Property Insurance Coverage Law Blog : Florida Insurance Lawyer & Attorney : Merlin Law Group Law Firm : Tampa, Houston, Coral Gables, Gulfport

I have often indicated that when insurance company claims executives start developing attitudes of ensuring no overpayments occur, there is only one way for a claims adjustment to go. Implied threats to field adjusters' financial incentives through a number of methods is one method claims executives use to create a culture of underpaying claims. This appears to be the case as disclosed in the article which referred to internal TWIA documents:

Worried About Overpayment

But when USAA, a private insurer that also handled some claims for TWIA, used prices from industry software, a TWIA manager worried that USAA was paying more on losses than other adjusters. “This could create a problem at TWIA in the long run if it is discovered that USAA was allowed to do something different than the other” adjusting firms, Reggie Warren, vice president of claims, wrote in an e-mail to USAA.

In the same e-mail, he grants USAA permission to use the software, but suggests the association should rethink its contract with the company. A spokesman for USAA declined to comment.

The implication is obvious to USAA--"lower your prices or risk the possibility that your catastrophe adjustment contract will be terminated." Can there be any other reasonable implication meant by the email from the TWIA claims executive to USAA? Such an email is far different than:

We have very different pricing numbers for construction. We need to meet with you to go over how you have determined your numbers to reconcile the differences. If you are right and we are wrong, TWIA has been severely underpaying our customers for amounts owed and we will have to start re-opening claims to make certain our customers get every penny they deserve.

The documents referred to in the article are far from that type of attitude. Yet, such an attitude should be easily apparent from claims executives memos and training if an insurer truly has a claims culture based upon "good faith."

Instead, TWIA attorneys are spinning the claims attitude as TWIA executives being responsible for preserving assets. Those same attorneys are also seeking to avoid accountability for the wrongful claims conduct as indicated in Purva Patel's article "Windstorm Insurer Seeks Immunity in Lawsuits."

...lawyers for policyholders say the association is effectively a private company, and that immunity would let the insurer escape consumer protection laws. More than 900 lawsuits against TWIA could hinge on how courts rule on the immunity question.

Nearly all of the lawsuits seek punitive damages, attorney fees and other amounts beyond what policies provide, Mike Wilson, an attorney representing the insurer, said in a written statement.

“TWIA wants to pay all claims that are owed under the policy,” he wrote. “For claims that seek money damages beyond policy benefits, the association has a duty to conserve TWIA's assets so that affordable windstorm and hail insurance is available to all policyholders.”

See the clever "spin?" Those attorneys suggest it is better to break the obligation of good faith because they have an obligation to other customers to preserve money. They seek to avoid accountability for mistreating customers under a worthy, but false, pre-text--making certain there is money in the treasury for other losses. The effect is that while rules of good faith apply, there is no penalty for breaking any of the rules. I wonder if those other customers think they will be treated differently and in good faith when they eventually have a claim? Is it right to cheat people out of money or not pay fully on a debt to make certain there is money in the treasury?

Some political leaders in Texas have caught onto this claims mess and are also calling for regulatory action.

One lawmaker found the allegations and documents so alarming he called for an investigation of the insurer and its oversight by the Texas Department of Insurance. “The documents demonstrated a callous attitude toward insured families of the Texas coast,” Sen. Rodney Ellis, D-Houston, said in a written statement.

“These documents demonstrate a pattern of deception resulting in wrongful underpayment and denial of Hurricane Ike claims by TWIA.”

I made a comment yesterday to some insurance industry executives serving with me on the Windstorm Network's Board of Directors that 'TWIA claims executives make you guys look like pussycats when it comes to hardball claims practices.' They were amused by TWIA's practice of refusing to pay for adjusters time and work when a file was re-opened. I know of no other insurer with such a scheme from trying to get the full amount paid as reported by the Houston Chronicle:

By November, TWIA was getting hit with requests from policyholders asking for their homes to be reinspected. If an adjuster finds more damage upon additional visits, they submit what’s known as supplements to the claims.

...

In an e-mail to an adjusting firm in November, Warren noted that many of the adjusters it used were inexperienced and “not getting the job done.” If adjusters had done a better job the first time they visited a site, there would be fewer files to reopen, he noted.

Despite acknowledging TWIA could face many reopened claims because of adjuster mistakes, the insurer made it hard for homeowners to get their claims reexamined, according to the lawsuit. Warren told adjusters in a memo that homeowners had to have credible evidence to force the reopening of a claim. An estimate from a public adjuster — independent adjusters hired by homeowners — was not enough, according to the memo.

To make matters worse, in late 2008 TWIA restructured how it paid adjusters for re-inspections, effectively discouraging them from looking for more damage...After Dec. 1, adjusting firms earned $105 plus time and expenses if they denied a claim....If they found more damage, they risked not getting paid at all if TWIA determined an adjuster erred during the first inspection...

I recently read an interesting engineer's report attacking the opinion of a Safeco engineer's report. In it, the engineer was so upset with the Safeco's engineer that he wrote that Safeco was "peeing on my leg, but telling me it was raining." I suggest that many of TWIA's customers feel the same way when reading the responses from TWIA's claims management.
 

Javier pointed out that although the TWIA letter implies a policyholder can administratively appeal and file suit, this is not the case. If a policyholder chooses the administrative appeal, the policyholder cannot later file suit against TWIA when the administrative judge rules against them:

Texas Windstorm Insurance Association says you only have 30 days to appeal its determination of damage to your property! DO NOT RUSH TO APPEAL before you learn what TWIA is not telling you; you will give up valuable legal rights and remedies.

Many people received a letter from Texas Windstorm Insurance Association explaining how TWIA determined the value of damages to their property. The TWIA letter states:

“You are hereby notified that an appeal of the Texas Windstorm Insurance Association’s decision must be filed with the Commissioner of Insurance at the Texas Department of Insurance … no later than the 30th day after receipt of this letter.” [emphasis added]

The letter further states that a policyholder can appeal or file suit.

TWIA’s letter implies that a policyholder can appeal and file a lawsuit for violation of unfair settlement practices under Section 541.060 of the Texas Insurance Code. THIS IS NOT TRUE. Texas Statutes Section 2210.552, of the Insurance Code states that a person may appeal the decision with the Texas Department of Insurance OR file a lawsuit under Chapter 541. A policyholder cannot do both.

A person who appeals gives up his or her right to file a lawsuit against the insurance company….

An example of why a policyholder should think twice before giving up the right to file suit against TWIA can be seen in the letter below that was forwarded to me. The homeowner had suffered roof damage from Hurricane Ike and chose an administrative hearing to contest TWIA’s determination of damage. My guess is he now regrets having made that choice.

Ginger Loeffler, the Texas Department of Insurance attorney who attended the seminar, and Steve Augustine, of the Texas Department of Insurance, need the help of TWIA customers, independent adjusters, public adjusters, experts, contractors, and anybody with information regarding TWIA claims handling and conduct to contact them as soon as possible.

Their contact info is:

Texas Department of Insurance
333 Guadalupe, P.O. Box 149104
Mail Code 110-1A
Austin, TX 78701-9104
Phone: (512) 322-3428
Fax: (512) 4751772
Steven.Augustine@tdi.state.tx.us

I urge consumers and others with complaints and information about adjusters and experts in the field saying one thing and TWIA claims managers saying another to contact the TDI attorneys as soon as possible.

I also urge those who are contacted or who anticipate being contacted to tell the truth and not do anything to destroy evidence. Advising others not to provide information, to destroy internal information, or to lie can be a criminal act. I suspect that some claims managers are subtly suggesting that those involved with claims provide a "sanitized" version of reality. This is not an insignificant investigation or a civil lawsuit where all kinds of "gamesmanship" seems to be allowed and encouraged to protect the company. Doing anything in a conspiracy to avoid the truth when authorities are investigating matters could result in criminal prosecution.

If you are a licensed public adjuster, I encourage you to attend. I think it will provide you a unique opportunity to explain improper conduct to a regulator actively investigating important claims matters.

Many claims issues will be explored during the seminar, and I will also explain why I think some appraisals are being lost in Texas and what can be done about it.

I reported on this last January in my post, Citizens And TWIA Bad Faith Exposed. I further documented it last February in my post, Views From Hurricane Ike TWIA Insurance Adjusters. I made a sarcastic report of it in The Parable of Hurricane Ike Insurance Claims. Then, I suggested that my current client and Ike protest leader, Brenda Cannon Henley, had a valid reason to protest against TWIA in, Texas Windstorm "Slabbers" and Policyholders March on Austin. Indeed, we ran over three separate posts regarding how TWIA was wrongfully adjusting roofing claims. If you simply type “TWIA” in my keyword search to this Blog, TWIA shows up 37 times in 2009. Virtually all of my posts are negative regarding the reports of TWIA claims handling. TWIA makes State Farm and Allstate look like angels regarding claims ethics and satisfaction.

It finally seems as if the local media and Texas regulators are learning what all of us in the claims administration business believe--TWIA claims executives are out of control and its claims management needs to be replaced. Purva Patel of the Houston Chronicle recently reported in, HURRICANE IKE: State Looking into Roof Damage Policy, that Texas regulators started an investigation of TWIA roofing claims:

State regulators are investigating how the Texas Windstorm Insurance Association handles certain roof claims related to Hurricane Ike.

At issue is whether unsealed asphalt shingles are considered damaged, and if so, whether Ike was the cause.

The windstorm association doesn't always think so. But some homeowners say they have valid claims because Hurricane Ike lifted the shingles on their roofs, breaking the seal that binds shingles to each other.

The Texas Department of Insurance notes that although the association claims such shingles are not necessarily damaged, unsealed shingles would not pass a home inspection that's required to obtain coverage from the association and to keep coverage if a home is repaired after a storm.

“Because we see that discrepancy, and we think that when a homeowner's shingles have been adhered, that does constitute damage, we're pursing an investigation,” said Catherine Reyer, an associate commissioner of enforcement at the department.

The insurance department began investigating in late July and has received 23 complaints against TWIA on the issue.

Yesterday, reporter Mark Greenblatt, of station KHOU published an excellent article regarding an investigation by Texas authorities into TWIA’s unfair and deceptive claims handling:

The Texas Department of Insurance has filed a formal complaint against the Texas Windstorm Insurance Association , accusing it of “unfair or deceptive” handling of claims.

In a letter to the State Office of Administrative Hearings, the Department of Insurance says the insurance company could be subject to disciplinary action if the complaint is upheld.

Texas Windstorm is the only insurance option against windstorm damage or hail from hurricanes for consumers who live along coastal sections of the state.

 The complaint specifically criticizes how the company handles claims related to wind-lifted roof shingles.

The department’s action comes as KHOU continues its ongoing, two-month investigation of Texas Windstorm’s claims handling practices, and one week after we asked the State why no enforcement action had been taken against the company. At that time, KHOU cited the 724 consumer complaints we found that the Department of Insurance upheld against the company since Hurricane Ike.

You can watch the video broadcast of Mark Greenblatt’s news story by clicking here.

Next Friday, September 11, 2009, our firm will host a seminar for licensed public adjusters in Texas. This event is titled “Hurricane Ike-What a Difference A Year Makes?” and Texas Department of Insurance representative Jack Evans will be a featured speaker at lunch. I will introduce Brenda Henley who will discuss some of the events planned for the memorial of Hurricane Ike.

While I plan to finish teaching public adjusters how to help policyholders prove and present claims at 2 pm, I will finish early if any TWIA executives or claims managers wish to have a civil discussion with experienced and licensed claims adjusters about how they may better adjust TWIA customer claims. The planned informational meeting of the Texas Association of Public Insurance Adjusters (TAPIA) can certainly be delayed to allow for such an important exchange of information.

Everybody who knows me understands that this will not be a lynching, but a civil discussion of issues and concerns. The question is whether TWIA claims executives have the stomach to engage in civil debate with skilled and knowledgeable public adjusters as to how policyholder claims should be handled and paid and about their claims practices that are now under public scrutiny.

Recognizing that public adjusters need to have a relationship with the Texas Department of Insurance, Jack Evins from TDI will speak during lunch and be there to answer questions. Our experience is that regulators like to hear what is going on in the field and will follow-up on proof of abuses reported to them and verified by others.

The seminar will end at 2 pm and the TAPIA introductory meeting will start immediately thereafter.

So, if you are a Texas public insurance adjuster, September 11, 2009, is an important professional date for you to be in Houston to learn and share information and ideas.

We are currently surveying past public adjuster attendees for specific questions before this seminar so that the question and answers will be thoroughly analyzed. The primary purpose is to provide my experience and that of my firm, which has primarily done this line of legal work for 25 years, to those who are similarly licensed and dedicated to helping policyholders.

The tactics and strategies of each case and each type of loss change as the circumstances dictate. There have been some legal changes to appraisal in Texas as well as other developments which impact the "best practice" a public adjuster uses in the field when dealing with insurance companies. We will share with you what is working and what is not working.

So, if you are licensed Texas public insurance adjuster, please plan on attending, learn how you can make more money by doing your policyholder a better job, and you will also get some free continuing education credits from the Texas Department of Insurance. Please go to www.adjusterlife.com to register.

I am looking forward to seeing you at our seminar on September 11, 2009.

A news article,Insurance Department in Limbo as Texas Legislature Adjourns, correctly notes that the Legislature did not get its entire job done. The Department of Insurance and Office of Insurance Council will no longer exist on September 1, 2009, unless a special session is held to prevent the laws that created these entities from expiring. Of course, with talk from Governor Perry about the status of Texas in the Union, anything is possible in Texas.

Florida Governor Charlie Crist was finally provided the proposed Surplus Lines Bill--a month after the legislation was passed. He now has until June 16th to sign or veto the bill. He can also allow it to become law by doing nothing.

In an earlier Post, I explained why this bill is flawed. It will hurt the carriers admitted in Florida. It is overbroad and will have unintended consequences for consumers, surplus lines carriers, and the admitted carriers. I predict that even if signed by Governor Crist, the Legislature will have to revisit the bill next year. I also predict the surplus lines carriers and the small admitted carriers will be the first to call on the Legislature to do so.

I suggest that those interested in the insurance market note how many large personal lines carriers currently do business through wholly owned surplus lines subsidiaries. The large carriers are escaping regulations, in part, by simply doing business in surplus entities. What a great strategic position for the large carriers. They can decide not to sell policies in certain areas of Florida where they think they can get higher premiums if they sell through a surplus line subsidiary and with unregulated forms which will probably offer much less coverage.

Our newly admitted carriers had assistance from the State. Now, one year later, the same legislature passed a surplus lines law which favors the large carriers and allows surplus lines carriers to unfairly compete with the newly admitted carriers. If public policy favors the smaller admitted carriers, why has the current legislation been passed?

Governor Crist has two remaining insurance bills before him. He should veto both.

New York is losing a very fine insurance regulator. Eric Dinallo is resigning. Earlier this week, I posted a video clip which shows how eloquently he has stood up against the Federal Charter proposal in New York Insurance Superintendent Says Creating an Optional Federal Insurance Regulator Will Erode Consumer Protections. Sam Friedman, an editor of the National Underwriter, mentioned that Dinallo is a respected insurance commissioner and will be missed:

"In case you forgot all that Mr. Dinallo accomplished during his relatively brief time in office, check out his record:

–He was a key player at the table, along with then-Gov. Spitzer, in convincing seven carriers to end six years of acrimonious litigation and pay some $2 billion to settle all remaining claims from the World Trade Center’s developer.

–He helped formulate and push through a long overdue workers’ comp reform measure that was hailed by insurers and employers alike–no surprise, being that Mr. Dinallo was able to authorize a 20.5 percent rate cut, despite raising injured worker benefits for the first time in over a decade.

–He also was very influential in leading the way towards reform of the reinsurance collateral system, helping drive NAIC action by moving to unilaterally do away with the standard 100 percent of liabilities collateral requirement imposed on foreign reinsurers, and replacing it with a sliding scale based on a carrier’s capitalization and standing.

–Meanwhile, even though his old boss, Mr. Spitzer, made a name for himself in part by exposing shameless bid-rigging and contingency fee abuse by major brokers and carriers, Mr. Dinallo did not rush to judgment on the entire producer community. His efforts to encourage disclosure of agent and broker compensation has been rational and open-minded.

–Despite being a state regulator, he did not dismiss the notion of federal oversight out of hand. Instead of a knee-jerk reaction, he offered a thoughtful critique of the insurance regulatory system.
Yes, he reminded everyone repeatedly that state oversight was not to blame for the debacle at AIG (which was undermined by its unregulated Financial Products unit, while its state-supervised insurance subsidiaries remained sound and fire-walled off from the rest of the organization’s toxic holdings).

But while he conceded that a national systemic regulator might be needed, he warned strongly against any “optional” federal chartering, arguing that giving players the choice of referee would eventually ruin the game for all."

Sometimes, those in the insurance industry write and complain that I am unfairly criticizing the industry. Possibly true because my allegiance is to the policyholder and with that perspective. Yet, there is a need for thoughtful criticism of insurance, how it works and how it should work for society's benefit because unlike other forms of business, insurance is a social commercial product. It is not, and never has been, a business thought of as others in a "free market" sense. We need thoughtful regulators that will fairly balance competing financial interests of insurers with the needs of the consumers and society.

Florida Governor Charlie Crist is a wonderful public servant because he is very thoughtful. However, this trait makes it difficult to predict what he may do when faced with the possibility of a veto. While he has hinted he may, Crist still has not vetoed the insurance bill deregulating big insurance from rate making. As noted in the South Florida Business Journal, consumer organizations are worried:

"The Consumer Federation of the Southeast and Florida Public Interest Research Group claim HB 1171 would pit the largest insurers against the smallest, which would be hamstrung by regulation.

But, during a Wednesday news conference, Brad Ashwell, legislative advocate for Florida PIRG, said the answer is not deregulation of all companies. He said that rates need to more closely conform to real risk, and that keeping rates artificially low, as Citizens Property Insurance Corp. did for several years, is not the answer.

Walter Dartland, the consumer federation’s executive director, emphasized that partial or complete deregulation is not the answer, either. He maintains that the state’s rate review process has been a valuable consumer protection tool against arbitrary rate increases.

A practical solution would need to involve a deeper pool of insurers, specifically smaller ones, and higher rates that are regulated, Ashwell said.

“Florida is in the midst of an economic crisis, and our residents cannot afford to be caught in a volatile insurance market faced with erratic rate increases," he said.

But, the insured also have to be realistic about the impact a hurricane would have on them. Floridians will not be able to avoid assessments.

“It’s just a question of how big the assessment will be,” Ashwell said.

The bill awaiting Crist’s signature would allow major carriers, such as State Farm, which earlier this year said it would leave Florida, to raise rates unchecked without a guarantee that they would continue writing policies in the state.

Dartland said his organization would encourage State Farm and others to poach the customers with the least risk, leaving those with the most for companies that are least capable of paying out in the event of a storm.

“This doesn’t help anybody except the few companies that are involved,” he argued."

While waiting on Crist's decision in Florida, Texas TWIA politics is getting more frustrating to observe by the day. In my post yesterday, TWIA Bill Moves Along in Bizarre Manner, I noted how the Texas Senate literally pulled the plug on the Senate clock to get legislation passed within the time allowed. The Southeast Texas Record noted the following:

"The state Capitol has been a colorful place the past few weeks, with lawmakers resorting to stalling tactics one day and marathon approval sessions the next. The Senate managed to suspend time to avoid a deadline, and late into one night Senators could be heard crowing like roosters to cast their vote on a cockfighting bill."

These are the people Texans have to trust to make thoughtful decisions on laws to be followed. The article, "Hundreds of Bills in Limbo as End of Texas Legislative Session Looms," also mentioned that the TWIA legislation is mired in limbo as well. We'll keep you posted.

The format of the seminar seemed to work very well, so once again we expect this event to be very interactive. The agenda will include the following topics:

• TWIA Issues – Status of Litigation, Whistleblowers, Overhead & Profit, Flood, Depreciation, Co-operation
• Causation and Sufficient Proof, Texas-style—It’s Different Here
• Valuation – Estimates That Have Impact and Hold Up in Appraisal or in Court
• Update on TAPIA
• Expert Panelist Analysis—Topics: Wind Speeds, Roof Damage, Wall Damage, Flood vs. Wind Damage, Sliding Glass Door or Window Damage, and Wind-driven Rain

The conference will begin with registration at 7:30 am and conclude at 2:00 pm. To register and receive additional details, you will need to go to www.adjusterlife.com. Please register by May 28, 2009.

This is an invitation-only event for Texas-licensed public adjusters. Be sure to register today, and please bring your Texas Public Insurance Adjuster license with you to the seminar.

It’s been nearly nine months since Hurricane Ike. Both Merlin Law Group and you, the public adjuster, have been working hard to hold insurance companies accountable so that policyholders see the results to which they are entitled.

Merlin Law Group is pleased to once again provide this free seminar as an opportunity to share knowledge we have gained by serving our clients and each other.

Many people received a letter from Texas Windstorm Insurance Association explaining how TWIA determined the value of damages to their property. The TWIA letter states:

“You are hereby notified that an appeal of the Texas Windstorm Insurance Association’s decision must be filed with the Commissioner of Insurance at the Texas Department of Insurance … no later than the 30th day after receipt of this letter.” [emphasis added]

The letter further states that a policyholder can appeal or file suit.

TWIA’s letter implies that a policyholder can appeal and file a lawsuit for violation of unfair settlement practices under Section 541.060 of the Texas Insurance Code. THIS IS NOT TRUE. Texas Statutes Section 2210.552, of the Insurance Code states that a person may appeal the decision with the Texas Department of Insurance OR file a lawsuit under Chapter 541. A policyholder cannot do both.

A person who appeals gives up his or her right to file a lawsuit against the insurance company for unfair settlement practices, such as misrepresenting a material fact or policy provision relating to covered loss, failing to attempt a prompt, fair, and equitable settlement of a claim after the insurer's liability has become reasonably clear, unreasonably delaying a settlement, requiring a release when only a partial payment has been made, or refusing to pay a claim without conducting a reasonable investigation. There is a very good chance that you have faced one of these situations or know of someone who has.

The TWIA letter gives the false impression that if a policyholder does not appeal within 30 days, the decision is final, and the policyholder has no other options or remedies. Texas has some very good consumer protection laws:

• Texas allows an insured to recover attorney fees and costs under Chapter 38 of the Civil Practices and Remedies Code.
• Tex. Ins. Code Section 542.060, Prompt Payment Statute, entitles the insured to collect 18% interest plus additional attorney fees and costs if the insurance company does not promptly pay the claim in violation of the statute.
• Tex. Ins. Code Section 541.152, punishes the insurance company by forcing them to pay the full amount of damages, attorney fees, expenses, and, if the violation is done knowingly, the damages owed by the insurance company are three (3) times the actual damages.

In addition, as some of you already know, an order has been entered in Galveston County directing that all homeowner Ike cases be stayed for 100 days to allow plaintiff and defense counsel to exchange discovery and set mediation. This order is very specific and holds the insurance company in contempt of court if its attorneys attend this mediation without full authority to settle the case or if they fail to settle in good faith. Mediation is not binding, and the insured decides whether to accept or reject the insurance company’s final offer. In my opinion, entering this order was a very wise decision by District Judge Susan Criss and will result in many more settlements. In this instance, mediation is not an alternative but a method within the litigation process, again another great example of consumer protection in Texas. Hopefully, a similar order will be entered in neighboring Harris County, helping to expedite settlements there.

Each policyholder has the right to contest TWIA’s decision through either an administrative hearing or by filing a lawsuit. Policyholders should carefully consider each option before making a decision.

It is important to note that policyholders who have already filed for an administrative hearing may, prior to the hearing date, ask to withdraw their administrative appeal, cancel the hearing and pursue remedies through the courts. A person wishing to do so would be well advised to contact an attorney to make sure that the proper procedure is followed in withdrawing the administrative appeal and preserving the policyholder’s right to file suit.

Texas provides some of the best consumer protection laws in the nation; I truly see no reason not to take full advantage of them.