The Texas House approved widespread changes on June 15 to the Texas Windstorm Insurance Association, the organization that insures people who live along the coast.
The House passed the bill on a 99-41 vote. The bill must pass a final procedural vote before it goes to the Senate for consideration.
The most intensely debated change was eliminating a policyholder’s right to sue the association for punitive damages if it does not pay a legitimate claim. Rep. John Smithee, R-Amarillo, said the state could no longer allow lawsuits against the association and expect it to survive another hurricane season.
“Our present rates system can’t support the tort system as it is now,” Smithee, the author of the measure, said.
But consumer groups say that punitive damages are the only way to make sure the association acts responsibly. They want policyholders to collect more than just actual damages and legal fees if they win a lawsuit against the association.
The association is a nonprofit, state-supervised insurer of last resort for people who can’t get private property insurance in 14 coastal counties, and part of Harris county. The organization is subsidized with mandatory dues from for-profit insurance companies.
Following Hurricane Ike, there were numerous allegations of collusion between claims adjusters and the association. More than 1,900 policyholders sued the association for failing to pay for legitimate damages. The Texas Department of Insurance placed the association under administrative oversight in February.
The proposed changes would also impose stricter ethics regulations on the association’s employees and change the name to the Texas Coastal Insurance Plan Association. Many of the complaints against the association accused claims adjusters of collaborating with the association to keep payments down.
The measure also proposes improving the association’s financial backing to make sure it can afford to pay claims in the event of another major hurricane.
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