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New Version of TWIA Reform Bill Cuts Out Access to Courts

By John Reynolds
Published April 13, 2011 6:10 PM
Original Printed at http://quorumreport.com/login.cfm?G=http://quorumreport.com/Subscribers/buzz.cfm?&CFID=3269526&CFTOKEN=17441991

"This is the Residential Construction Commission all over again," says Mostyn

Yesterday, when we posted a quick piece on the Texas Windstorm Insurance Association (TWIA) reform bill that was voted out of House Insurance, we noted that our understanding of the bill's details was limited due to details being sparse at the time.

Well, we looked at the bill more closely last night and we'd like to clarify the judicial component of the bill. We described a judicial review included in the committee substitute as allowing access to the court system.
That, however, is not the case. The chairman's committee substitute calls for a judge to review the facts and legal standards used in a review of a claims settlement. But it's not a judicial proceeding as many laymen might conceive it. There is no trial by jury, for example.

House Insurance Chairman John Smithee (R-Amarillo) originally had envisioned a mandatory arbitration process. And while there are more review procedures in place now, it remains fundamentally an arbitration process because the disputes would not be heard by a jury.

Smithee tells QR today that his intent is to keep claims dispute as much as possible out of the courts system. Since TWIA is a government agency, attorneys fees arising from litigation are in essence "a diversion of funds we cannot afford," he said.

Plaintiff's attorney Steve Mostyn said that committee substitute is in fact worse than the arbitration called for in Smithee's original bill. At least, he said, an arbitrator looked at the case before. Now, a claims dispute would go through a panel appointed by the insurance commissioner before going before a judge who because he acts under a substantial evidence rule cannot issue his own fact rulings.

The best he can do, Mostyn said, is send the matter back to the agency.

Mostyn's key complaint is removing a jury as an option for holding the state's windstorm insurer of last resort accountable. He said that abuses committed by some TWIA claims adjustors only came to light through judicial discovery.
With the review mechanism proposed under Smithee's legislation, the state would lock any accountability tools "away in a dark closet of an administrative process and give (TWIA administrators) immunity."

Coastal representative Craig Eiland (D-Galveston) said he was unhappy that the bill creates one set of remedies for TWIA policyholders and one set of remedies for every other policyholder.

He said that he would work with other coastal representatives to make big changes in the bill.

Smithee, for his part, said that he was also unhappy with the bad actors at TWIA uncovered during the claims settlement process in the wake of Hurricane Ike. He said, though, that he thought the solution isn't opening the floodgates to litigation but getting lawmakers to fix the problems in the agency. He said that he's working on legislation that would do exactly that.
He added that he would press upon the incoming TWIA general manager the importance of getting the agency's house in order.

Mostyn said that removing juries from claims disputes upset the separation of powers because the judiciary (jury trial) was providing a check on the executive (TWIA, a state agency). He also rejected the argument that litigation was a burden on the taxpayers because general revenue doesn't prop up TWIA, but policyholders and for-profit insurance carriers. In addition, the agency has the option of using reinsurance, which would further shield taxpayers on payment of claims.
While this bill is now clear to go the House floor, at this point it seems highly likely that more changes are in store given the conflicts that are coming into focus between coastal and inland interests.

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