Updated: Windstorm Negotiations Fail

The marathon negotiations over the Texas Windstorm Insurance Association failed to produce a bill, probably prompting a special session later this summer over that issue.

Gov. Rick Perry outside the House chamber on May 28, 2011.

Updated Sunday, 8:50 a.m.

The marathon negotiations over the Texas Windstorm Insurance Association failed to produce a bill, probably prompting a special session later this summer over that issue. The insurer of last resort is short of funds and lawmakers are trying to reform the quasi-government agency and get it on sound financial footing. The last sticking points were over when and how much to compensate policyholders and their lawyers and became a proxy fight for trial lawyers and tort reformers.

Negotiators for the Senate said the House kept adding issues to be negotiated; the other side — the governor and the House — said the lawyers were trying to preserve a gravy train that can't be financially sustained.

Perry, in a statement attributed to spokesman Mark Miner, blamed the lawyers, and in particular, the trial lawyer who spent millions against him in the last campaign:

“The death of the windstorm insurance bill is bad for Texas taxpayers, insurance customers and coastal residents. By undermining negotiations on important legislation to fix TWIA, the Texas trial lawyers, Steve Mostyn and their allies in the Capitol have put personal enrichment ahead of coastal homeowners and Texas taxpayers.”

 

Updated Saturday, 5:30 p.m.

A combative Gov. Rick Perry said Saturday that Texas trial lawyers were trying to use the troubled Texas Windstorm Insurance Association as their "personal ATM," and vowed to call a special session if needed to reform the way claims are paid to people who depend on the fund.

Negotiators were still trying to put a TWIA deal together as the regular session comes to a close. Perry, speaking with reporters outside the House chamber, said he was pleased that Steve Mostyn, the head of the Texas Trial Lawyers Association, was no longer serving as lead negotiator. Mostyn used part of his vast personal fortune to run millions of dollars of negative advertising against Perry in 2010. Mostyn was the largest single contributor during the 2010 elections.

Perry said Mostyn needed to get out of the negotiations because he had "such a vested interest in this, and you know, making tens of millions if not hundreds of millions off of TWIA." TWIA serves as the insurer of last resort for people in areas most impacted by hurricanes and other wind-related storms.

"Having (Mostyn) as a lead negotiator has been a bad idea from the get go,” Perry said. The governor said he would call a special session in July if the negotiations collapse because "we cannot go through a hurricane season without a TWIA bill, a windstorm insurance agency, in place."

Perry suggested trial lawyers would get a better deal now than they would in a special session, when a governor has authority to declare what is and is not eligible for consideration.

"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.

Updated Saturday, 4:50 p.m.

Sen. John Carona, R-Dallas, is semi-optimistic that the negotiators will work out the differences on the TWIA legislation. They've got new negotiators in the room for the Texas Trial Lawyers Association, replacing Steve Mostyn, who as a free-spending Democratic financier has made himself something of a lightning rod, with fresh faces. They're still talking about how lawyers get paid in the claims process and whether any of that payment is automatic, with TTLA on one side and Gov. Rick Perry and others on the other.

At issue, Carona says, is a provision that adds damages to claims at the rate of 18 percent per year. The lawyers want that left alone; the others want it set at zero.

Carona says the rest of the bill has been worked out and says the biggest enemy left, "is just time." If they don't have a finished conference committee report this evening, they'll get into a situation where the House and the Senate have to produce supermajorities to keep things going.

Updated Saturday, 1:01 p.m.

Rep. John Smithee, R-Amarillo, said as much as he'd like to avoid a special legislative session, there have been no developments overnight into the standoff over the Texas Windstorm Insurance Association. 

Smithee said he's working to get the House conferees to sign off on a version of it this afternoon, and ship it over to the Senate. But he acknowledged that time is running out, and it doesn't look good. 

"I think there's only a very slim chance we can get a bill passed," he said. 

Previous report: 

School finance negotiations at the state Capitol appear to be coming together, but an impasse over another issue — the Texas Windstorm Insurance Association — could push the Legislature into a special session when the regular session ends Monday.

"The governor stated to me this morning that if we were unable to reach agreement, he most assuredly would call a special session on this issue July 15," said Sen. John Carona, R-Dallas. "It's quite possible based on that statement that we'll be in special session this summer."

TWIA, the insurer of last resort for people seeking coverage for damage from hurricanes and other storms in 14 Texas counties, is running out of money. Hurricane Ike hit the pool particularly hard, and the lawsuits that followed the first round of settlements have further drained it; TWIA is still paying claims from that storm. The money is replenished by insurance companies, which then take credits against their state taxes until they're repaid. In other words, the shortages in the fund are ultimately paid by taxpayers.

The fight over the bill, Carona said, boils down to an argument between to wealthy and powerful men: trial lawyer Steve Mostyn and Gov. Rick Perry. Mostyn has made millions from lawsuits over windstorm insurance claims. And he's spent hundreds of thousands of those dollars on Democratic candidates opposing Perry.

"There's no denying this is becoming a very personal matter between two very powerful individuals," Carona said.

Lawmakers are arguing over legislation that would limit claims on the fund and damages awarded in lawsuits, and the House and Senate have been unable to find middle ground. Carona said the Senate agreed to a bill that would limit penalties in windstorm insurance claims against TWIA to 18 percent, the current limit. Perry and House legislators want the penalty limit scaled to zero. The other sticking point, Carona said, is a measure that would increase the burden of proof for ratepayers who sue TWIA, making it more difficult for homeowners who feel the insurer wronged them to collect damages.

Carona said both sides have strong arguments, but the fight has become intractable. "It's a disappointment, but this kind of breakdown happens in the political process," he said.

Time is short, and the governor has indicated he'll call lawmakers back if they can't get an agreement in the regular session that ends on Monday. He doesn't want to leave things as they are through another hurricane season, according to aides.

"It's probably too late to make the fund whole for this season," said Rep. John Smithee, R-Amarillo. "But if we wait two years, we'll miss two or three hurricanes, and we can't afford that."

Smithee says reinsurance companies are reluctant to cover TWIA, because the lawsuit awards in recent years have made it difficult to predict expenses. "They can afford our storms, but they can't afford our lawsuits," he said.

He and Rep. Larry Taylor, R-Friendswood, said the state is trying to change the agency's culture after a shakeup there. They've got new people in place and now they want to limit claims on the fund to try to get a handle on costs. Hurricane Ike, he said, gave the state an expensive lesson. "We just can't afford to make that mistake again," Taylor said.

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.