The Texas Senate on Wednesday passed legislation to reform the state's windstorm insurance association while preserving the right of policyholders to seek damages in court if their claims are wrongly denied or delayed.
The bill now goes to a conference committee, where House and Senate members will attempt to find a compromise before the special session's deadline of June 29th.
Governor Rick Perry said on Wednesday he would call another special session if lawmakers fail to find agreement on how to reform the Texas Windstorm Insurance Association.
"We must pass legislation to adequately compensate TWIA policyholders without enriching trial lawyers or further undermining TWIA's financial stability," the governor said in an emailed statement. "Reforming TWIA is imperative to protecting Texans from the effects of devastating hurricane seasons, and I look forward to this important legislation reaching my desk in the next week, otherwise, I will be forced to call another special session to protect Texas taxpayers and homeowners."
Sen. John Carona, R-Dallas, who authored the reform measure, acknowledged his bill departs significantly from a proposal recently approved by the House but said he would not "be run over by the House or the special interests."
"I think this is the answer," Carona said of his bill, which would overhaul an agency described as "dysfunctional" during the Senate debate. "We want to provide a claims process that is fair. We want to make sure that people don't take advantage of the system, but at the same time, when the day comes to rely on their insurance, that claims are resolved promptly and settlement is received."
Legal action, accusations
TWIA has been dogged by lawsuits amid allegations of mismanagement since the aftermath of Hurricane Ike in 2008. Some 6 percent of claimants wound up suing TWIA, a nonprofit association backed by the state, with trial lawyers earning large fees that sparked controversy.
Perry and the House want to restrict policyholders to suing for actual damages, even if TWIA wrongfully denies or delays a claim. Carona's version encourages pre-lawsuit mediation but allows a policyholder to sue for double the amount of actual damages if evidence that TWIA failed to compensate policyholders fairly is "clear and convincing." Otherwise, he says, TWIA would have no incentive to pay claims fairly and promptly.
His House counterpart, State Rep. John Smithee, R-Amarillo, called the Senate proposal "fantasyland," pointing out that insurance policyholders throughout Texas can be assessed to pay TWIA's debts.
"TWIA is broke. If there are double damages, what people have to realize is that policyholders in other areas of the state will have to pay them off. That is very problematic," he said.
Negotiations on the issue broke down during the regular session of the Legislature, prompting Perry to ask lawmakers to try to find a resolution during this month's special session.
Carona said the issue has been overshadowed by a political war raging between two powerful special interest groups: the Texas Trial Lawyers Association and the business-backed Texans for Lawsuit Reform.
"The whole battle, regrettably, is over how money is divided up by two powerful interested groups. The trial lawyers, understandably, have a substantial investment in this in terms of potential revenue and the business community, through the Texans for Lawsuit Reform, have a desire to cut off funds to the trial lawyers for political reasons at every opportunity," he said. "Unfortunately, neither of those arguments deals with what is in the best interest of the people."
'Just deal with it'
Texas Trial Lawyer Association president Steve Mostyn, who earned millions of dollars in fees suing TWIA, spent more than $4 million on television ads in an attempt to defeat Perry last November. Perry threatened to veto a previous Senate version of the TWIA legislation which he thought encouraged lawsuits.
In an attempt to appease Perry, Carona deleted a provision in his original bill that allowed assessment of stiff penalties for delaying claims payment. The remainder of his bill, he said, addresses the concerns that his fellow senators have for their constituents.
"The executive branch can just deal with it. Veto it or accept the will of this body," he said. "This is fair to policyholders."