Taylor, who is running to replace Republican Mike Jackson in Senate District 11, on Monday emphasized the $1.2 billion in money from TWIA -- the insurer of last resort for many of the state's coastal residents -- that has gone to claims and litigation related to Hurricane Ike, which struck the coast in 2008. That figure includes $768.3 million spent on legal settlements as of October -- $352 million of which went to Mostyn's law firm.
"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," Taylor said in a press release. "The payout patterns don't make sense, the exorbitant costs are atrocious and the abuse of the public trust is at an end."
Steve Mostyn, a major Democratic donor whose law firm has received the highest settlement payouts for litigation related to Hurricane Ike claims, called Taylor's statement a "complete political stunt." Mostyn gave hundreds of thousands to Taylor's Republican primary opponent, Dave Norman, earlier this year.
"Everybody has admitted, even the new people in charge of TWIA have admitted, there were serious problems in the way they handled claims in Ike," Mostyn said. He suggested the cost of Ike would have been even greater than the current litigation costs if TWIA had paid all claimants the full amount they were due under the insurer's policies.
"There's not a claim I have seen that didn't have some problems in there," Mostyn said. "It was a mess, and they deserve to have their house cleaned."
Matt Welch, a spokesman for Taylor, said in an email to the Tribune: "The only stunts going on are the plaintiff lawyers mailing client solicitation letters to just about every homeowner in Galveston County, including Rep. Taylor, in a 'Hail Mary' attempt to sign up new clients to sue TWIA four years after the storm." He emphasized that Mostyn previously sought a temporary restraining order to prevent the disclosure of settlement amounts related to Hurricane Ike.
After months of fierce political debate that pitted Mostyn against Taylor, and multiple failed attempts to pass reforms, lawmakers changed the TWIA claims process last summer in a special legislative session to prevent massive litigation costs in the future. But the new rules do not apply to past storms, like Ike, and that has allowed litigation to continue. Most of the management at TWIA has been replaced since Ike, and courts have found significant evidence of claims fraud. The organization has also been under the supervision of the Texas Department of Insurance, which hired a private insurance adjustment firm, Alvarez and Marsal, to evaluate ways to make TWIA more financially stable.
Mostyn said most of his pending cases would be wrapped up soon, and that the statute of limitations is nearing, which would prevent future litigation. Rather than use litigation costs for political purposes, he said, Taylor should focus on TWIA's financial stability.
Mostyn also accused Taylor, who works as an insurance agent along the coast, of profiting off the high commission rates agents receive for selling TWIA policies.
The Alvarez and Marsal report recommended reducing commission rates to 10 percent for initial policy sales and 7 percent for policy renewals. Agents currently receive 16 percent for both new sales and renewals of TWIA policies. Reducing those rates could save $100 million without increasing company costs and help constituents, according to the report.
"That won't be the topic of tomorrow's hearing because Taylor is an insurance agent and these people want to collect $64 million every year for selling a product that no one has any choice but to buy," Mostyn said.
In response to Mostyn's allegation, Welch said Taylor supports lowering the commission rates, but that they are set by the Board of TWIA, not by legislators.
Some of the current plaintiffs pursuing litigation against TWIA are public entities. State Rep. Craig Eiland, who represents the city of Galveston in both litigation against TWIA and in the House, told the Galveston Daily News in September that TWIA did not offer sufficient compensation to cover damages to public buildings, such as City Hall and fire stations, that were damaged by the storm. "The unpaid damages to City Hall are significant, in excess of $1 million," Eiland said.
* Mostyn and Eiland worked together on settlements, which total $12.3 million. In the graph above, that amount is included for both of their law firms.
Editor's Note: This article originally stated that Welch said the commission rates are set by the Department of Insurance, but he said they are set by the Board of TWIA.
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