Jun
22
Written by:
Andy Hogue
6/22/2011 11:24 AM
Any conference committee on the TWIA reform bill can "expect one hell of a fight," Senate Business and Commerce Committee Chairman John Carona (R-Dallas) said this morning.
The committee tentatively approved a committee substitute of HB 3, the Texas Windstorm Insurance Association restructuring bill. The tally was 7-1, though the vote was left open as Sen. Mike Jackson (R-La Porte), one of three coastal area legislators on the committee, was en route.
The Senate is expected to take up TWIA this afternoon.
"I'm going to do everything I can to defend this bill in the process. We're not going to be rolled over," Carona said, adding that he would not send the House bill to the Senate floor.
Among the differences: The House supports binding arbitration as an alternative to lawsuits, and seeks to limit damages to only "actual damages" from a windstorm event; whereas the Senate allows policyholders to sue for twice the actual damages if TWIA initially denies coverage, and does not require out-of-court settlements as a first step.
An alternative sought by Rep. Pete Gallego (D-Alpine) called for three-times the actual damages.
"If we cannot reach an agreeement and pass a bill, that's just what it will have to be," Carona said. "And if the results are that we produce a bill in both chambers that gets vetoed, well, my summer plans are flexible."
(That comment met some groans from across the committee room.)
"Unlike the first two or three false starts, this time we're going to protect the will of the Senate," Carona continued, "and we're going to represent the Senate product we built consensus around. And in conference committee, folks can expect one hell of a fight to assure that what we leave conference with resembles as close as possible what the Senate stood for."
Carona said this bill has been "like no other" he's seen, with feedback coming in around the clock from coastal bend residents -- even minutes before today's hearing.
Sen. Eddie Lucio Jr. (D-Brownsville), one of the coastal legislators present for the hearing, said he was "not comfortable" with the committee substitute.
Lucio said the bill should serve two basic purposes: 1) improve operations of TWIA so it more effectively handles claims, and 2) to discourage lawsuits and TWIA.
"I believe if we achieve the first goal, we won't have the second," he said, "and property owners won't have a need to sue the association."
"TWIA should be subject to the Open Meetings Act" he continued, urging published salaries of employees.
He said the removal of an 18 percent late fee for reimbursements "moves us away from our goal."
"If we're giving TWIA this additional flexibility, why are removing the one mechanism in place to incentivize the asssociation to comply with prompt payments of claims?" Lucio said.
Lucio also criticized the issuance of "pre-event bonds" and a requirement that TWIA beneficiaries have flood insurance.
Sen. Chris Harris (R-Arlington) pointed out that there is no sunset provision to the bill. Carona responded that the previous TWIA Senate bills also contained no sunset language.
LSR Managing Editor Will Lutz wrote in our June 17 subscription edition that TWIA is one of remaining "flashpoints" of the special session. In his article, he provides a little more background on the disagreements between the chambers -- including the usual struggles between pro-defense and pro-plaintiff sides -- which we include below.
The Texas House passed HB 3 -- the Texas Windstorm Insurance Association (TWIA) reform bill -- June 16. The Association is a state-created insurance company that provides coastal coverage for wind damage. Recent lawsuits regarding Hurricane Ike caused lawmakers to want to redo the Associations legal structure and claims-handling practices.
From both the House debate on the bill and the Senate Committee hearing, it's clear one of the big flashpoints on TWIA is the level of damages a court can award. The House bill limits damages to actual damages and attorney's fees.
During House debate on the bill, Rep. Pete Gallego (D-Alpine) tried to allow for award of treble (three times) damages in cases where TWIA knowingly or intentionally deceived a policy-holder. This is the law for most private businesses.
But during the debate, Reps. Larry Taylor (R-Friendswood) and John Smithee (R-Amarillo) noted that TWIA is unlike any other business. Smithee said most private companies pay damages from profits, but if TWIA has to pay large damage awards, it comes from other policy holders, especially along the cost. TWIA is a non-profit entity.
The Gallego amendment was soundly defeated.
But it may have life in the Senate. (see LSR, June 3, for a more detailed description of the differences between the two chambers in regular session). At the June 15 hearing on the bill, Sen. John Carona (R-Dallas) pledged that he wanted to work with all Senators to come up with an agreed bill. But he also issued a pointed warning to his colleagues. "If we fail, as a committee, to move this bill because we can't get a product that is a good product, albeit not a perfect one, I feel confident this bill will simply be placed into another committee where a favorable vote will occur and the bill will proceed," Carona said.
Any bill that is too friendly to the plaintiff's bar will not be acceptable to Taylor, Smithee or Gov. Rick Perry -- who will likely keep the Legislature in session until this issue is solved. But any bill too unfriendly to the plaintiff's bar or coastal policy holders will have trouble passing the Senate. Negotiations are currently ongoing on this issue. Both Smithee and Carona want a bill both can accept, with the hopes of avoiding a conference committee. (LSR, 6/17/2011).
UPDATE: (4:37 p.m.) The Senate passed its version of the TWIA reform bill on third and final reading, with no objection. So far no word on a conference committee.