Senate Transcript, June 28, 2011

LT. GOVERNOR DAVID DEWHURST: Members the Senate will come to order. A quorum is present. Members, Senator Whitmire moves to excuse Senator Lucio due to illness, is there any objection? Chair hears no objections, it's so ordered. Senators, I'm going to recognize Senator Duncan in just a very few moments, but I'm going to present an out of bounds on Senate Bill 1. Chair lays out Senate Resolution No. 130 by Senator Duncan. The secretary will read the amendment.

PATSY SPAW: Senate Resolution 130 suspending limitations on conference committee jurisdiction on Senate Bill 1.

LT. GOVERNOR DAVID DEWHURST: Chair recognizes Senator Duncan to explain the amendment -- the resolution.

SENATOR ROBERT DUNCAN: Thank you, Mr. President, members. Members, you know, and I think last night my staff e-mailed to you and your staff a detailed summary and index as to what's in this bill and as is in any large bill like this, when you go to conference, there were like 80 floor amendments put on on the House side, we had to work through those. There were some sunset bills that were vetoed that we needed to put on, there is a provision, the conference committee became convinced that after working with DPS that we could come up with language that would allow the governor's protective detail to be -- for those records to be confidential for a short period of time. That amendment is in the bill, this resolution has it in there and just for a brief explanation, what that has in it, it's prospective only. In other words, it doesn't apply to -- to any expenses that have occurred in the past, I think there's currently litigation pending on that and the current law -- whatever that law is would apply to pending or current expenses incurred before the bill, the effective date of the bill. After that time then the records are going to be kept -- the documents would be kept confidential for a period of 18 months but in the -- during that period of time they'll need to be -- there will be summaries that will actually tell what expenses in a summary form, where they're being spent and what they're being spent for, but not in detail. Then they will be available to us 18 months after the expense's incurred and then finally the arbiter of that would be -- of any disputes or at least mandamus, supreme court, attorney general's office receives that detail. There are a few others things in here but that primarily covers the main things. Unless there's any questions I move adoption of Senate Resolution 130.

LT. GOVERNOR DAVID DEWHURST: Members, Senator Duncan moves the adoption of Senate Resolution No. 130. The secretary will call the roll.

PATSY SPAW: Birdwell, Carona, Davis, Deuell, Duncan, Ellis, Eltife, Estes, Fraser, Gallegos, Harris, Hegar, Hinojosa, Huffman, Jackson, Lucio, Nelson, Nichols, Ogden, Patrick, Rodriguez, Seliger, Shapiro, Uresti, Van de Putte, Watson, Wentworth, West, Whitmire, Williams, Zaffirini.

LT. GOVERNOR DAVID DEWHURST: Members, there being 22 ayes and eight nays, the resolution is adopted. Members, the Chair recognizes Senator Duncan for a motion to adopt the conference committee report on Senate Bill 1 and to explain the conference committee report. Members, to give Senator Duncan a moment, the Chair signs in the presence of the Senate the following Senate bills.

PATSY SPAW: Senate Bill 8, Senate Bill 7, Senate Bill 6, and Senate Bill 2.

LT. GOVERNOR DAVID DEWHURST: Congratulations, members. The Chair recognizes Senator Duncan to approve the conference committee report on Senate Bill 1 and to explain the bill.

SENATOR ROBERT DUNCAN: Thank you, Mr. President and members. Senate Bill 1, as you know, was old 1811, we sent it out of here without any amendments, we took a few things off, it includes the school finance, it included the measures that are necessary to allow what we call nontax revenue or cash management tools to be able to make the budget balance. The House put on several amendments, one of the amendments they put on was interesting, it's a school finance amendment that helped us with regard to the regular program adjustment factor that Senator Van de Putte has asked about a lot and I think we've improved that program and that idea substantially and we now have a couple of sunset bills in here that we've been able to incur. You've got a summary that shows many of the things we have, most of the stuff we have done was in 1811, the summary explains what else is in the bill. I'll be happy to answer any questions that you have about the bill. If there's no questions, Mr. President, I move adoption of the conference committee report of Senate Bill 1.

LT. GOVERNOR DAVID DEWHURST: Senator Davis, for what purpose do you rise?

SENATOR WENDY DAVIS: To ask the author a couple of questions.

LT. GOVERNOR DAVID DEWHURST: Will Senator Duncan yield.

SENATOR ROBERT DUNCAN: I yield.

SENATOR WENDY DAVIS: Senator Duncan, I just want to make sure I understand the things that are now included. I think as you introduced the out of bounds resolution, you talked about the fact that the governor's travel vouchers, a bill that came through Senator Wentworth's committee and that we voted against, has now been included in part of that bill.

SENATOR ROBERT DUNCAN: No, that's incorrect. That bill is not a part of the bill. What we did was we came up with a -- what we felt like was a more balanced approach to doing that. First it's prospective only. It doesn't apply to any records or travel vouchers for expenses that would be incurred or paid prior to the effective date of the bill. Then the records are only confidential for a period of 18 months. Each quarter, the department has to file with the -- file a summary report by object code showing what they have spent the money for and even the destination or the final destination where the funds were spent on the protected detail. After 18 months those records become open records other than things that are normally -- that are already under current law considered to be confidential like the social security number of the peace officer requesting driver's license, things like that. Finally, since these issues are sometimes subject to dispute and because the attorney general is our normal gatekeeper on open records but has a security detail, the House had I think a good idea of saying that we'll allow a mandamus jurisdiction in the supreme court to resolve those disputes. So -- and developing in we listened -- I met with the press folks and kind of listened to their concerns, I'm not -- I'm sure there's not agreement with that entity or those groups but I do think that we have tried to make this situation work. I was impressed by the notion that we live in a different world. We've had somebody throw a Molotov cocktail on the governor's front porch. Since you and I have been here, we've had to add security for people that come into the Capitol. This session I've witnessed a lot of -- just a lot of -- this world's just different and I think this is a reasonable way to try to solve the concerns that DPS has about being able to protect its operational strategies for protecting the governor and other elected officials, yet provides transparency so that we as a legislature -- every two years we want to be able to come in or every 18 months the legislature or the media can get the full vouchers so I think it's a pretty good balance.

SENATOR WENDY DAVIS: Certainly a huge improvement of the bill as it was filed in Senator Wentworth's committee.

SENATOR ROBERT DUNCAN: I agree with that.

SENATOR WENDY DAVIS: Sounds like. A couple of other questions. I know when the bill left the Senate originally it had included some language that Senator Jackson had added with some amendments that I had added relating to the enterprise and emerging technology funds which would have given some more accountability in terms of those funds. It's my understanding in the conference committee process that was removed.

SENATOR ROBERT DUNCAN: I think that was the decision of the conferees as we went through the process for the governor's office.

SENATOR WENDY DAVIS: And it's also my understanding that again as the bill left the Senate, we had included language in there that essentially was an override of the governor's veto relative to the collection of sales taxes to Amazon. We have included the collection of the taxes with the bill as it left the Senate and it's my understanding that in the conference process that also was removed.

SENATOR ROBERT DUNCAN: I don't think so. I think we maintained the provisions with regard to Amazon in the conference committee report. We did not remove or change those provisions in the bill at all as far as -- we made a conscious decision to maintain -- there was -- there were a lot of ideas floating around, I think you saw some, in fact, newspaper about some sort of economic development deal, we didn't feel that was the right way to approach it. We felt like the language that was in 1811 and then later Senate Bill 1 was the appropriate language. It was John Otto's -- John Otto's amendment on the floor is what kept that intact.

SENATOR WENDY DAVIS: Good, I'm very sorry I misunderstood that and I'm happy to hear that in that regard. I'm glad I asked you the question. Thank you, Senator.

LT. GOVERNOR DAVID DEWHURST: Members, the question is on the adoption of the conference committee report on Senate Bill 1. If there's no further questions, the secretary will call the roll.

PATSY SPAW: Birdwell, Carona, Davis, Deuell, Duncan, Ellis, Eltife, Estes, Fraser, Gallegos, Harris, Hegar, Hinojosa, Huffman, Jackson, Lucio, Nelson, Nichols, Ogden, Patrick, Rodriguez, Seliger, Shapiro, Uresti, Van de Putte, Watson, Wentworth, West, Whitmire, Williams, Zaffirini.

LT. GOVERNOR DAVID DEWHURST: Members, there being 21 ayes and nine nays, the conference committee report Senator Duncan on Senate Bill 1 is finally passed. Congratulations to you.

SENATOR ROBERT DUNCAN: Thank you, Mr. President.

LT. GOVERNOR DAVID DEWHURST: Dean, why do you think I put him in the Chair? We have a problem going on, the dean is criticizing our Chair of administration. All right. All right. All right. If we can have some order here. Members, we have got a technical correction. The Chair lays out SCR No. 5 by Senator Duncan. The secretary will read the caption.

PATSY SPAW: Senate Concurrent Resolution No. 5 instructing the enrolling clerk of the Senate to make corrections in Senate Bill No. 1.

LT. GOVERNOR DAVID DEWHURST: The Chair recognizes Senator Duncan to explain the resolution.

SENATOR ROBERT DUNCAN: Thank you, Mr. President, members. The ledge counsel advised us that there was a correction that was necessary in their drafting of the governor's detail. It actually goes back to the notion that there are two sections that are currently in the code that are numbered the same and we change one -- we change that had error -- that section in another bill and this section just reflects the changes that are made by the bill that corrects the section number that's referred to the government code. With that explanation unless there's questions, I would move to adopt Senate Concurrent Resolution No. 5.

LT. GOVERNOR DAVID DEWHURST: Thank you, Senator Duncan. Members, you heard the motion by Senator Duncan. Is there objection from any member? The secretary will call the roll.

PATSY SPAW: Birdwell, Carona, Davis, Deuell, Duncan, Ellis, Eltife, Estes, Fraser, Gallegos, Harris, Hegar, Hinojosa, Huffman, Jackson, Lucio, Nelson, Nichols, Ogden, Patrick, Rodriguez, Seliger, Shapiro, Uresti, Van de Putte, Watson, Wentworth, West, Whitmire, Williams, Zaffirini.

LT. GOVERNOR DAVID DEWHURST: Members, there being 30 ayes and no nays, SCR No. 5 is adopted. Members, pursuant to our discussions and agreement last night, I'm going to at this time only bring up the out of bounds resolution to Senate Bill 3. Chair lays out Senate resolution No. 113 by Senator Carona. The secretary will read the resolution.

PATSY SPAW: Senate Resolution 113 suspending limitation on conference committee jurisdiction on House Bill No. 3.

LT. GOVERNOR DAVID DEWHURST: Senator Watson, for what purpose do you rise, sir?

SENATOR KIRK WATSON: Parliamentary inquiry.

LT. GOVERNOR DAVID DEWHURST: State your inquiry.

SENATOR KIRK WATSON: Mr. President, does this Senate Resolution No. 113 -- can this be brought up absent a suspension of any rules?

LT. GOVERNOR DAVID DEWHURST: Yes.

SENATOR KIRK WATSON: So --

LT. GOVERNOR DAVID DEWHURST: There's not a layout required on the out of bounds resolution.

SENATOR KIRK WATSON: So, as part of my parliamentary inquiry let me ask: As part of a layout requirement, there's no rules that would be necessary for suspension before this resolution is considered whether it be a layout rule or otherwise.

LT. GOVERNOR DAVID DEWHURST: That is 100 percent correct.

SENATOR KIRK WATSON: Thank you, Mr. President.

LT. GOVERNOR DAVID DEWHURST: Thank you, Senator Watson. The Chair recognizes Senator Carona to explain Senate Resolution No. 113.

SENATOR JOHN CARONA: Thank you, Mr. President and members. Members, just as lieutenant governor stated it's just my intention to talk to you for a few moments about the resolution to go outside the bounds on this House Bill 3, the TWIA bill. It was necessary to go outside the bounds on this conference committee report to address a few issues that arose during the conference committee process. The first item I would note it was necessary to change text added in section 2210.260D to ensure that certain grandfathered structures would continue to be exempt from the certification program and if the effective state of the alternative eligibility program coincides with the termination of the current program. The second issue it was necessary to omit text in added section 2210.502 subparagraph two to maintain the current practice of setting a maximum liability limit for wind storm and hail insurance policy issued by TWIA through the TWIA board. The third and fourth issues were these. Provision was added in the conference committee report given limited authority to the commissioner to extend by rule on a showing of good cause any deadline under the L1 dispute resolution process. This extension was replaced -- it was replacing authorization to extend several independent deadline and it's for a maximum aggregate total of 120 days. A change to section 2210.573D of the bill which includes a reference to a 60-day deadline was also necessary to ensure that any extension of this section was included in the 120 day total aggregate of the extension. Section 2210.5818 provides text to provide for that authorization. The fifth item, section 2210.582 was added to the bill to establish an ombudsman program to provide information and educational programs to persons insured under chapter 2210 which is the TWIA chapter to assist those persons with the claim chapter established under subchapter L1 of the bill. No. 6, it was also necessary to omit text in section 2210.613C1E of the bill in order to clarify the lines of insurance subject to a premium surcharge in the event bonds are sold. Current law is a bit ambiguous on this point. And finally items seven and eight it was necessary to change text in section 60A and D1 of the bill to allow the legislative interim study committee to study a broader range of alternative ways in which wind storm and hail insurance may be provided in the seacoast areas of our state. Mr. President, with that explanation, I would move adoption of Senate Resolution 113.

LT. GOVERNOR DAVID DEWHURST: Thank you, Senator Carona. Members, there being no questions at this time, the secretary will call the roll.

PATSY SPAW: Birdwell, Carona, Davis, Deuell, Duncan, Ellis, Eltife, Estes, Fraser, Gallegos, Harris, Hegar, Hinojosa, Huffman, Jackson, Lucio, Nelson, Nichols, Ogden, Patrick, Rodriguez, Seliger, Shapiro, Uresti, Van de Putte, Watson, Wentworth, West, Whitmire, Williams, Zaffirini.

LT. GOVERNOR DAVID DEWHURST: Members, there being 19 ayes and 11 nays, the motion to go outside the bounds on Senate Bill 3 contained in Senate Resolution No. 113 by Senator Carona is adopted. Senator Whitmire, could you approach the podium please, sir? Members, the Chair recognizes Senator Whitmire for a motion.

SENATOR JOHN WHITMIRE: Mr. President, I would move at this time the Senate stand in recess until 1:15.

LT. GOVERNOR DAVID DEWHURST: Members, you heard the motion by Senator Whitmire. Is there objection from any member, the Chair hears no objection and the Senate will stand in recess until 1:15.

LT. GOVERNOR DAVID DEWHURST: Members, the Senate will come to order. Senator Watson, my cellphone shows it's 1:25. What time does your cellphone indicate?

SENATOR KIRK WATSON: Mine says 1:25 but we always know you're a little bit early.

LT. GOVERNOR DAVID DEWHURST: Well, this explains it, this explains it.

SENATOR KIRK WATSON: It explains why you're always a little bit early?

LT. GOVERNOR DAVID DEWHURST: And you and I talked about having dinner and I was going to buy -- you're going to buy now. Members, the Chair recognizes Senator Carona for a motion to adopt the conference committee report on Senate Bill 3.

SENATOR JOHN CARONA: Thank you, Mr. President and members. Members, I'm going to take just a few minutes to --

LT. GOVERNOR DAVID DEWHURST: I am sorry, members. I said Senate Bill 3, I apologize. It's House Bill 3. Excuse me.

SENATOR JOHN CARONA: Members, I'm going to take just a few minutes to take you through the changes that have been made from the Senate Bill that left here most recently into the conference committee report as I'm going to ask you to adopt here in a few minutes. The conference committee report for House Bill 3 strikes a delicate balance, retaining many of the provisions that are important to the Texas Senate while addressing the concerns raised by the governor and the House. I wish this was a one chamber bill, but as we recognize that's not the process. So the following changes were made to the bill by the conference committee. I'll begin with the section that's best described as a funding structure and governance and go through those items then go through the rest of the bill. This will take a few minutes. The conference committee report states that the alternative eligibility program provided for under the bill begins on August 31st, 2011, this allows it to coincide with the completion of the current program and specifies that the current surcharge for that policy cannot be greater than the surcharge under the current alternative eligibility program. Senator Jackson, you may recall this was an issue importance to you. The conference committee report removes the retroactive flood provisions that were contained in the in the Senate Bill. This also was an issue of concern by Senator Jackson, Representative Hunter in the House voiced his concern and we took careful -- took into careful account the concerns of coastal residents and the cost associated with such. The conference committee report removes the residential cap of 1.5 million that was in the Senate Bill. Currently, members, just for your information that cap is at 1.7 million and it's determined by the TWIA board, so that policy will continue. The conference committee report restructures the combined sources bond so that class one bonds that cannot be sold maybe backed by a combination of class one or two bonds. Any portion of that bond would be paid by class two would count against class two's 1 billion-dollar obligation. Just to remind you, members, class one bonds are paid by TWIA policyholders up to $2 billion, class two bonds are paid 70 percent by property and casualty policies in the catastrophe areas and 30 percent by assessments of the insurers. Those bonds can total up to a billion dollars, and finally class three bonds are paid by assessments against the insurers, that's another 500 million. This change was agreed to in the House and designed to maintain the funding structure that was established under House Bill 4409 last session. So that is an issue, Senator Fraser, that we have taken into consideration and attempted not to disrupt. The conference committee report brings back specific standards of conduct for board members and employees that were included in our filed version of Senate Bill 3 and I might remind all of you that when we began conference committee negotiations we began and we worked from at all times the base Senate Bill. So I think that was -- I think we're off to a good start and I'm very appreciative of the work that we were able to accomplish through the cooperation of the House members and certainly Chairman Smithee. The conference committee report removes the definition of marketable that was in the Senate bill for -- allowing the property agencies including the Texas Department of Insurance and the comptroller to make that determination when they're going out in the market. Under the conference committee report the commissioner may initiate random audit claims at any time. You might remember in the Senate Bill that the threshold before these audit claims would begin would be a thousand and more claims. I think this certainly adds greater flexibility should at least in theory increase the number of random audits. The conference committee reports back agreed language from the filed version of Senate Bill 3 that requires the Texas Board of Engineers and the Texas Department of Insurance to work together to regulate qualified inspectors and the report brings back provisions from the filed version of Senate Bill 3 that changed the minimum retained premium to 90 days rather than the 180 days minimum return premium under current law. I want to talk for a moment about chapters 541 and 542. Under this conference committee report these two chapters of the insurance code do not apply to TWIA. Eliminating the treble damages and the 18 percent penalty for prompt pay damages, instead treble damages are provided for as well as consumer protections in Chapters 220 now of the insurance code which governs TWIA, which we'll talk about more in just a moment. An arbitration discount, there's a great deal of misinformation afloat this morning as we near a final vote on this issue, and I'll be happy to answer questions at the appropriate time but I want to make it clear that it's understood that in the report it sets a cap of 10 percent of any premium discount which is allowed when a claimant elects to include an arbitration provision in his or her policy. This would be if the claimant, if the insured elects this particular method of dispute resolution, it also makes clear in the same provision that there is no requirement for the commissioner to even offer this program. So statements to the contrary that have been in press releases and otherwise this morning are simply erroneous. Filing of lawsuits under two sections of the bill, the conference committee report repeals 2210.552 of the code which provided an avenue for filing an action in district court, pursuits involving claims disputes. With the addition of the bill's L1 claims dispute process, this section was simply no longer needed. Under the subject of judicial appointment, the conference committee report requires that the judicial panel on multi-district litigation appoint an active judge from the county of loss or second or first adjacent county for all suits brought in district court. This was an issue that was discussed and brought to us by Senator Huffman and I appreciate your input and guidance. The expert panels, the conference committee report allows the expert panel to provide guidelines and make recommendations concerning all claims against TWIA. The Senate Bill had allowed this for slab claims only I believe the expert panels an appropriate means to resolving issues and I think it will be helpful in not only -- not only accelerating the process as we try to solve these, especially in the event of a catastrophic loss, but it will ensure some continuity and some consistency in how we value these claims across the broad spectrum of reports that are submitted. The L1 process. In the conference committee report, the commissioner has the authority to extend L1 deadlines by an aggregate total of 120 days including for military deployment or because TWIA does not have sufficient funds to pay claims. If you recall, Senator Lucio and Senator Van de Putte spoke to us on those issues and we have taken that into account in the drafting of the specific language. The CCR removes the automatic 30-day extension of TWIA deadlines to notify a claimant of its acceptance or rejection of the claim which was contained in the Senate bill. Senator Williams brought this to us and ask that the process be shortened, we have done that, Senator Williams, and in fact we were able to shorten within the total time line that you had indicated you believed to be more acceptable which at that point was 180 days. The CCR, the conference committee report limits district court review of appraisal decisions in certain circumstances where an appraiser acted inappropriately or outside the bound of his or her authority, the Senate Bill allowed for review of all aspects of the appraisal decision. But what we did we wrote language that was consistent with the language found in any other homeowner policy written any elsewhere in the state. The conference committee report establishes an ombudsman program at TDI which is funded by TWIA and focused on assisting claimants while navigating the L1 process. This was important to Senator Jackson and I assured him we would do our best and it went outside the bounds to include this. Damages recoverable under the conference committee report and this is an important issue to everyone on both sides of this issue and I know to all of you. Damages that you can recover under this bill include covered losses, they include common law consequential damages, they allow for double damages of both covered losses and consequential damages and you can obtain those double damages by showing clear and convincing evidence that TWIA failed to meet deadlines; district art of settlement guidelines, failed to provide notice of acceptance or denial of claims, reject a claim without an information or deny coverage when liability was reasonably clear. It also allows prejudgment interest and it allows court costs and attorney fees. Most of these issues beyond covered losses were not in the early drafts of this bill, so I think it's worth noting that we've come a very long way to ensure that this bill is fair one, a balanced one and one that allows our constituents along the Texas coast to not only cover the losses but to be treated fairly in the event that their insurance policies are breeched. Members, that is a quick rundown of the bill. I'll do my very best to answer questions if you have them and I would be glad, Mr. President, to take questions at this time.

LT. GOVERNOR DAVID DEWHURST: Senator Watson, for what purpose do you rise, sir?

SENATOR KIRK WATSON: Question of the author.

LT. GOVERNOR DAVID DEWHURST: Will Senator Carona yield.

SENATOR JOHN CARONA: Yes, certainly.

SENATOR KIRK WATSON: Thank you, Mr. President. And Chairman Carona, thank you very, very much. I have watched you work on this bill through the regular session and through this special session and all I can say is that it has enhanced my respect for you as a chairman of a committee and someone that carries difficult legislation and works with all sides the way you do.

SENATOR JOHN CARONA: Senator, I wish I could tell you it had been a measure of love but I'd be lying.

SENATOR KIRK WATSON: Well, I understand. With that being said, and you and I have already talked to some degree, I've indicated to you that I have some issues with the bill that are going to require me to be opposed to the bill and I'm not going to go into all of those, but the one I want to point out and ask some questions about I want to point out to the members of the body is that there is another change in the conference committee report that we ought to talk about and that is that in the conference committee report that the members have in front of them, there's a provision that talks in terms of the applicability and who this would apply to; is that correct?

SENATOR JOHN CARONA: That's correct, Senator.

SENATOR KIRK WATSON: And the applicability provision in the conference committee report says that it will apply to causes of action that accrue on or after the effective date but it also says in the basis of which is a claimed filed under a Texas wind storm and hail insurance policy that is delivered, issued for delivery or renewed by the association regardless of the date on which the policy was delivered, issued for delivery or renewed. So what that means is that hundreds of thousands of people in Texas that live in the coastal area that have insurance policies, Texas wind tomorrow and hail insurance policies currently, this bill seeks to cover them and that is different than what was in the 31 to zero bill that passed during the regular session and is also different than what was in the bill, the HB3 version that this Senate passed out; is that correct?

SENATOR JOHN CARONA: Well, I don't agree that it's different, but I do agree that it's in dispute. There are different opinions by various lawyers on this issue but I can tell you and I believe the issue -- the primary focus on the issue is when a cause of action accrues. And what we're saying is this bill only applies to causes of action that accrue after the date of this policy. The date -- I'm sorry, the date of this change in law. Now, it is true that once the effective date of this change in haw occurs, that it will -- it will impact all policies that are out there. Those that are written on that day, those that are written the day after and those that already exist because they were written at some point the day before or longer and that part is true but because the central focus of the bill and the language contained in the bill specifies when the accrual period begins. The attorneys that have been part of the drafting process and part of the review process believe that the bill is, in fact, appropriately drawn and legal as it's drawn. I do respect there's some attorneys but with a different opinion.

SENATOR KIRK WATSON: Then let's talk about that because I'm not sure how you can get to that opinion -- let me go back to HB3, I believe it's the version that passed out of here, and what that version said is a Texas wind storm and hail insurance policy and a dispute under a Texas wind storm and hail insurance policies that delivered, issued for delivery or renewed by the Texas Wind Storm Association before the 60th day after the effective date of this act is governed by the law in effect immediately before the effective date of this about and the former law is continued in effect for that purpose. So what was attempted to do before the conference committee report was to say that if you already had a policy of insurance, the cause of action may accrue sometime in the future but the policy of insurance in other words, the contract that a consumer paid a premium for and was seeking to get a benefit of their bargain, they would have current law applied. This instead of saying that says this new law applies. So I guess my question to you is what do you think -- do you think that this is retroactive and applies to policies that are already in existence and changes what might be in those policies or do you think it doesn't do that?

SENATOR JOHN CARONA: Senator, I do not believe that it's retroactive, but as I say, you know, there are attorneys that this Capitol that have taken different views on this. The view held by the Trial Lawyers, which is one that I've learned over the last 25 hours, is that there is an element of retroactivity here. Others hold a different opinion. I believe -- and I am going to support the view held by the attorneys that drafted this, that it is a fair and appropriate way to draft it, that it certainly would withstand any kind of legal challenge but also remind all of us that this particular bill has a severability cause clause in it. So this is an issue that probably will have to be decided by a court as most new laws do and are and should it be decided in a manner that is unfavorable to the language to the bill itself, the severability clause will allow us to pull that from the bill, if you would, and continue with all other aspects of the bill and that's the best answer I can give you at this point.

SENATOR KIRK WATSON: And I understand, I really do understand, I would say two things about that. First of all, if in fact it wasn't intended to be retroactive, there would have been no reason to change the language from what we passed 31 to zero during the regular session and what this Senate passed I guess again 31 to zero when we sent it over, but there's clearly been a change to the applicability clause. The other thing I would say there's constitutional and case law that indicate that if we try to change the terms of a contract that is already been entered into, that that will be an unconstitutional taking because the impact is you get to look through the contract and I got a couple of these contracts here, for example, in the TWIA commercial policy, it expressly provides that 541 and 540 -- let me make sure I get this exactly right that I'm looking at page seven of the policy that I got in front of me and it specifically refers to chapter 541. So the party that bought this contract has in that contract the right to use chapter 541, this bill says they don't get the right to use chapter 541. So what concerns me that there's now an unconstitutional taking even if you're on the floor right now and you're in favor of doing away with chapter 541, you're compromising the contractual rights the parties would have under an executed contract that they paid for and acquired those rights. So what concerns me, of course, is that it does create an unconstitutional taking and I worry that since it's the applicability provision that you're going to have difficulty stripping something like that out with the severability clause because then you don't have -- it's not made applicable. So that's one of the reasons I'm in opposition to your bill, and I appreciate your answering my questions. Thank you.

SENATOR JOHN CARONA: You're quite welcome.

SENATOR STEVE OGDEN: Senator Ellis, for what purpose do you rise?

SENATOR RODNEY ELLIS: Couple of questions.

SENATOR STEVE OGDEN: You're recognized to ask the author a couple of questions.

SENATOR RODNEY ELLIS: Senator, thank you for your work on the bill and I was proud to support it in the regular session I'm not going to be able to support it this go around, and of course you know that. I share some of Senator Watson's concerns about retroactivity. I do just want to ask one other question about the line of questions that he went through. Is this any precedent for this language being in the bill? Have we done that to your knowledge in any other area involving insurance?

SENATOR JOHN CARONA: Senator, I don't know either way, to be honest with you. You know, I'm not personally aware of any time we have done it, but I'm not personally qualified to be aware of whether we've done it before. Given my relatively new effort in this area work here in the chamber. All I do know is this. This bill, thank goodness, wasn't written by myself. I mean, elements of this bill, those that required legal expertise were assembled by the top lawyers here in the Capitol and so while I don't mean to sound disrespectful of the claim by the Trial Lawyers groups that this bill has drafting errors and therefore someone shouldn't vote for it, you know, highly qualified attorneys in this building believe otherwise. And it is a little suspect to me and please understand, I'm not questioning your sincerity or that of Senator Watson's at all but it is a little more suspect to me that this issue would be raised literally in the last eight to ten hours by those who have been opposed to numerous actions of the bill and have issued press releases and everything they can do to try to convince members not to vote for the bill. If they are correct, then a court will address the issue.

SENATOR RODNEY ELLIS: I think severability will take care of that part.

SENATOR JOHN CARONA: Yes, sir. I hope it does, and I hope -- though I recognize that there's certainly nothing wrong with there being different opinions on the interpretation of this bill, I hope I'm right and the other side is wrong. But I thinks that what you have the court for especially when you got new legislation and we'll sort through this and find a suitable answer one way or the other.

SENATOR RODNEY ELLIS: I'll take that as face value. Just for the record, I want to point out that Senator Watson was making reference to is on page 69 line 18 of the bill.

SENATOR JOHN CARONA: Yes, sir.

SENATOR RODNEY ELLIS: I think whether it would work on not, but I think a little bit at least in the criminal justice base we don't do what you call ex post facto laws. If you got 300,000 policyholders through TWIA and their policies are going to end up essentially being rewritten as Senator Watson said, that's a legitimate concern. But for what it's worth, I'll leave it alone, let the court settle it out. Let me ask you this, based on your understanding, Mr. Chairman, how did we get to the position where we're trying to do something with regard to TWIA with this legislation? Is it fair to say that it's because of issues that were exposed over the last couple of years involving problems with TWIA? I mean, I know you have seen that stack of e-mail, internal e-mails.

SENATOR JOHN CARONA: That's fair to say.

SENATOR RODNEY ELLIS: So we're trying to solve a problem, this bill is supposed to be a solution for a problem that was created by people at TWIA forced the state to take unprecedented action to do something about TWIA because there were serious problems. I mean, there were some bad actors at TWIA is that fair --

SENATOR JOHN CARONA: I think that's accurate, yes.

SENATOR RODNEY ELLIS: I just want to make sure as members we realize what we're doing because employees that we have some control over, because of disclosure of e-mails that a number of us on this floor and in the other chamber helped bring about. I can remember when I did open records request and several of those e-mails came out some of my colleagues were jokingly saying, well, I guess you didn't open request for somebody and we got all of the e-mails because they thought there'd be nothing there but they found a lot of smoking guns, right? That's a fair statement?

SENATOR JOHN CARONA: Yes.

SENATOR RODNEY ELLIS: I just wanted to make sure I put that in record. Now, let me ask you this, isn't it interesting that because of problems created by some employees that we have some influence -- the TWIA state employees at least the way we're going to solve the problem is we're going to encourage people to give up their right, policyholders their right to get a trial by jury, we're going to offer them a 10 percent discount so if you go in on the front end and when you're sold the policy, policyholders be offered the 10 percent discount to sell their right to a jury trial, I assume a good number of them are going to take that discount not understanding the effect after what that means; is that a fair statement?

SENATOR JOHN CARONA: No, sir, I would not agree with you that that's a fair statement. While it is true there'll be a provision in there where the commissioner can decide to give a discount from zero to 10 percent, the commissioner can also decide not to offer that discount at all. It's not mandatory, it simply gives the authority to do so and some people prefer knowingly -- I mean, I tend to believe that a great many people do understand what they read and they do understand what they're buying and they do understand the contracts that they enter into and they are being given an opportunity for going through binding arbitration if they choose. It's completely voluntary to receive a possible discount on premium. That's really not what all of these changes are about. I mean -- the -- we talk about what led us being here today and while it is true that we have had some bad actors within TWIA, we've also failed to have an organization that was properly structured. We've had an organization that simply wasn't -- wasn't managed appropriately in part at least because we never set out the proper expectations for what we as legislatures wanted of that agency and I think that this bill lays out in great detail and great transparency going forward what we as a legislature will expect from TWIA in terms of how it operates as a agency or quasi agency and in terms of what we demand in taking care fairly of those coastal residents and so a lot of things brought us here today not just the bad actions of some employees.

SENATOR RODNEY ELLIS: Senator, do you think that there is a disclosure requirement for an agent with this 10 percent discount is offered, is that requirement -- that it be disclosed. We have to tell them. So like on my Blackberry I assumed I signed something five, six, seven, eight, nine years ago but I admit I didn't read it. I don't know what I signed.

SENATOR JOHN CARONA: Well, they had actually have to have an endorsement to do that, they had have to have an -- policy so you know if the commissioner even decides to offer that program, it'd have to be done by endorsement.

SENATOR RODNEY ELLIS: So you think the commission would have to provide a disclosure for the part.

SENATOR JOHN CARONA: I believe so, yes. That would be my expectation anyway.

SENATOR RODNEY ELLIS: Do you think whether or not the bill eliminates liability of fraudulent representations or fraudulent misrepresentations and nondisclosures?

SENATOR JOHN CARONA: Well, you know, we had some discussion about that and yet at the very time when you go through the settlement process of the claim relative to dispute of appraisal not disputes of causation which are much more complicated. One of the ways we allow people to have an avenue to court even under dispute of appraisal is if in fact there is a type of fraud or bad faith dealing. So, you know, again as part of the flurry of press releases this morning, there's been some rather ambiguous information at least in one of the releases I saw of that nature, but I think this bill does more on the whole to protect policyholders' rights and to make transparent a process that up to this point has been anything but transparent, that anything we've seen, you know, since the existence of TWIA.

SENATOR RODNEY ELLIS: So you think there are some repercussions in your bill for bad faith?

SENATOR JOHN CARONA: Yes, sir, I do.

SENATOR RODNEY ELLIS: Okay. I know during the regular session there were letters from some of the coastal mayors one from the mayor of Houston against the House bill. I don't know whether or not they came out with any letters or resolutions for your bill but I have one here, which I'm sure you've seen pretty descriptive from the mayor of Houston, the mayor of Galveston, the Galveston chamber of commerce and the board of directors of the Texas city La Marque chamber of commerce.

SENATOR JOHN CARONA: Senator, I haven't seen those letters but I'm assuming, correct me if I'm wrong, I'm assuming those letters are in opposition to the House bill as it was originally filed back during the regular session months ago.

SENATOR RODNEY ELLIS: So most of them -- the one from the mayor of Houston was May 5th.

SENATOR JOHN CARONA: Yeah, and that would have been back during the regular session. This billed to --

SENATOR RODNEY ELLIS: They supported --

SENATOR JOHN CARONA: No, I don't want to represent they supported, because honestly I have not heard from them in my office one way or the other, so I can't really attest to what their position is. But I will say this I think when you compare this to the originally filed House bill, there really is very little to compare. I mean, the Senate moved this process a long, long way in our direction. Remember, folks, originally, the House bill simply said they will be binding arbitration and settling these disputes forever more. The Senate came back and said, wait a minute, current law allows for treble damages and actual damage and this and that. We're not going from that all the way back to binding arbitration period. Too bad, end of story. And so we've come back as a body because of the effort of all of us in here and negotiated double damages, consequential damages, prejudgment interest, all things that were not to be found in earlier drafts. So I recognizes that this is not the ideal situation for some of you in here and I respect that. I hope I've always been respectful of different opinions, but the one thing I can tell you is whether you vote for this bill today or to those who don't or can't vote for the bill, it still is a bill that moves the process along way from where we started back in early January or so when that first House bill was filed.

SENATOR RODNEY ELLIS: Senator, you did a good job of getting the bill out of here a little more than a month ago 31 to zip, and all of us appreciate what you did then and I think that you've been put in a terrible situation and you've done your best to make a bad situation not as bad as it would have been were you not carrying it. Obviously we're operating on 16 votes instead of 21 votes. I assume that had a little bit to do with it as well. I'm not going to vote for it -- hope that when we come back, I hope we don't get some of the storms that people are talking about for this cycle.

SENATOR JOHN CARONA: I agree.

SENATOR RODNEY ELLIS: But if we do, I hope people out there will be visible, will make noise and make sure that members who do vote for it, there's some responsibility for those votes and then they'll let us know whether or not they think this bill ought to stay in place. So I'm not going to vote with you, I'm going to let members go home, there's nothing worse than trying to talk between airplane flights and I don't want to be down here in the hurricane season. So I'm just going to sit down at this point. But look, I appreciate what you have done, I hope when we come back, we take a good look at it some more and make some good changes. You had a good bill and that bill should have been passed.

SENATOR JOHN CARONA: I will tell you, this is -- I know this is a huge issue, particularly along the Texas coast, and one of the things this bill calls for is an extensive interim study because this bill is only half of the answer to the problem and in particular we still have yet to deal in my view, but there's some who differ but -- with the financial side of TWIA and the necessity that it be actuarial sound. But whether or not we even have a TWIA two years from now will be the question to be answered and this committee will do its work down in the coast, where coastal residents can come forward and hopefully come by the hundreds at a time to tell us what we need to do. It's not our intention at all to ignore or infringe upon the people of the Texas coast. We want fair coverage but we also have to do it within the reality of what TWIA is. Because it is a quasi state agency, because it is -- it today lacks the money that we all believe it or most of us believe it should have in there. Should this hurricane season be a bad one, we clearly got a lot more work to do. But I clearly know how important it is to those along the coast. Please know that I recognize a good bit of the work is still ahead of us.

SENATOR RODNEY ELLIS: Thank you, sir.

SENATOR JOHN CARONA: Thank you, sir.

SENATOR STEVE OGDEN: Senator Hegar, for what purpose do you rise?

SENATOR GLENN HEGAR: Just to ask the gentleman a question or two.

SENATOR STEVE OGDEN: You're recognized.

SENATOR GLENN HEGAR: Thank you, Senator Carona. I like the sentiments that two of our colleagues have said, I know that you have had a an untenable task over your hand over the course of the last several months and I know you have done this job as well as anyone could, trying to manage not just -- and I appreciate your comments earlier this year that, you know, learning through as we all learn through the process of trying to write a bill that 31 senators can have input into and I appreciated that more than almost anything I heard over the course of this year. I know also as you mentioned dealing with both chambers and I guess as a member who represents a large portion of the coast as well as a significant portion of noncoastal areas and trying to balance those two differences and how do we go forward with public policy, it appears to me, and I think you fully gather that No. 1 TWIA was not structured in any shape, form, or fashion to handle a storm of such magnitude as Ike.

SENATOR JOHN CARONA: You're correct.

SENATOR GLENN HEGAR: And I think it's so prudent that one of the first and foremost things we need to have structured is to have a rapid response to deal with the policyholders, God forbid, if we have such a magnitude event again which with all probability those events are structured out over years but hopefully we don't have one. And so No. 1 they were not structured for it and we have to deal with that. No. 2, the lawsuit issue and ultimately who pays for that. Make sure that the policyholders, make sure they have their claims s paid, paid timely and they get what they paid for. But on the flip side as you mentioned to make sure earlier in talking about this issue of wind versus flood that -- of surge that is, that people are not paid for something that they didn't pay for and that means the rest of the policyholders or the state pays for that and that's part of the issue that I think you're trying to deal with in the lawsuit portion here.

SENATOR JOHN CARONA: It's a big part of the problem, Senator. You know, when you get into the midst of a storm like that, any big hurricane, you know, you would think that it would be easy. Some damage comes from water, some damage comes from wind. But as we all know here it's not easy at all and when you have folks that don't have flood insurance and this bill addresses that in part going forward, Senator Ogden and I poke of that earlier today. When you don't have -- when you have insurers under TWIA which is wind policy, wind and hail policy and they don't have that flood insurance, the natural tendency because we want to settle claims, we want to settle disputes and get on to the next case file is to afford a level of coverage or generosity of payment that really wouldn't be there if the loss could be spread over two policies that including a national flood policy as well. So it's a real challenge and there are other things we can and should do to TWIA of a nonfinancial nature if in fact TWIA is to survive long term. But we're making a good and necessary leap forward right now and I'm glad that we're able to approach this in this one respect in special session because as most of you are aware, we are now in hurricane season and we need this I think on the books ready to go.

SENATOR GLENN HEGAR: One of the things the bill deals with is an expert panel in order to deal with the wind surge issue and I guess my only comment on that and my concern as we move forward is what are the rules that are put into place and what is the magnitude of issues that that expert panel deals with. My point being I want to make sure they deal with the issues at hand but they don't get off on to issues they shouldn't be dealing with and cause us to have (inaudible) or causing problems.

SENATOR JOHN CARONA: I guess the intent and certainly as specified by the legislation that it be an expert panel that these not be political appointees or novices, these are to be folks that can and will qualify as an expert panel to come in and look at both preevent and post event the cause or likely cause of storms of this nature. They'll be looking at what factor water played. They will be looking at the tidal surge, they'll be looking at wind and velocity and other related issues. The whole idea of being -- to treat everybody fairly and to provide some degree of uniformity. Now, having said that, one of the criticisms that were leveled against this is it's a one size fits all approach and that's just not the case by the design of this panel. Different regions will by necessity have to be treated fairly, it just means by consisting of an expert panel as opposed to no panel at all and adjusters with a wide variety of opinions in how we settle these.

SENATOR GLENN HEGAR: And I think that's a significant improvement in making sure we have those in place, as long as we don't view that as a mechanism or TWIA or the successor name, I haven't gotten quite used to the successor name yet, but does not use that as a mechanism to cause delay.

SENATOR JOHN CARONA: That's right.

SENATOR GLENN HEGAR: And so I then -- Senator Ellis mentioned the 10 percent cap and I guess my question is -- you know, my only comment on that one regretted that we did put a specific limit on it because in my opinion maybe that premium discount should be more, but obviously you're going to continue to look at this issue during the interim and I guess several people will. And I guess my last comment and I mentioned this to you earlier in a conversation that we had, is my concern as we go forward in dealing with TWIA and how do we deal with the funding mechanism, and how do we deal with the private funding on the coast which I think is so vital. We have to have more private coverage on the coast realizing there's certain properties that the private market is never really wanting to cover and so I don't think that mandating people to have a certain percentage of coverage on the coast is really the right public policy, but as we move forward, I also wonder is if the mechanisms that we're creating in here and we'll know over time, do they in some situations maybe encourage people who are writing coverage to write themselves out of having to pay TWIA when there's a claim, that mow when they look at it and say, you know what, now, we have less of an incentive to write on the coast. And I want to make sure that -- I think it's prudent that we start to -- creative ideas to give incentives for people to write more coverage rather than doing the opposite and I just think we need to be cognizant moving forward.

SENATOR JOHN CARONA: I think you're right. Some of that is addressed in section 55 of the bill, Senator. It provides some incentives to the rest of the insurance market and some things we can do in terms of writing those policies in areas that otherwise have not been able to obtain insurance in the private market but it has been forced otherwise to have TWIA coverage or no coverage to get them back involved. We want the private market involved and I agree with you to the extent it can be done in a positive fashion as opposed to a mandate, we are all better off.

SENATOR GLENN HEGAR: And hopefully looking at that as incentives we're focusing on the coast and not necessarily providing a broad blanket brush of those across the entire state of Texas because that may not necessarily be in the interest of the consumers. But thank you, I appreciate your work and thank you, Senator.

SENATOR JOHN CARONA: Thank you, Senator Hegar.

SENATOR STEVE OGDEN: Senator Duncan, for what purpose do you rise?

SENATOR ROBERT DUNCAN: Question of the author.

SENATOR STEVE OGDEN: You're recognized.

SENATOR ROBERT DUNCAN: Like all others, I want to thank you on your hard work, I know what you have been through and you've done a nice job of bringing something to the floor. Purpose of my questions are merely to kind of understand some intent. The conference committee report refers to an arbitration provision that allows the commissioner to implement a discount on premium for arbitration you talked about that earlier. Like this bill, as I understand it deals with extraordinary circumstances of trying to maintain health and provide health insurance on the coast or we've had a lot of issues and problems.

SENATOR JOHN CARONA: Yes, sir.

SENATOR ROBERT DUNCAN: And so the scope of the bill is designed to address those problems. Is that right?

SENATOR JOHN CARONA: That's correct. Yes, sir.

SENATOR ROBERT DUNCAN: And it's not the intent including what I would call an optional arbitration idea to introduce a model that would

(inaudible) insurance that's not related to TWIA or to the coast or to general liability or to general homeowner's insurance correct.

SENATOR JOHN CARONA: No, sir, not the intent at all. This provision was only added because of the uniqueness because TWIA and the desire to try to get claims when there are disputes to resolve in the most efficient manner possible. Fair but efficient.

SENATOR ROBERT DUNCAN: Thank you.

SENATOR STEVE OGDEN: Senator Davis, for what purpose do you rise?

SENATOR WENDY DAVIS: To ask some questions of Senator Carona.

SENATOR STEVE OGDEN: You're recognized.

SENATOR WENDY DAVIS: Thank you. Senator Carona, I join all the others of my colleagues who have stood and congratulated you on your hard work on this bill, and I know you have had to navigate some very difficult terrain, some competing interest that have very different perspectives on the direction of this bill should have headed.

SENATOR JOHN CARONA: Well, and I might add friends on both sides. I'm a member that's proud to say that I think both the primary outside groups that have been involved in this have very legitimate reasons and needs for being involved in the legislative process and I respect them both and I consider myself politically speaking to have friends from both of those groups. And yet this is just not an issue about who your friends are, as you know. This is trying to put together the best public policy you can and trying to find the right public balance because as you and others in the chamber have reminded me throughout this process, this is about the insureds, this isn't about the competing interest and so thank you, Senator.

SENATOR WENDY DAVIS: Well, that's exactly the point that I was going to make, which I agree with you that certainly those groups that have weighed in on this issue, have every right to be a part of the legislative process but unfortunately I think sometimes when we're dealing with competing pressures in that regard, we wind up negotiating in a way that isn't necessarily starting from the right place, starting from the perspective of the consumer and really that as you just said is what we should be working to represent. My concern following up on some of what Senator Ellis was talking about, we do know that we have a history here of acknowledge agency and insurance quia side state insurance agency where we have got some very real problems. We know we have had some very real problems with bad faith, and other issues, and certainly there've been pressures held to bear against them that have in some ways corrected that. They've had to answer that in terms of some pretty high damage claims that they've had to pay in response to successful claims against their bad acts and that ability really has held them to an accountability that I fear they wouldn't have under the constraints that are being put forward in the bill as it's currently structured. Right now it's my understanding that a TWIA claimant just like any other insured in the state of Texas has certain rights under their right to request a jury trial under sections 541 and 54s of the civil rights and remedies code and that's provided some very important protections for them consumer protections for them in terms of their ability to make a claim and that included today for TWIA claimants as well as any other insured in the state of Texas is a constitutional right for them to have a jury decide a number of issues, the jury can decide whether the loss is covered, the amount that's owed under a policy, they can decide any other damages that might be caused by denial or delay to pay such as extra living expenses or lost business income that may have been incurred, they can determine whether there should be a liabilities for breach of contract, unfair claims handing, deadline violations, misrepresentation, nondisclosures, and other types of conduct and they also have the ability to determine whether TWIA knowingly and unfair -- unfairly should pay up to triple damages based on their actions, correct?

SENATOR JOHN CARONA: Yes, that's correct.

SENATOR WENDY DAVIS: And what we're talking about today is going to take TWIA claimants and it's going to put them into a special category, it's going to change the rights they have under existing law, some of the protections that they have under existing law to make the same kinds of claims against TWIA that another insured would be able to make against their insurance companies under sections 541 and 542, correct?

SENATOR JOHN CARONA: Well, there will be some changes but I would have to say change is not necessarily a bad thing and I think that's the challenge with this bill is that change had to happen. The fund was becoming rapidly depleted, the number of lawsuits were overwhelming the state which means overwhelming the plan which ultimately means overwhelming the policyholders. So change was essential here if we were to continue with TWIA but the effort has been made in this legislation to provide the kind of changes that still protect those individual rights of the insurers. For example, there are specific penalties in this bill if TWIA intentionally fails to meet deadlines or disregard settlement nines or fails to provide proper notice of acceptance or denial of a claim, list of them in fact, five major issues so we're really -- while 541 and 542 were eliminated because of the treble of damages and the 18 percent issue, we have come right back into the bill through the L1 settlement process and made certain that you can come back and while not tripling the damage, that you could literally get double damages not just on the covered loss but on consequential damages, in other words -- and you of course know what consequential damages are, some of our colleagues may not, I certainly wasn't familiar with consequential damages a few short months ago. They can come in even get a doubling of consequential damage ifs TWIA fails to act and then as a result of their intentional failure to act, not only have the losses that the claimant began with but other losses occur as a result of the breach or the bad act on the part of TWIA. All of those are back in law under this rewrite of the bill to try to provide the maximum amount of protection within what we can reasonably afford to provide through TWIA. The challenge with TWIA is to find or is to put in place the best possible policy with people along the coast at a rate, a premium rate that they'll pay or can pay and that continues to be -- I guess as long as we have TWIA that will be the battle, that will be the challenge and so what this bill is and perfect as I'm sure it is our best effort to write to figure out what is that right balance. So I hope I've answered your question at least in part.

SENATOR WENDY DAVIS: Well, you have and I want to explore that a little bit further and clearly as you laid that out we're talking about a quasi state agency here but my concern is that we're holding this quasi state agency to a different standard than private insurers would be held and I understand the pragmatic reasons behind that but I think the better solution for it really was that advocated by Senator Fraser, which was if you're going to write a policy in the state of Texas, you have got to provide coverage throughout the state and not provide an opportunity for insurers to pick and choose those that they cover here where they can take higher profits from some than they might able to take others. But setting that aside for a minute, let's talk about the change of consumers' rights under this bill versus the rights they would have in place today, you're correct. Your good work, and I know you had to fight very hard to create a double damage provision or to include one in this bill. I know you worked very hard to include the consequential damage piece into the bill but the standard that the consumer has to demonstrate in order to achieve those damages is higher now, isn't it, than it would have been under existing law under sections 541 and 542?

SENATOR JOHN CARONA: Yes, it is. There's a higher evidentiary standard.

SENATOR WENDY DAVIS: And in fact the evidentiary standard right now is that the claimant would have to show by a preponderance of evidence which really means just more likely than not that TWIA had acted in bad faith, but today under this bill they're not going to have to show clear and convincing evidence that TWIA intentionally engaged in certain very limited conduct, correct?

SENATOR JOHN CARONA: Yes, Senator, but shouldn't we require that if we're going to pay out a doubling of damages out of a limited pool of money, should we not have evidence that's both clear and convincing and should we not be able to ascertain that the acts were intentional before we allow someone to double their actual damages?

SENATOR WENDY DAVIS: Well, Senator, the entire history of our civil practice and remedies in the state of Texas is built on a different standard than that, and again I go back to the about that we're going to have insurers who are being treated and held to a different level of responsibility to demonstrate damages under this new law than they would be under the protections that they have in place today. And the history of jurisprudence in the state of Texas has determined that for insurance claims, the more correct balance, the waiting of a claimant should have to demonstrate really is more appropriate in that lesser burden, that burden of preponderance of evidence or more likely than not because what our courts have understood and what we legislatively respected is that it's almost impossible for John Q. Smith, whose home has just been destroyed by a hurricane and who's fumbling through the morass of the legal system to try to make out a legitimate claim, it's almost impossible for John Q. Smith out there to demonstrate by clear and convincing evidence intentional violations, intentional acts of bad faith. It's actually under the legal standard it's a tremendously huge burden and almost impossible quite honestly to demonstrate, and my fear is that even though we put a double damage provision here and even though we put a consequential damage provision here, the ability for a claimant to actually make it out is going to be impossible.

SENATOR JOHN CARONA: Senator, I just -- I disagree with you and let me -- and I don't say that to be argumentative but let me tell you why. This bill makes certain and clear if you got a covered loss, TWIA's going to pay it, that responsibility is a given. We're only -- and it also says if TWIA acts badly or as part of the claim TWIA errs in some fashion not intentionally but they just simply err, you're going to also get consequential damages. The only time that we asked for a higher standard is if we are looking at doubling the damages and if we're going to pay someone their actual damages and we are going to pay someone their consequential damages and we're going to pay someone their prejudgment interest, we're even going to pay their attorney and court costs, then there ought to be a higher standard before we take all of that, roll it up and say, oh, by the way, we're going to pay you double that. I mean, the sheer notion that we're going to double something or triple something by that matter absolutely ought to have a higher standard and I think that a clear and convincing evidentiary start is not only a good idea, it probably is the way it should have been all along and the fact that at some point in time we made the decision, some legislature before us made the decision to allow for a lower standard in this state I think is no justification in and of itself that we wouldn't opt for a higher standard today. Things change, times change. In this case, the fund changed. We just want to make sure in the drafting of this that when the time comes, that a coastal resident has a claim and needs to be paid promptly we have the funds there to do it and that's what we want to do, that's what we want to accomplish, none of us Republican and Democrats alike want bad actors in TWIA. We want good actors who respect the policyholders and so when we talk about doubling damages which means ultimately there's no magic money as you and I both know. Double damages means that's coming out of a fund paid for by policyholders. So if we're going to take out of that same fund and we're going to give you all of your actual damages, and then we're going to come back and say we're also going to give you double damages, then that means that all the other policyholders gets the privilege of paying for that. State isn't on the hook for that. The way these laws are written currently state's not on the hook any longer since 2009 for a dime of it and so we're talking about taking money from one policyholder and giving it to another because some people in the system, not all by any means, but some people in the system have abused the legal system and they have cost money out of this fund that we don't have to give and, you know -- so the more I look at this issue the more convinced I became that there had to be some changes and there had to be some balance and what we had through all of our good intentions and providing TWIA along the coast was a fund that if we didn't change the law continue to be exploited in a manner that we couldn't afford any longer.

SENATOR WENDY DAVIS: Well, respectfully you and I will agree to disagree on that, Senator Carona, because it is I think putting a burden on a claimant that is nonexistent today and going to set aside and set apart for TWIA claimants a different level of difficulty in making out a claim, and in the process I think the consequence of that will be that TWIA which to date has already demonstrated its practice of acting in bad faith even with the accountability methods that were in place under the law today. I'm afraid that when we say that we're coming back in and we're drafting a law to try to address some of the issues that we know are problems with TWIA and our response to that is to actually remove current pressure that they have against acting in bad faith and creating a dynamic for claimants in TWIA, that's very, very different than one that would exist for other insurers. Right now it's the case, isn't it, Senator Carona that if TWIA violates a claim deadline, then they owe 18 percent in damages for the violation of that claim deadline?

SENATOR JOHN CARONA: That's correct, Senator. This bill will change it from 18 percent to qualification for double damages, which you're right. Current law it's 18 percent.

SENATOR WENDY DAVIS: Okay. And then finally I want to walk through a little bit this issue of the appraisal. It's really in my opinion it's an arbitration by appraiser and it's required every time that a dispute over the amount of a loss which really includes almost every disputed claim, correct?

SENATOR JOHN CARONA: Senator, if you'll go to your own homeowner's policy, I'm assuming you probably live in a single family home, perhaps a townhome. If you'll go look at our private insurance coverage, it talks about how to handle issues of appraisal dispute and the language we now have in this bill almost mirrors that. That's the very practice that every other homeowner all throughout the state works under. They don't have the ability to simply go straight into court. What this process does is it says there's an appraisal review process in the event that damages cannot be agreed upon but after that if you have been treated unfairly, you've been discriminated against, there's a list of things that could happen, you could still go to court on those limited basis to seek redress but it prescribes prior to that the very same things that every other homeowner's policy outside of the coastal area, in fact, I would argue inside the coastal area too, because people have -- in addition to wind coverage they have their property coverage. So there's nothing unique about this. It's been one of the things singled out as inappropriate by the Trial Lawyers Association and yet in the very meetings with the Trial Lawyers Association they make clear time and time again that was not part of the dispute resolution they had an issue with. They thought that was an appropriate means of handling things. Now, I'm not going to say they agreed to anything down to the letter but the entire time the appraisal process was not opposed and discussed, was not the area of controversy until the array of press releases were let out, all the controversy was on the causation side of the argument which of course is what we deal with through required mediation which is nonbinding and then what we allow policyholders to then do which is to go straight into court without any restrictions whatsoever on evidence that can be admitted or otherwise, file a suit and seek whatever damages they believe they have that weren't covered by TWIA or through the resolution process. So it's only now in the waning hours of this that I've heard any kind of criticism, and please I'm not referring to the fact you're bringing it up, you're obviously bringing it up on someone's report and I can just tell you throughout the negotiations this was not an issue because issues that are about appraisal are real just about the dollars and cents. They're not about whether or not it's covered, they're not about partial coverage. These are just issues that say, I'm going to pay you $3,000 for your roof instead of 4,000 that you might want. Oh, you disagree? Then let's go get an appraisal in here to figure out the difference and figure out why there's a dispute and that's why there isn't the protection to be able to go on that type of dispute into a full blown court trial. And in fact it wouldn't even be practical that it work under that part of the equation. It's only when you get into issues of causation if the big dollars are at stake and a big issue more than that, than either coverage is flatly denied or largely denied.

SENATOR WENDY DAVIS: Well, unfortunately Senator, I think that what we're going to see in actuality is because there's always a dispute over the amount of the loss. There almost always is and underlying amount of loss questions many times are deeper issues than simply you know I think 1 going to cost $2500 to replace this sort of shingle on my roof or assume I think 1 going to be $25,000 and TWIA thinks 1 going to be $2500 underlying amount of loss questions are often an insurance issues deeper questions of causation and other claim issues and so if we say that every time an amount of loss issue arises, we're going to force that into an appraisal process, my fear is we really are going to be providing nearly as many opportunities on the left hand side of the flow chart as we are on the right hand side of the now chart and once you're in that right hand side, once you're there if you're an insured, the way it will function different than my personal homeowner policy would function that I have to share the cost with TWIA to pay for my appraiser and their appraiser and in the event that my appraiser and their appraiser didn't come to an agreement then TDI gets to put the third appraiser in place to help determine that dispute. In putting that third person in place, we've now got my appraiser, the consumer and we've got a TWIA appraiser and a Texas department of insurance appraiser and putting my consumer hat on for a minute I have to tell you I think that's pretty much going to stack the debt against that consumer because what we've done we have thrust them into essentially what is an arbitration process that's going to be decided by a TWIA appraiser and a TDI appraiser over the appraisal that I may have received as a homeowner.

SENATOR JOHN CARONA: Well, an appraiser -- excuse me an appraisal is going to be needed in any kind of damage dispute and so I can tell you an appraisal whether 1 one appraisal two appraisal, and I don't fully agree with the way you laid it out, that's a whole lot cheaper than a lawsuit either way you go. So the methodology for this bill in settling appraisal disputes in and of itself is the most efficient, least expensive way to go and most importantly 1 the very same process bo u roughing just a handful of words that exist in every other homeowner's policy in this state. So 1 been proven -- its been out there for years and years and it's been proven to be a very efficient process in that way and those issues again, those issues of appraisal only, it takes out the unnecessary cost of litigation. Now, if you have got a dispute that is part causation, part appraisal, well, then you're free to go through the entire other route which allows for mediation and ultimately a full blown jury trial if that's what you need to have. But most people want to go in the most expeditious fashion and least expensive fashion and this bill provides for that. I think 1 a fair fashion.

SENATOR WENDY DAVIS: Well, I'm going to say one more thing and then I'm going to sit down, Senator, and 1 that with the exception of a few words that you just mentioned between my homeowner's policy in north Texas versus a coastal policy with TWIA on the coast and that is if I ultimately as a homeowner disagree with the appraisal amount, I have the opportunity then to go into the court system for the court to review basically de novo that decision and to make a determination in the court system whether a fair amount is going to be provided to cover my damage. Under this -- under this new law as 1 going to be passed through today, a homeowner would only have access to the court system on that right hand side of the chart, if they can show that there was fraud or some collusion by the appraisers, 1 putting a very unique and difficult standard in place for the homeowner to wind up in the court system if they ultimately cannot win out over the TDI appraiser and the TWIA appraiser joining forces in determining an appraisal amount that they view is unfair. It simply isn't the case that because they think 1 unfair that they're going to have access to the courts to decide differently. Instead they will only be able to get into the court system under this very unique and difficult standard not in place for other homeowners in Texas that's going to require them to show some kind of collusion or other fraud by the appraisers themselves in making the decision that they made. And I am very, very concerned that we are not being consumer protective when we put a provision in place like that. In fact what I think we're doing is we're essentially setting up a situation where TWIA has actually no consequence for any bad actions on their part now and we're going to see an unwinding of some of the progress that was made by virtue of accountability that they've been held to in the legal system. And with that I will sit down. Thank you, Senator.

SENATOR JOHN CARONA: Thank you.

SENATOR STEVE OGDEN: Senator Jackson, for what purpose do you rise?

SENATOR MIKE JACKSON: Will the gentleman yield?

SENATOR JOHN CARONA: Yes, I will yield.

SENATOR STEVE OGDEN: You're recognized.

SENATOR MIKE JACKSON: Thank you, Senator Carona. Finally got here. We finally got to the last day. I was asking Senator Fraser a minute ago why it was that this bill has a history that 1 always heard that 1 probably the last bill on days of session and we talked about that a little bit. But I want to congratulate you on your hard work and getting to the point where we are. And I just had two or three quick questions and I'll sit down. I appreciate your saying that you know this bill isn't a perfect bill, 1 not going to fix everything. I think it moves things forward in a manner that we need to move toward. I wanted to ask though in what your -- the thought pattern was when we talk about premium discounts or surcharge credits where policy -- customers that need to buy a policy can make an option to buy, get some type of a discount if they choose binding arbitration over not having that option, when they go to resolve their dispute and what if everybody chose that they wanted to use the option to have binding arbitration and then there wasn't a storm the whole year. That a -- would we be rookie doing ourselves out of the ten percent of money or whatever?

SENATOR JOHN CARONA: Well, I don't think so because if you don't have a storm, it means you're building (inaudible) reserves and so that's a good thing. The language that is specifically placed in the bill says that first these discounts are voluntary on the part of the commissioner. He doesn't -- he can -- he may choose this program, he may not. He may discount anywhere from a theoretical zero all the way to 0 percent. But then again he didn't have to offer the program at all. But I think that the key language is that it has to be actuarial sound. And so in the theoretical example that you set forth where a material number of people choose that route and therefore a material amount of premium is discounted by 0 percent or whatever percentage it might be -- above all it states that the commissioner can adopt any discount that's not actuarial sound. And so if you've got a fund that's not actuarial sound, he's not going to be able to offer a program anyway, he or she, and if you have got a program that you have worked toward to make more actuarial sound, better than we are today but still not fully funded. Same situation. So I don't really think so. I think that not having claims, not having storms is a good thing not a bad thing and if the cost of not having a storm was a small premium discount that enabled us to accrue still a substantial amount of funds, I think that would certainly be advantageous on the whole but the -- the whole purpose in offering that is just to assure that homeowners that wish for -- you know, a lot of people like binding arbitration that wish for a streamlined but fair process have that option. Not everybody can either afford or prefers to go the route of the courtroom. So there was never my plan or motive any greater than that, but the idea was just simply to if you have some people that take that, it will in fact ultimately streamline the process and keep us from clogging the courts with these kinds of issues. We also put the cap on it so that there was no question that under no circumstance could the amount of the discount become abusive to all the rest of the policyholders, thus the 10 percent.

SENATOR MIKE JACKSON: Okay. Your answer brought another question to mind. What do you consider actuarial sound? I guess is it your intent that the commissioner does not offer any discount or whatever you want to call this until you said, until 1 actuarial sound? Now, what does actuarial sound mean to you?

SENATOR JOHN CARONA: Well, actuarial sound would be a number, a funding level determined, there's some formulas in current law that give us targets where we should fund that reserve but otherwise you would bring in, as all insurance companies are required to do, an actuarial firm that takes a look at projected or predicted losses versus the amount of income from policyholders, the premium, and they determine whether or not over time sufficient funds should be at a level to sustain losses as they're incurred.

SENATOR MIKE JACKSON: So this would be under your definition or my interpretation of your definition, this could be several -- say maybe 20 or 30 years away before that ever came into effect, is that what --

SENATOR JOHN CARONA: Well, regrettably, yeah. If we just go out and borrow what we need when we need it for claims. If we just do that, well, then you probably would never have a fund that could be declared actuarial sound.

SENATOR MIKE JACKSON: Okay. And you realize when you make a comparison to a regular for profit insurance company that TWIA has one arm tied behind its back and one leg tied up where it can't function like a for profit insurance company, right?

SENATOR JOHN CARONA: I do, Senator. There are definitely -- it becomes more apparent to me all the time that there are political restraints that exist in trying to operate a solvent and efficient TWIA. I'm not even sure it can be done.

SENATOR MIKE JACKSON: But if your goal in this legislation is to use arbitration and that the commissioner shouldn't offer that until 1 actuarial sound, you're not going to be achieving your goal because he won't be able to do that, I guess that's my point.

SENATOR JOHN CARONA: That's correct. And we did not put anything in this bill purposefully that would be purposely a cost driver. You know, that would cause premiums to increase. And Senator Ogden and I talked about that. That's a separate issue but an issue for another time.

SENATOR MIKE JACKSON: Okay. Well, another item that I think we need to discuss here just a little bit for what your intention was, is the time that a policyholder has after TWIA gets all of its information that it needs to decide on the policy and then TWIA must give notice on a limited amount of time to request an appraisal if you do not agree with the TWIA amount. So the policyholder has 60 days to demand an appraisal and it can be extended if you ask for a 15-day extension; is that right?

SENATOR JOHN CARONA: No, it can be extended by 30 days if 1 requested not later than 15 days of the 60-day extension period.

SENATOR MIKE JACKSON: Okay. And without getting all the details there, my question is in the event of another Ike hitting Galveston, when you have all of these claims that are going to be made at pretty much the same amount of time after Hurricane Ike, it was about two weeks before people were allowed to even go back on to the island to look at their house and assess damage and then with an onslaught of a huge number of claims, I guess my question here is would it be your legislative intent to have the commissioner of insurance be able to maybe relax or adjust some of these deadline numbers to keep people from having their rights taken away from them after a huge event like that?

SENATOR JOHN CARONA: In the event of an appraisal dispute, clearly an appraisal dispute, what would be on our chart is on the left hand side in the event of a catastrophic occurrence, you know, it would be my legislative hope, let me say that our insurance commissioner would provide whatever flexibility's needed to meet the extraordinary standards that exist at the time.

SENATOR MIKE JACKSON: Yeah, I certainly don't want people to be in a line waiting to get information from an appraiser and their window of opportunity run out just simply because there's not more people there to do the job in the amount of time that's allotted. So hopefully we can allow the commissioner some leeway on that. The other thing you have covered a little bit but I want to say the retroactive discussion that we've had where this bill would affect policies that have been written since the first of the year or whatever each of these policies is a one year policy, I think 99 percent of them are a one year policy and you've said that you've had differing opinions from different lawyers about whether the -- this bill or the language in this bill will affect policies that have been written say in January or February of this year.

SENATOR JOHN CARONA: Well, not exactly, Senator. What we're saying is that every bill that we passed has to have an effective date at sometime and based on the effective date of this bill, once this date becomes effective, it applies to whatever policy you may have at that moment of effectiveness. You might be buying a new policy that day, you might be buying tomorrow a new policy in which case clearly this would be reflected or would be affected or you might have a policy that already exists and still have several months left on it. But at some point the prescription under this bill for certain actions take place and it doesn't matter which policy you got, whether 1 one you're still burning half the time on, whether 1 a brand new one or one you buy tomorrow, but it makes clear that any action that might occur -- in other words, anything that -- any event that might occur and take place that you would rely upon these new provisions for would be prospective. It would -- anything accruing after the date of effectiveness of this bill would be impacted. Anything that's accrued, a cause of action beforehand would be under previous law.

SENATOR MIKE JACKSON: Okay. So it is not your legislative intent for this bill to apply to policies that are written after the effective date of the bill.

SENATOR JOHN CARONA: No, that's not what I said. No, sir. What I'm saying is that there is nothing -- there is not an intention in this bill that it be retroactive in the manner that I think you described a moment ago.

SENATOR MIKE JACKSON: That's clear. Okay. Well, I'll let the -- well, I think there's going to be a lot of discussion about that and maybe a little bit of lawyer talk and I'm not --

SENATOR JOHN CARONA: I think, Senator, I think it might be retroactive in some respect depending upon who analyzes it but I don't think there's anything unconstitutional or illegal in the way that 1 drawn and its effect.

SENATOR MIKE JACKSON: Highly unusual for one of your members no I'm just kidding. The oversight committee, legislative oversight committee, we haven't changed any of that.

SENATOR JOHN CARONA: No.

SENATOR MIKE JACKSON: I think I -- if the lieutenant governor allows me to continue to be a member of that and I'm sure you be a member of that, I think that board needs to be very active a lot more so than it has been in its first session after it was created.

SENATOR JOHN CARONA: I agree, Senator.

SENATOR MIKE JACKSON: And there are a lot of these issues that you learn more about unfortunately only after experiencing some act of Mother Nature that you wish would never happen but hopefully we will get very involved in this and come to some fruition. I appreciate your work Mr. Chairman.

SENATOR JOHN CARONA: Thank you, sir.

LT. GOVERNOR DAVID DEWHURST: Thank you, Senator Jackson. Senator Van de Putte, for what purpose do you rise, ma'am?

SENATOR LETICIA VAN DE PUTTE: Would the chairman yield just for a question?

LT. GOVERNOR DAVID DEWHURST: Will Senator Carona yield?

SENATOR JOHN CARONA: Certainly.

SENATOR LETICIA VAN DE PUTTE: Thank you, Mr. President and thank you Senator Carona. I echo my colleagues' gratitude in your handling of this bill. My question will be very, very quick. And as you know, Senator, I really worked with you on the structure of TWIA and category one, two, and three bonds, the preevent bonds securities and audit and internal, so I just wanted to ask a question because in listening to my colleagues with regard to the binding arbitration at a point to where the policyholders get to decide. My question is I know that we had always talked about having a discount for those policyholders. Can you explain and reiterate the time line at the time that the policyholder can choose to have the arbitration and that discount is at least 10 percent.

SENATOR JOHN CARONA: No, no. If the timetable on that, the specific timetable the terms of it, the language on it all of that is left to the authority of the insurance commissioner but most importantly, Senator, there is no requirement that the insurance commissioner offer that at all, the insurance commissioner could simply decide for a variety of reasons including actuarial soundness not to offer it. But if he or she does decide to offer it, the maximum discount that they can offer someone who elects arbitration would be a 10 percent reduction and what would otherwise be the policy preview. That's the maximum, they could choose to offer 1 percent or even zero but -- and so 1 even as Senator Jackson pointed out a moment ago, 1 even questionable because of the requirement of actuarial soundness, 1 even questionable whether the commissioner will get the option to offer it in the first place.

SENATOR LETICIA VAN DE PUTTE: Thank you. And my question is once the commissioner -- say the commissioner does offer it and the policyholders choose that, if there are the funding mechanisms that require us to repay bonds or securities with policyholders taking into account certain discount, does the commissioner of insurance or does the TWIA board then take that discount amount and socialize the cost to repay the bonds over all policyholders with TWIA?

SENATOR JOHN CARONA: Oh, Senator, if it was socializing, then I couldn't be for it. I can tell you two things. The TWIA board would make the first decision and have the latitude and then as with most issues involving TWIA going forward, the insurance commissioner has the final word. So we didn't choose to specify down to that grandeur level in the bill, but we could have. We didn't and so it would first begin by being a TWIA board decision.

SENATOR LETICIA VAN DE PUTTE: And my final question is if policyholders choose the arbitration and they say they want to do that at either at the beginning of the policy or is it at the time of the claim?

SENATOR JOHN CARONA: No, it would be selected up front at the same time you bought your policy or at the front end when you renewed your policy going into subsequent renewal.

SENATOR LETICIA VAN DE PUTTE: And my question is if the policyholder decides that and subsequently even if the TWIA board or the commissioner says we were going to have that in effect but because of whatever financial variables if that discount -- basically it says that the discount, but if the discount is zero, is the policyholder still subject to that binding arbitration if there is no discount given but they elect to --

SENATOR JOHN CARONA: Well, the discount is this as intended, Senator, would be stated before the decision was made to select that. I mean, the commissioner would say you know we are actuarial sound No. 1. And based upon our degree of actuarial soundness, I think we can afford a 4 percent discount and then the customer would be told, if you elect this, you know, you get a 4 percent discount but it wouldn't be a discount level determined after the fact, it would be prospective.

SENATOR LETICIA VAN DE PUTTE: Thank you. I appreciate your answers to this. As you know the fiscal soundness to most folks is most important, look forward to the interim. And the dean of the Senate also had those questions so I'm asking for the both of us.

SENATOR JOHN CARONA: Well, I'm honored to answer for the both of you. Thank you, Senator.

LT. GOVERNOR DAVID DEWHURST: Senator Gallegos, for what purpose do you rise?

SENATOR MARIO GALLEGOS: Will the gentleman yield?

SENATOR JOHN CARONA: Yes, sir, I will.

SENATOR MARIO GALLEGOS: And, Senator Carona, I'm going to just talk to you, just conference committee report, not really to you, I know you have done a hard job on this issue but -- and Senator, my colleagues have really asked a lot of questions that I was going to ask, but Senator Davis brought up John Q. Smith and I'm here to ask questions for my mother who's a TWIA policyholder and, you know, after Ike -- after Ike and some of the damages that were done, you know, she went on ahead and filed her claim and everything but there was others beside her that had slabs and obviously they don't have to prove damages or approve it because all they had was a slab. Well, my question here, Senator, is -- and my mother didn't sue. Okay? My mother doesn't like to sue, 1 just her deal and she just took the claim and after that there was other damages that we went on ahead and she paid out of her pocket so -- but this conference committee report has been the issue there in that West Beach community that some of my colleagues here represent. And No. 1 they're confused first of all if they take this discount, they take this discount and you understand my mother's 83 years old and if you look at a lot of these communities they're elderly, they're elderly and they pay their taxes. And when you come up -- 1 different -- as some of the questions that have been asked of you, 1 different than our homeowners insurance and some of the rights that we have and we have flood insurance. But under this conference committee, now her and her neighbors are afraid that you're taking a lot of her rights from her. Is that -- what would you answer to that, Senator?

SENATOR JOHN CARONA: Well, I would remind them that that's completely voluntary on their part. There's no requirement whatsoever for the insured or the prospective insured to take that provision. No requirement at all. That's the policyholder's choice, and of course, as I mentioned earlier, there's no requirement that the insurance commissioner even offer that. We're simply placing in the conference committee report and it was also in earlier bill drafts, the ability to offer that program but not their -- no requirement on anybody's part.

SENATOR MARIO GALLEGOS: I understand that, but you're talking about elderly people here and I'd hate for anybody to be either going through a

(inaudible) like this as I read it and then they went on to ask me over the phone about the retroactive clause in this conference committee report, Senator Carona. Now, what -- and you just got through saying, well, we'll let the courts decide it. Why would you put a policyholder or policyholders that have already bought the policy, who live there, pay their taxes and all that, now, you're saying, well, a judge -- a court is going to decide that issue, the court is going to decide that issue, pay good money that are -- you know, policyholders right now, I'm talking about right now, right now that live there and they try to put them under this and especially elderly like they are and I grew up in that subdivision and at least -- now, you got them thing, calling me, calling their friends, calling their kids, hey, where are we on this retroactive? I've already paid my policy. Now, what would you tell them Senator Carona?

SENATOR JOHN CARONA: Senator, when I look at this issue, I would tell you that I don't believe there's anything retroactive about it based on my own personal view and based on the view of the attorneys that put this final language to be together. So that's the very first thing I would tell you. I'd also tell you that this will never apply to the vast majority of cases. On TWIA's worst year performance, 94 percent of all TWIA claims were solved without incident. We only had 6 percent ha went into some degree of controversy and ultimately law suits. The -- for insurance carriers is about 98.5 percent of all claims are satisfied without incident, meaning no need for litigation and etc. So we're only talking about something that would reflect a very small percentage of all policyholders and all claimants in the first place, so I think we all have to keep it in perspective, but you do have to plan for the uncertainties and the possibilities. We do worry ourself within the bill language that 1.5 percent of the people who according to private insurers might end up in this situation. But I would tell you that claims of retroactivity is an example, though I respect the parties bringing forth those claims, are widely disputed and 1 only in the event that someone can't settle a claim, believes they have been truly treated unfairly and finds it necessary to go into the judicial system and that you might ever need to remotely consider that issue. So I would say if it were my mother, I would say, you know, this is the coverage, these are your options, you know -- one way to save money is binding arbitration. Now, binding arbitration is not a bad word. Binding arbitration if done properly is effectively like a court case. Evidence is presented, the parties are well organized, records are made in the proceedings and, of course, the proceedings are binding. Some people prefer that over the opportunity to go in a courtroom. Now, attorneys don't -- some attorneys don't prefer that is and some do because some people that go into binding arbitration take legal counsel with them as well and so my point is just to, you know, through all of those -- all of those narrow odds that anybody would even find themselves in that position is the ultimate fact that if you were in binding arbitrations that's a perfectly legitimate, perfectly fair way to resolve claims in and of itself.

SENATOR MARIO GALLEGOS: Well, Senator, with all due respect and I was looking at current law which is obviously the option that they have now and then I read the provisions of the conference committee report and 1 really -- I mean, if you look at it a side by side and in talking to not only my mother but some of the neighbors is that you have -- not you, the conference committee report, has limited them and then to go through a gauntlet of issues here that my colleagues have already stated. I won't go into though but you really, to me, limit the process and especially the elderly to go through these provisions or at least have to hire -- if not a lawyer at least hire somebody to go through these provisions and grant them some type of relief. But, you know, with all due respect, Senator, I believe that at least -- and they have current law especially for the elderly, they have a majority of these probably 300,000 of policyholders that you give that under current law, at least they have some type of chance. My mother did not sue and she just did her claim, got her money and fixed her house. And -- but this conference committee report on her and her neighbors over in West Beach in Galveston, and I don't know who represents them now or who under redistricting represents them now, they're pretty upset about it, the John Q. citizen, and my mother and her neighbors and people like that are not going to like this, these limits that you put on them. And I just wanted you to know.

SENATOR JOHN CARONA: Okay, sir, thank you very much.

LT. GOVERNOR DAVID DEWHURST: Members, if there's no further questions, I'm going to recognize Senator Carona for a motion.

SENATOR JOHN CARONA: Members, thank you all. I really respect the differing opinions in the chamber. I am glad we were able to put together a product. I want you to know we will continue to listen as this issue is undoubtedly debated as this issue comes. I move adoption, Mr. President, of the conference committee report on House Bill 3.

LT. GOVERNOR DAVID DEWHURST: Thank you, Senator Carona. Members, Senator Carona moves to adopt the conference committee report on HB3. The secretary will call the roll.

PATSY SPAW: Birdwell, Carona, Davis, Deuell, Duncan, Ellis, Eltife, Estes, Fraser, Gallegos, Harris, Hegar, Hinojosa, Huffman, Jackson, Lucio, Nelson, Nichols, Ogden, Patrick, Rodriguez, Seliger, Shapiro, Uresti, Van de Putte, Watson, Wentworth, West, Whitmire, Williams, Zaffirini.

LT. GOVERNOR DAVID DEWHURST: Members, there being 18 ayes and 12 nays, the conference committee report on Senate Bill 3 is finally passed. The Chair signs in the presence of the Senate the following.

PATSY SPAW: House concurrent resolution No. 18, House concurrent resolution No. 19, House concurrent resolution No. 22 and House concurrent resolution No. 25.

LT. GOVERNOR DAVID DEWHURST: Thank you, Madam Secretary. Mr. Doorkeeper.

MR. DOORKEEPER: Mr. President, there's a message from the House.

LT. GOVERNOR DAVID DEWHURST: Admit the messenger.

MESSENGER: Thank you, Mr. President. Mr. President, I'm directed by the House to inform the Senate that the House has taken the following action: The House has passed the following measures, HCR5 by Harper-Brown urging Congress to take appropriate action to ensure acceptable treatment of the public by personnel of the Transportation Security Administration. Respectfully submitted, Robert Hainey, chief clerk.

LT. GOVERNOR DAVID DEWHURST: Members, the next order of business is the election of the president pro-tem at interim. Chair recognizes Senator Whitmire.

SENATOR JOHN WHITMIRE: Mr. President and members, I would nominate Senator Jackson to become our president pro-temp tempore for the interim that hopefully we're fixing to enter. I make that motion at this time.

LT. GOVERNOR DAVID DEWHURST: Thank you, Senator Whitmire. Members, the issue before us is the question is on the election of Senator Mike Jackson to the office of president pro tempore at interim. Would all those in favor please rise? It being unanimous, Senator Mike Jackson is elected president pro tempore at interim. Members I'm going to ask Senator Jackson if he would come to the podium for the oath of office. Members, I'm going to administer the oath of office to Senator Jackson. Mike, if you'd say after me, I Mike Jackson.

SENATOR MIKE JACKSON: I Mike Jackson.

LT. GOVERNOR DAVID DEWHURST: Do solemnly swear.

SENATOR MIKE JACKSON: Do solemnly swear.

LT. GOVERNOR DAVID DEWHURST: That I will faithfully execute the duties.

SENATOR MIKE JACKSON: That I will faithfully execute the duties.

LT. GOVERNOR DAVID DEWHURST: Of the office of president pro tempore at interim.

SENATOR MIKE JACKSON: Of the office at president pro tempore at interim.

LT. GOVERNOR DAVID DEWHURST: Of the state of Texas.

SENATOR MIKE JACKSON: Of the state of Texas.

LT. GOVERNOR DAVID DEWHURST: And will to the best of my ability.

SENATOR MIKE JACKSON: And will to the best of my ability.

LT. GOVERNOR DAVID DEWHURST: Preserve, protect and defend.

SENATOR MIKE JACKSON: Preserve protect and defend.

LT. GOVERNOR DAVID DEWHURST: The constitution and laws of the United States and this state.

SENATOR MIKE JACKSON: The constitution and laws of the United States and this state.

LT. GOVERNOR DAVID DEWHURST: So help me God.

SENATOR MIKE JACKSON: So help me God.

LT. GOVERNOR DAVID DEWHURST: Congratulations.

SENATOR MIKE JACKSON: Thank you, Mr. President.

LT. GOVERNOR DAVID DEWHURST: The president's desk is almost clear. Members, I'm going to recognize Senator Whitmire for a highly privileged motion but if I can two or three sentences --

SENATOR JOHN WHITMIRE: Mr. President, could I ask everyone to have a seat and give you their undivided attention, please.

LT. GOVERNOR DAVID DEWHURST: Members, 1 been a long 169 days and I think we have all been looking forward to this day. But I want to thank each and every one of you all for a very, very good session. It's been a tough session. This is the first time we've had as large of a shortfall as we have and I think every one of you regardless of whether you're Republican or Democrat worked your heart out for your district and for your vision of Texas and I want you to know how much I appreciate that and your service has been extremely honorable and I think the people of Texas when they know what we've accomplished in tough times are going to be very appreciative. Coming in here, whatever the number was 20 billion, 25 billion, 15 billion, whatever the number was but -- and I know some of you wanted to go more in the rainy day fund but balancing our budget without raising taxes and cutting spending by over 8 percent, holding on to enough in the rainy day fund to pay our bills on Medicaid a hundred percent, balance our budget in 2013, putting $3.8 billion more money into our foundation school program even when you factor in federal, state, local decline in local school property tax, a little under a billion dollar increase, extremely good job, Senator Ogden, thank you. Senator Whitmire.

SENATOR JOHN WHITMIRE: Mr. President, at this time I think on behalf of the entire body we'd like to stand and thank you for your leadership and wish you well whichever path you choose to take, if you're back here two years from now for a tough session, we look forward to your leadership. If not we look forward to your -- wish you well with your family and endeavors.

LT. GOVERNOR DAVID DEWHURST: Well, Senator Whitmire, I appreciate that the -- you know, I do have these thoughts from time to time that I need to be here for a number of more years to provide some supervision of you so -- and I want you to know, Senator Whitmire --

SENATOR JOHN WHITMIRE: I more than most will miss you, I promise you.

LT. GOVERNOR DAVID DEWHURST: I want you to know that this year I've talked to the guys and because of your outstanding service this year, this October when we go elk hunting again, I have reached a consensus with the guys and this year for the first time we are prepared to actually give you bullets for the rifle.

SENATOR JOHN WHITMIRE: Well, you'll be safe, I promise. Members, if you'll join me --

LT. GOVERNOR DAVID DEWHURST: Thank you. Thank you. I appreciate that.

SENATOR JOHN WHITMIRE: At this time, Mr. President, before I make my motion, I would yield to you for some remarks on another matter.

LT. GOVERNOR DAVID DEWHURST: Members, I would ask that when the Senate adjourn today they do so in the memory of Spencer Reed. Now, you may -- I know you all remember Spencer but he passed away on November 14th of last year. Spencer was a big guy, six, five, and he passed away in November 14th of 2010 from Parkinson's disease and he fought, God dog, he fought it every day. He was in here on some days where he could barely walk and I for one and all of his friends, you know, we remember him. He was a quiet, unassuming person and during his 20 plus years in the -- employed in the state of Texas I think he did a great job. He was the constitutionally created chief clerk of the general land office and all because of his work, he significantly improved the oil and gas receipts from the Texas lands which of course directly benefit our school children and he helped me develop the clean beaches and the beach restoration programs that make Texas part of what it is and bring so many tourists and profit our taxpayers and as general counsel in my office as lieutenant governor, he brought and provided invaluable counsel and advice. On a personal level, Spencer Reed was my friend as well as a colleague and I think he had a love and respect for all of Texas that mirrors yours and mine and he dedicated his life to our Texas government. He even met his wife Royce and married her on one of his first jobs in state government as a messenger. I think Spencer to me was always a gentle giant. And again I ask that the Senate adjourn in the memory of Spencer Reed. Thank you.

SENATOR JOHN WHITMIRE: Mr. President, I would yield to Senator Van de Putte at this time.

LT. GOVERNOR DAVID DEWHURST: Chair recognizes Senator Van de Putte.

SENATOR LETICIA VAN DE PUTTE: Thank you, Mr. President and thank you dean. I would also like to adjourn in memory of a great Texan a war veteran, a man by the name of Concepcion (inaudible), only no one really knew his name was Conception because he went by the name of Creeper. He served in the Army, he came home and returned to be a letter carrier and was always very active in community endeavors in his neighborhood and in San Antonio and in the (inaudible) of wives for particularly those veterans. We're indebted to him because it was this little man's, and I say little because I don't think Creeper was more than 5-foot four, but all of the Hazelwood Legacy Act, all of the ideas for that didn't come from a special committee, it didn't come from any legislature. Like many of the best things that happen in Texas and where we get to enact statutes, it comes from the common man and the common woman who just think that there might be a better way or say, you know, maybe if you could do this. Well, Creeper was one of those persons and it took him eight years before the legislature finally passed the legacy portion of our Hazelwood Act. And so for the many men and women who impact us as decision makers and have their own legacy by ideas that then become laws in statutes, I would ask that when the legislature adjourns today in addition to a public servant, our lieutenant governor's dear friend, that we also adjourn in memory of Creeper Conception

(inaudible), a very common man but with very uncommon ideas that he then fought for and then became law. Thank you, dean.

SENATOR JOHN WHITMIRE: Mr. President, I would move that the senate of the 82nd legislature first called session adjourn sign dine pending the completion of administrative duties and receipt of House messages and I ask that we do so in memory of Spencer Reed and Concepciƛn Creeper (inaudible).

LT. GOVERNOR DAVID DEWHURST: Thank you, dean. Members, you have heard the dean's motion. Is there objection from any member? Chair hears no objection and the Senate will stand adjourned sign dine. And I think I can say in closing from each one of you 1 an honor and a privilege to serve as a state Senator, 1 an honor and privilege to serve as your lieutenant governor. God bless you.

(Adjourned.)