance Committee. "They’ve been much too involved."
The fight over how to overhaul TWIA has become the latest proxy battle between two powerhouse legal lobbying groups, Texans for Lawsuit Reform and the Texas Trial Lawyers Association. TLR, which has long and successfully promoted tort reform, wants legislators to limit the number of lawsuits filed against TWIA and the amount of damages claimants can collect. TTLA, which represents plaintiffs' lawyers, wants to preserve the ability of policyholders to sue and to recover money when they have been treated unfairly.
While the high-powered, deep-pocketed lawyers' groups fight using lawmakers as their intermediaries, critics say those who get left out are the coastal residents who stand to be most affected by the TWIA overhaul. Alex Winslow, executive director of the nonprofit citizen advocacy group Texas Watch, said lawmakers' have a duty to set aside the extraneous interests of lobbyists. "They're supposed to be the adults in this process," Winslow said.
TWIA, a quasi-governmental association, was created in 1970 to provide windstorm insurance for coastal residents after many private insurers pulled out of the market in the fallout of Hurricane Celia. It has become the only choice many coastal residents have for storm insurance. After Hurricanes Rita, Dolly and particularly Ike, TWIA spent millions on damage claims. And the spending on settlements in lawsuits increased after plaintiffs' lawyers discovered TWIA had intentionally wrongly denied coverage to some policyholders.
Ike alone resulted in claims from nearly 93,000 people that totaled about $1.9 billion. TWIA officials have said the agency now has about $100 million in cash and the capability to issue $2.5 billion in bonds. TWIA has also purchased $636 million in reinsurance.
Current law allows policyholders to sue for triple damages — though no court or settlement so far has made such an award — and it subjects TWIA to paying 18 percent fees when it doesn't pay claims timely.
Lawmakers agree the money TWIA has is not enough for what is expected to be an active hurricane season this year. And they agree that changes are needed in the way TWIA handles claims. Their disagreement is over how to ensure that TWIA doesn't run out of money and that lawsuits don't bankrupt the agency.
The House agrees with the approach supported by TLR. The group, which has given nearly $19 million to largely Republican lawmakers and candidates since 2000, wants strict limits on when policyholders can sue TWIA and how much they can be awarded when TWIA doesn't honor policies. The House bill, which is also supported by Gov. Rick Perry, would allow policyholders only to recover actual damages from the storm even if TWIA intentionally dishonored the policy. Smithee said the House bill would ensure TWIA remains financially viable, that it would speed up the claims process for policyholders and that it would ease the burden on taxpayers statewide to pay for coastal storms. "The House version was fair," Smithee said. "It was good for normal TWIA policyholders."
The Senate approach aligns more with the position of the TTLA, which, along with the trial lawyer political action committee Texans for Insurance Reform, has given more than $13 million to lawmakers and candidates since 2000. TTLA president, lawyer Steve Mostyn, was the largest individual contributor during the 2010 elections — he, his law firm and his wife Amber Mostyn gave more than $9 million — and much of the money funded attack ads against Perry. Mostyn also represented many clients who sued TWIA after Hurricane Ike, and he made more than $4 million from those cases.
Under the bill the Senate approved Wednesday, if TWIA failed to honor its policies, a claimant could sue for twice the actual damages, and they could recover "consequential damages," which are losses that result from TWIA's refusal to cover the initial damages caused by the storm. Some senators, particularly those from coastal regions, are adamant that punitive damages are needed to ensure that TWIA doesn't leave coastal policyholders in the lurch. State Sen. Eddie Lucio Jr., D-Brownsville, said coastal residents should have access to the same judicial remedies any other insurance policyholder would have, especially since many of them have no choice but to buy insurance through TWIA. "This bill ultimately says to coastal policyholders I represent, 'It doesn’t matter… you still don’t deserve the same level of protection and rights,'" Lucio said.
The participation of lobbyists in negotiating the bill has been a point of contention since the measure fizzled in the final days of the regular legislative session. In May, Perry singled out Mostyn for allegedly meddling in the bill, and said the lawyer's involvement was a bad idea. "I'm not going to be a party to continuing to fund a bunch of trial lawyers that are using this agency as their personal ATM," Perry said.
Expressing frustration with the process on Monday, after a committee hearing in which senators refused to vote for a bill the House favored, Carona said the influence of TLR and TTLA was making matters worse among lawmakers. "Too many special interests have their hands in it," he said.
And Wednesday, after Smithee saw the bill the Senate approved, he said lobby groups must be ejected from continuing discussions if there is to be any agreement among legislators. "Somebody is going to have to have the fortitude and the leadership to say that, or we’ll never get a bill," Smithee said.
Mike Ramsey, past president of TTLA, said his group has simply worked to support a bill that is good for home and business owners they represent on the coast. "TWIA overhaul has certainly been a complex issue with, I’m sure, frustration among all the involved parties," Ramsey said. "It is, however, an issue that is absolutely vital to the policyholders."
TLR spokeswoman Sherry Sylvester said that the organization has made its case that their proposed solution is the best one for TWIA, coastal residents and taxpayers. "We know that reform is essential to begin restoring financial solvency to TWIA, expediting claims processing for coastal residents and businesses and reducing the heavy transactional costs imposed by litigation.”
Lost in all the back-and-forth over which lawyers will wind up profiting from the TWIA plan are the people who live on the coast whose homes and businesses are destroyed by hurricanes, said Winslow, of Texas Watch. Lawmakers, he said, need to ignore the noise from lobbying groups and decide what's best for Texans who become storm victims. "Lawmakers should shut out all these special interests who have agendas that don't fall in line with the needs of the folks on the coast," he said.
Former state Sen. A.R. "Babe" Schwartz, a Democrat from Galveston who wrote the bill that created TWIA and now lobbies for the Galveston Windstorm Action Committee, said it's time for lawmakers to kick out the lobbyists and work on the bill together in public meetings. "The problem today is there’s nobody saying, 'Let's sit down and decide what the people on the coast need,'" Schwartz said. "This is not brain surgery. We've done it before."
And if they don't do it again — before Wednesday at midnight — Perry says they'll be back in another special session for another try.
Data reporter Ryan Murphy and reporter Jay Root contributed to this story.
Steve Mostyn and his wife Amber Anderson are major donors to The Texas Tribune. The Texas Trial Lawyers Association is a Texas Tribune corporate sponsor.
Texas Tribune donors or members may be quoted or mentioned in our stories, or may be the subject of them. For a complete list of contributors, click here.