Rep. Larry Taylor Releases Startling TWIA Litigation Summary

AUSTIN, Texas, Oct. 29, 2012 /PRNewswire/ -- Since Hurricane Ike struck the Texas Gulf Coast over 4 years ago, the Texas Windstorm Insurance Association (TWIA) has paid out over $1.2 billion dollars on individually litigated claims related to the disaster.  The information released today by Rep. Larry Taylor (R – Friendswood) reveals troubling legal settlement patterns and staggering litigation expenses on the part of TWIA.  Rep. Taylor requested the information from the Texas Department of Insurance (TDI) in preparation for an upcoming hearing of the TWIA Legislative Oversight Board on November 1, 2012.

The information provided by TDI reveals an additional $1.2 billion dollars spent on Hurricane Ike litigated claims since the previously reported class action settlement for slab claims.  This figure represents almost half of the $2.5 billion total estimated loss.  Rep. Taylor, the Co-Chairman of the Oversight Board, said, "September 13, 2012 marked the 4 year anniversary of Hurricane Ike, yet TWIA continues to pay out tens of millions of dollars and plaintiff attorneys continue to solicit additional lawsuits.  Coastal residents deserve to know how their dollars are being spent.  I intend to get answers at the upcoming hearing because this natural disaster has turned into a man-made disaster with serious repercussions."

The damage from Hurricane Ike resulted in an estimated 93,000 claims along the Gulf Coast.  However, the $1.2 billion paid out to date only represents approximately 10% of all claims.  To add insult to injury, on October 26, 2012, TWIA management announced a reduction in their expected contribution to the reserve fund by $100 million dollars due to ongoing lawsuits associated with Hurricane Ike.  This announcement leaves TWIA with only $25 million dollars to be deposited into the Association's reserve fund to pay future catastrophic claims.

The records also reveal a troubling and problematic settlement pattern between TWIA and the plaintiff attorneys involved in the litigation.  There are extremely high settlement amounts above and beyond prior payouts made by TWIA for claims resulting in litigation.  For example, TWIA paid out on average 7.2% of all policy limits on the initial claims by policyholders.  But, after litigation, TWIA paid out an additional 43% of policy limits on average.  This represents a combined average payout of 50% of policy limits on 9,622 claims (10%).  In addition, TWIA has spent approximately $70 million dollars on defense costs since 2008, an additional $69 million on expense costs and $1.3 million on mediation related to Hurricane Ike settlements.

A summary of the Top 10 Plaintiff Law Firms handling TWIA litigation reveals an astounding settlement payout over $600 million dollars.  There are over 300 plaintiff law firms with Hurricane Ike litigation claims in Texas, but a small cadre of 10 law firms has handled over 74% of TWIA litigated claims. 

These firms are on track to handle over 800 additional claims in the coming months.  Last session, the Texas Legislature passed legislation to reform the claims settlement process and litigation practices of TWIA.  However, the legislation affects future events, not past events like Hurricane Ike.

Rep. Taylor added, "the bleeding of TWIA ratepayers has got to stop and it's time TWIA management explain exactly how they've been running their business since Hurricane Ike devastated Texas.  The payout patterns don't make sense, the exorbitant costs are atrocious and the abuse of the public trust is at an end." 

NOTE TO MEDIA: Rep. Larry Taylor is the Co-Chairman of the Joint Texas Windstorm Insurance Association Legislative Oversight Board with Sen. John Carona (R – Dallas).  The board is charged with monitoring windstorm insurance in Texas and is scheduled to convene in a public meeting on Thursday, November 1, 2012 in Austin, Texas at the Capitol Extension, Room E1.014.

NOTE TO MEDIA: See charts below.

1. TWIA Litigation Summary
2. TWIA Settlement Overview
3. Top 10 Plaintiff Law Firms Ranked by Settlement Payout

* - These figures are in addition to the costs associated with the Global and Class Action Settlements.

** - TWIA Litigation Expenses consist of engineering firms, inspectors, adjusters, etc. 

* - These figures are in addition to the costs associated with the Global and Class Action Settlements.

* - These figures don't include the costs associated with the Global and Class Action Settlements.

** - Mostyn & Eiland's settlement payout amounts include $12,341,591, 185 cases pending, and 87 cases settled.

SOURCE: Data provided by the Texas Department of Insurance.

Contact: Matt Welch (512) 417-8084; [email protected]

SOURCE Rep. Larry Taylor