Political Storm Erupts Over Ike Claims

It has been five and a half years since Hurricane Ike pounded the Gulf Coast, killing dozens of people, pushing homes off their slabs and inflicting tens of billions of dollars in damage.

The storm also sparked a huge political fight in Texas, pitting Democrat-friendly trial lawyers who represented thousands of storm victims against Republican leaders who objected to the large payouts from the state-created Texas Windstorm Insurance Association, which insured property owners who could not get coverage elsewhere.

Now, in a deposition obtained by The Texas Tribune, the former head of the insurance association, Jim Oliver, said that two top Republican lawmakers, including the powerful lieutenant governor, David Dewhurst, tried to pressure him into fighting more cases in court and complained that the fees paid to lawyers in the settlements were ending up in the coffers of Democratic rivals.

“A lot of these funds are going to the Democratic Party,” Oliver recalled Dewhurst saying, according to a transcript. Oliver said the lieutenant governor was swearing and yelling in a conference room behind the Texas Senate chamber, over which he has presided since 2003.

“He made a point that you’ve got to — you’ve got to try these cases and various profanities and, you know, that sort of thing,” Oliver said in the deposition. “And you know, ‘You guys got to quit paying these stupid losses and try these cases.’ ”

He added that Dewhurst was “mad about the money going from Windstorm” into the pockets of Democratic mega-donor Steve Mostyn and other trial lawyers.

Oliver said Sen. Larry Taylor, R-Friendswood, expressed similar concerns in a separate meeting about all the money Mostyn was "funneling into Democratic causes" and wanted the insurance association to fight some of the lawsuits instead of settling so many. 

Oliver stopped short of saying that Dewhurst and Taylor instructed him to fight the cases specifically to cut off Mostyn’s fees, and both men said they did not do so.

Mostyn, who is considered the biggest donor to Democrats in Texas and has contributed heavily to the party nationally, provided the deposition to the Tribune because he said he wanted to shed light on the back-room dealings. The deposition comes as Texas gears up for the fall elections and days after Dewhurst ran a distant second in a Republican primary for lieutenant governor. He now faces a conservative talk radio host, state Sen. Dan Patrick, in a runoff.

“A sitting lieutenant governor inside his office should not be discussing the political contributions of anybody while he has the head of a department over there that he is directing on how to litigate cases,” Mostyn said. “He says the money is making it to Democratic campaigns, and he wants those cases to stop being settled. That’s the reason. There is no other reason that’s discussed in the meeting.”

Mostyn, who said he has made “north of $100 million” from lawsuits related to hurricane claims, still has about a dozen TWIA cases pending and stands to make even more money with that litigation.

Dewhurst acknowledged meeting Oliver to discuss the lawsuits, but he said he was not trying to cut off Mostyn’s political donations. He said he wanted to know why Oliver was settling thousands of cases that involved allegations of unfair or shabby claims processing.

The lawsuits generally involved accusations that homeowners and businesses were shortchanged or mishandled by the insurance association.  

“I have always been committed to ending lawsuit abuse in Texas, because it’s not right and it costs Texans and businesses money,” Dewhurst said in a statement. “I obviously wanted to know why these claims, prosecuted by both Democrat and Republican trial lawyers, were being paid a second time, and not being taken to court.”

Taylor dismissed Mostyn’s accusations as political posturing from a partisan Democrat with a financial interest. He said he had often pointed out Mostyn’s prolific donations — in public and in private. Taylor said many of the cases were “frivolous” and potentially damaging to future claimants.

Mostyn’s oversize giving to Democrats “wasn’t any kind of a secret,” said Taylor, who had legislative oversight of the insurance association. He said he told Oliver to settle valid claims and fight bogus ones.

“The things that I was asking TWIA to do was not undue pressure,” Taylor said. “I was asking them to do their job.”

The issue of restricting lawsuits, known as tort reform, typically pits trial lawyers and consumer advocates (along with their Democratic friends) against pro-business groups (and their GOP allies), who say restrictions are needed to limit the payouts and huge legal fees.

Charles Silver, a University of Texas at Austin School of Law professor and expert on tort laws, said the private complaints about money going to Democrats underscored a primary motivation behind lawsuit curbs.

“This is just another example of what tort reform has always been about,” Silver said. “It’s always been about defunding trial lawyers who are giving money to Democrats. It’s just a continuation of the prior endeavor.” 

Oliver managed the insurance association from 2000 to early 2011. He was fired a few months after the meeting with Dewhurst. A call to Oliver’s lawyer, Philip Durst, was not returned. Emails to the association went unanswered.

The quasi-state agency acts as the insurer of last resort in 14 coastal counties.

The question of how to insure property in windy regions has been a contentious topic in the Texas Legislature for years. But it quickly turned into a political tornado after Ike roared ashore in 2008 and spawned thousands of lawsuits over systematic claims mishandling by the insurance association.

The battle intensified during the 2010 election races, when Mostyn paid for negative ads against Gov. Rick Perry. Mostyn is again donating large amounts to Democrats, particularly state Sen. Wendy Davis, a candidate for governor.

According to Oliver, Dewhurst discussed Mostyn’s use of his lawsuit profits to fund political ads four years ago, but the former insurance association manager did not elaborate.

Mostyn now wants Dewhurst and Taylor to fill in the blanks. This week he subpoenaed both men, hoping he can compel them to testify in a hurricane lawsuit by the Brownsville Independent School District in South Texas.

Mostyn called the Brownsville case the most meritorious storm lawsuit he had ever filed, saying it could hit $100 million.

Stemming from damage by Hurricane Dolly in 2008, the lawsuit has already sparked controversy. It features a series of racist emails circulated by insurance association employees. One involved a denied request by a Hispanic claimant. It said: “Mexican working the system,” and “Mexican get no more money for displacement.”

A lawyer for the association, Andrew McKinney, said in open court in December that racism might have played a role in the case. He also acknowledged that the association had botched the claims handling process and intended to pay a 23 percent penalty to “make it right.”

Months later, the district still has not been paid, and the case is headed to trial in the summer. Mostyn said he had offered to settle or mediate the case. But he added he did not expect a settlement soon.

“There ain’t no damn way they’re going to give me money in 2014,” he said. “They don’t care what it costs later. They just can’t have it happen this election year."

Disclosure: Steve Mostyn was a major donor to The Texas Tribune in 2010. The University of Texas at Austin is a corporate sponsor of The Texas Tribune. (You can also review the full list of Tribune donors and sponsors below $1,000.)