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Blow back, blow out and a lot of hot air around state-funded insurance plans

By nowdoucit
December 14, 2009
Posted: June 10, 2008, 10:24 PM CDT
http://slabbed.wordpress.com/2009/12/14/blow-back-blow-out-and-a-lot-of-hot-air-around-state-funded-insurance-plans/

Since state-funded insurance plans are a big money maker for the insurance industry and a deep money pit for the states, it will be interesting to see how this trouble in paradise plays out.

Louisiana Citizens Property Insurance Corp., the state’s insurer of last resort, should be abolished, the Commission on Streamlining Government said Tuesday. Our friend Jim Brown was there.

Brown called Louisiana Citizens Property Insurance “the biggest financial disaster in history. “If the old system had been in place, you and I wouldn’t be paying off a $1.5 billion bond issue” that bailed out Louisiana Citizens Property Insurance”.

What a blow back!  Meanwhile in neighboring Texas, the general manager of the the Texas Windstorm Insurance Association had a blow out

Under fire for how it handled Hurricane Ike claims, the Texas Windstorm Insurance Association sent a letter to lawmakers this week criticizing lawyers suing the association on behalf of homeowners.

“These law firms stand to make huge profits if they are successful in these lawsuits, and some are using every means possible to influence public opinion,” Jim Oliver, general manager of the windstorm insurer, wrote in a letter to members of the Windstorm Insurance Legislative Oversight Committee…

Now, the hot air!

The letter is partly a response to a lawsuit filed by Houston attorney Steve Mostyn on behalf of a League City resident—one of hundreds of cases his firm has filed against the insurer.

Oliver also asks members of the oversight committee to give TWIA a “fair opportunity to present the true facts in context,” should lawmakers choose to investigate allegations against the insurer.

Homeowners allege in lawsuits that internal e-mails demonstrate TWIA unfairly stacked the deck against homeowners by using prices lower than market rates to estimate materials and repair costs, unfairly limited claims payouts on roof repairs and discouraged reopening closed claims.

TWIA, created by state government but privately managed, is the insurer of last resort for homeowners and businesses in coastal counties most vulnerable to hurricanes.

In his letter, Oliver complained that Mostyn’s law firm alone has demanded more than $86 million in legal fees in 315 of the the cases it has filed against TWIA. That’s not including economic and punitive damages.

Do your job right, man – that’s a real solution:

“They’re trying to direct the focus to my fees and away from their conduct,” said Mostyn, adding that ultimately a jury will decide if his fees are reasonable. “They’re not right on the law or the facts. Their conduct is horrible so they have to attack the law firm.”

Mostyn is the liaison for about 40 different firms representing policyholders against the windstorm association. He is also the 2010 president-elect of the Texas Trial Lawyers Association.

Much of the rest of Oliver’s letter to lawmakers reiterates previous statements that the insurer handled Ike claims fairly and appropriately and that plaintiffs’ attorneys were misinterpreting internal TWIA e-mails to create political and media pressure.

…and the moral of this story is you can’t trust anyone who offers true [sic] facts.

Louisiana Citizens, on the other hand, is too far gone to try and do the job right.  In a state with one of the nation’s highest percentages of children in poverty – 25% – there were other priorities for the $1.5billion bond it took to cover Citizens:

Before Louisiana Citizens Property Insurance was created, customers bought policies through Fair and Coastal and insurance companies split the profits if there was no major catastrophe and shared the loss if claims exceeded that amount of premiums paid, Kennedy said.

Former Commissioner Robert Wooley convincing the Louisiana Legislature to establish the Florida-type program that came to be known as Louisiana Citizens Property Insurance was “one of the biggest hornswoggles of taxpayers in my lifetime,” he said

The proposal “probably would work in reverse of the intention,” warned John Wortman, CEO of Louisiana Citizens Property Insurance. “It would push everything on the insurance industry. I’m concerned that the industry would pull back” and not issue policies in Louisiana.

Well, duh, Mr. Wortman, what’s better – pushing insurance on the insurance industry or sticking it to your employer, the taxpayers of Louisiana?  Maybe Perdigao was right after all.

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