HOUSTON -- New internal documents and e-mails that have come to light from the Texas Windstorm Insurance Association reveal what State Senator Rodney Ellis calls a “pattern of deception” worthy of a complete and thorough state investigation.
Ellis told 11 News in a written statement that “the documents demonstrated a callous attitude toward insured families of the Texas coast. These documents demonstrate a pattern of deception resulting in wrongful underpayment and denial of Hurricane Ike claims by TWIA.”
Ellis went on to write, “On the face of these documents, it appears abundantly clear that (Texas Windstorm) disregarded (Texas law) and many homeowners and business owners are still without the benefits that were promised, and contracted for in their policies.”
The documents have come to light on the heels of an ongoing 11 News Defenders investigation into Texas Windstorm’s handling of insurance claims for consumers statewide.
Texas Windstorm is the only wind insurance option for Texas consumers who live along the Gulf Coast and in the state’s most hurricane-prone areas.
The internal documents in question were released to Houston attorney Steve Mostyn, who subpoenaed them. He is suing Texas Windstorm. Mostyn and other area attorneys who get access to a pool of internal documents released by the company represent more than 1,000 consumers who allege their insurance claims were wrongfully rejected.
“This is alarming,” Mostyn said, referring to the approximate 20,000 pages of internal documents from Texas Windstorm.
“They …made it lucrative to deny claims,” Mostyn said. “You could make a fortune as an adjuster, denying supplements, and you could go broke as an adjusting company agreeing to supplements.”
Mostyn points to some of the internal documents from Texas Windstorm that are called fee schedules. Those documents show how much adjusters hired by Texas Windstorm get paid by the company.
He says they show that before Hurricane Ike struck, the company paid only $200 to adjusters who denied what are called supplemental claims. Those are claims which consumers file when they believe they were underpaid.
However, Mostyn found a document which he says shows Texas Windstorm changed its payment plan in December of 2008 to encourage the denial of supplemental claims. He says, at that time, adjusters who denied supplemental claims were now eligible for much larger payouts if they denied the claim outright.
However, Mostyn says if they approved a supplemental claim from a consumer, they actually stood to -- in some cases -- make no money at all from Texas Windstorm.
KHOU: There is a real risk (an adjuster) might not get paid if he approves the supplemental claim?
MOSTYN: Sure. That’s in some e-mails.
KHOU: But would he get paid for sure if he rejected the claim?
MOSTYN: Absolutely, he gets paid.
But Mostyn also alleges favoritism by top executives at Texas Windstorm could mean consumers had their insurance claims handled by adjusting companies with close ties to Texas Windstorm executives, rather than the most qualified companies. He points to Windstorm executive Reggie Warren as an example. Warren serves as the top claims handling executive at Texas Windstorm and he also interfaces with adjusting firms.
Mostyn alleges that documents show Warren received questionable favors for his own family from a top adjusting firm. He says Warren guided the most adjusting business to the very same firm that hired Warren's own brother and son. The firm is called Brush Country.
“We're seeing in there that the head of Brush Country (says he) is going to send money to pay for a truck for Reggie's brother,” Mostyn said.
The emails, reviewed by 11 News, begin with Warren telling the owner of Brush Country about troubles that Warren’s brother was having with his truck. Warren’s brother works for Brush Country.
Warren wrote: “I am not sure he shouldn’t just let the truck go, try to save a little money and see if he can get another one, at some point. Renting one today, he says. I doubt he does.”
Later that day, the owner of Brush Country wrote back to Reggie Warren, saying: “I will send him the vehicle money today which should help him get started.”
11 News asked the owner of Brush Country and author of those emails, Richard Myers, about those payments to Warren’s brother.
Myers told 11 News that he was indeed “a very dear friend, a close friend of Reggie Warren and his family.” He also confirmed Warren’s brother does insurance claims work for his Brush Country on a contract basis. Myers maintained that “he loans money to people anytime they need it.”
He said the payments for the truck were simply an advancement on the salary for Warren’s brother. Myers says that brother paid the money back to Myers shortly thereafter.
Texas Windstorm’s general manager, Jim Oliver, offered different information in a written statement sent to 11 News. He wrote, ”Without going into detail, any monies sent for the truck were to pay a per dium for use of the truck, not to buy the truck."
Oliver wrote in a separate email, “Plaintiff lawyers' allegations about Reggie Warren are intended to vex, harass and intimidate him personally and to gain leverage against TWIA in litigation. All of the allegations are currently being litigated so it would be inappropriate to comment about specifics.”
He also responded in writing to other allegations recently made by Mostyn in a court filing. “We have not had sufficient time to review the approximately 300 pages of material that you e-mailed me. All of the allegations in the Plaintiff's Fifth Amended Petition are just that -- allegations. We hope that those viewing this document and its attachments will give the legal process time to work and are confident that it will show that TWIA's claims handling practices are fair to our policyholders,” Oliver wrote.
State Senator Rodney Ellis saw the same documents and is aware of some of the allegations in Mostyn’s pleading.
“The internal TWIA documents that have recently come to light, including emails, training guides, and memorandums are alarming,” Ellis wrote. “The documents demonstrated a callous attitude toward insured families of the Texas coast.”
Ellis continued, “The foremost concern should always be the protection of the consumer. We have enacted numerous statutes to protect consumers in insurance claims. On the face of these documents, it appears abundantly clear that TWIA disregarded these statutes and many homeowners and business owners are still without the benefits that were promised, and contracted for in their policies.”
After 11 News contacted the Texas Department of Insurance to ask for comment on Senator Ellis’s call for action, a spokesperson released a document to 11 News that was also just released to the Texas Legislative Oversight Board, along with Senator Ellis.
“(We) cannot comment on pending litigation, but this report should be timely given the Senator's concerns,” spokesperson Jerry Hagins said.
The document is titled an “initial review” of Texas Windstorm’s handling of Hurricane Ike claims and noted that Texas Windstorm staff fully cooperated with the review.
The review found, among other items:
• Some claim files do not show evidence of communication with policyholders on certain aspects of the claims process
• Settlement checks were often sent without explanation as to how Texas Windstorm calculated the amount to send
• Certain claims were not processed within the timeframes set forth in Texas Windstorm’s own policy
• Texas Windstorm examiners do not have policies or procedures in place to effectively manage adjusters and track the processing of claims.
• Texas Windstorm does not maintain a complete complaint record as required by Texas insurance code
The report made note to the legislature of possible future actions that the Department
might take, including some kind of action related to the failure on Texas Windstorm’s part to track complaints and process claims in a timely manner.
It also recommended widespread changes in Texas Windstorm’s internal processes and concluded that “This undertaking will require a significant investment of expense and effort, but TDI believes the ultimate savings and policyholder satisfaction are well worth this investment.
Spokesperson Jerry Hagins also said the review of Texas Windstorm is ongoing with more findings or proposed actions to be released soon.
He specifically noted that the Texas Department of Insurance continues to review another matter 11 News brought to light: the alleged non-payment at Texas Windstorm of something called overhead and profit, which amounts to an additional 20 percent in claims for consumers who might need a general contractor to oversee their work.
Hagins said the Department would release its findings of that review, along with perhaps other matters, in the near future.