Updated: Senate Approves TWIA Bill, Awaits Fight

Updated 4:35 p.m. — Like ringing the bell at the boxing ring, the Senate today approved a bill that is all but certain to restart a brawl with the House over how to reform the state's windstorm insurer of last resort.

"I intend to fight for this tougher than I’ve ever fought for anything," said state Sen. John Carona, R-Dallas, chairman of the Senate Business and Commerce Committee.

The Senate's version of HB3, a bill meant to reform TWIA, is radically different from the one the lower chamber approved, and is not favored by Gov. Rick Perry. The approval today sets up a fight very similar to the one that scuttled the bill during the regular legislative session and prompted Perry to threaten a special session. It is the major reason lawmakers are in the current session.

Carona said he was prepared for "one hell of a fight," and that he is ready to stand up for the Senate's version of the TWIA bill, even if that means returning to the Capitol for another special lawmaking session. "My summer plans are flexible," he said.

Based on remarks from Rep. John Smithee, R-Amarillo, chairman of the House Insurance Committe, other lawmakers might want to consider making their plans flexible, too. Smithee said he Senate bill approved today is even more different from the House goals and more favorable to lawyers than the measure senators approved during the regular session "If that’s really what he wants to do, then we have a fundamental disagreement that is probably not reconcilable," Smithee said. "We’ve basically gone back to a system designed only for one thing, and it's to put money in the hands of lawyers."

Carona said the Senate approved a version of HB3 that is much the same as the bill the chamber approved during the regular legislative session. House and Senate negotiators can now return to conference committee negotiations to start hammering out the differences between their two bills in the seven days that remain of the special session.

The aim of the TWIA legislation is to overhaul the way the quasi-governmental association handles claims for hurricane damages and to limit high-dollar lawsuits against the agency when it fails to honor homeowners' policies. "TWIA is not actuarily sound," said state Sen. Steve Ogden, R-Bryan, chairman of Senate Finance. "In fact, it’s broke."

But the House and Senate favor very different methods to accomplish the goal of making TWIA financially sound. The House wants to strictly limit policyholders' ability to sue TWIA and the amount of money that can be recovered in such lawsuits. Under the House bill, policyholders would be allowed only to recover actual damages from the storm even if TWIA knowingly dishonored the claimant's policy.

Under the Senate bill, if TWIA did not honor its policies, then a claimant could sue for twice the actual damages and they could recover "consequential damages," which are losses that result from TWIA's refusal to cover the initial damages caused by the storm.

Current law allows policyholders to sue for triple damages — though no court or settlement so far has made such an award — and it subjects TWIA to paying 18 percent fees when it doesn't pay claims timely. Both sides argue that with an active hurricane season expected this year, TWIA can't afford to operate under those guidelines, and neither bill would allow those remedies. TWIA — the insurer of last resort and in many cases the only option for coastal residents — currently has about about $100 million in cash and the capability to issue $2.5 billion in bonds, plus about $636 million in reinsurance. TWIA is still paying for claims from Hurricane Ike, which blasted into Houston and Galveston in 2008. The storm resulted in claims from nearly 93,000 people that totaled about $1.9 billion.

Despite agreement on the need to address TWIA's financial situation, and soon, lawmakers have been unable to agree on a solution. Smithee said the version of the bill the Senate committee approved today was not the same as the bill that chamber approved in the regular session, and he said it was a move backward. "It basically makes the tort system worse instead of better," Smithee said. It seemed to him like a proposal written by plaintiffs' lawyers who want the bill to fail because they profit from the status quo. And he said it was not a measure that Perry, who is committed to overhauling TWIA, would accept. "I think they underestimate Gov. Perry,” Smithee said.

Carona said the House will have to "give and take." And he said he would not cave to threats from Perry to veto the bill. As early as this morning, Carona said, Perry expressed concern over the Senate bill's allowance of "consequential damages," an issue that had never arisen in previous discussions. "The threat of a veto alone is not going to keep us from passing legislation we believe is fair and just," Carona said. "We're prepared to come back again."