Lege Passes TWIA Bill, Punishing Coast for TWIA Abuses
Texas Watch—June 28th, 2011
Coastal homeowners and businesses are at risk with the passage of the final version of a bill to restructure the Texas Windstorm Insurance Association.
“TWIA needlessly punished and endangered its policyholders after Hurricane Ike. The lesson from this man-made disaster should be to bolster protections for policyholders. Instead, lawmakers have chosen to severely curtail the legal protections and constitutional rights of coastal residents and business owners,” said Alex Winslow, Texas Watch executive director. “This legislation is an unconstitutionally retroactive big government solution that severely restricts existing legal protections designed to guarantee that claims are paid promptly and fairly.”
The primary concerns about the legislation are as follows:
1) Expert panel: The bill creates a so-called “expert panel” to establish guidelines upon which claims will be handled. These guidelines are “presumed to be accurate and correct, unless clear and convincing evidence supports a deviation from the guidelines,” creating a virtually insurmountable legal burden on policyholders who dispute the panel’s findings. This represents an unprecedented amount of power for an unelected, unaccountable panel.
2) Damages: The bill severely restricts protections that are guaranteed for all other insurance customers for TWIA policyholders. In order to force TWIA to pay penalties for unfair claims handling, policyholders must overcome a legal hurdle that is much higher than all other policyholders must meet.
3) Retroactive: This legislation takes the exceptional step of upsetting current contracts. It states that limitations on lawsuits will apply to any cause of action that accrues on or after the effective date of the bill, “regardless of the date on which the policy was delivered, issued for delivery, or renewed.” So if a policyholder bought a TWIA policy today, which incorporated claims handling deadlines and policyholder protections on par with those provided in the private market, those contract terms could be trumped by this legislation. The coverage purchased by their hard-earned dollars would be undone by state action. Through this legislation, the state is effectively confiscating their property rights and providing no benefit in return.
4) Binding Arbitration: The bill includes a provision that is likely to result in most policyholders waiving their legal rights before a dispute arises. Additionally, the legislation creates a de facto binding arbitration process through appraisal for many claims.
