Texas Lawmaker: Windpool’s Ike Litigation Costs Still Rising

Texas’ insurer of last resort for coastal property has paid out more than $1.2 billion in individual litigation costs related to Hurricane Ike, which struck in 2008, one state lawmaker says.

Information released by Rep. Larry Taylor (R – Friendswood) shows an additional $1.2 billion dollars has been spent by the Texas Windstorm Insurance Association (TWIA) on Hurricane Ike litigated claims since the previously reported class action settlement for slab claims.

Rep. Taylor requested the information from the Texas Department of Insurance (TDI) in preparation for an upcoming hearing of the TWIA Legislative Oversight Board on Nov. 1, 2012. Taylor is the co-chairman of the Oversight Board.

Although the additional $1.2 billion in litigation costs represents almost half of the total $2.5 billion in estimated losses for Hurricane Ike, it is for only 10 percent of the 93,000 total claims, according to Taylor’s announcement.

TWIA management on Oct. 26 announced a reduction in their expected contribution to the reserve fund by $100 million dollars due to ongoing lawsuits associated with Hurricane Ike, Taylor noted. This action means TWIA would deposit $25 million into the Association’s reserve fund to pay future catastrophic claims.

The records also reveal that TWIA paid out on average 7.2 percent of all policy limits on the initial claims by policyholders. But, after litigation, TWIA paid out an additional 43 percent of policy limits on average, according to Taylor.

This represents a combined average payout of 50 percent of policy limits on the 10 percent of claims that were litigated. In addition, TWIA has spent approximately $70 million dollars on defense costs since 2008, an additional $69 million on expense costs and $1.3 million on mediation related to Hurricane Ike settlements, Taylor’s announcement stated.

A summary of the Top 10 Plaintiff Law Firms handling TWIA litigation reveals a settlement payout of more than $600 million dollars. There are more than 300 plaintiff law firms with Hurricane Ike litigation claims in Texas, but a small cadre of 10 law firms has handled more than 74 percent of TWIA litigated claims. These firms are on track to handle more than 800 additional claims in the coming months.

Last session, the Texas Legislature passed legislation to reform the claims settlement process and litigation practices of TWIA. However, the legislation affects future events, not past events like Hurricane Ike.