Attorney General: Texas not obliged to pay for excess TWIA losses

You heard it here first.  As I wrote back in July of 2012, if the Texas Windstorm Insurance Association does not have enough money to pay its claims, the State of Texas has no obligation to pay its unpaid claims to policyholders. This was confirmed this week by Texas Attorney General Greg Abbott in an opinion letter written to Texas State Representative (and Chair of the House Insurance Committee John Smithee).  The bottom line of the letter  providing the formal opinion of the Texas Attorney General is reprinted below. Here is a link to the full opinion.

The bottom line of Attorney General Abbott's opinion

The bottom line of Attorney General Abbott’s opinion

The Attorney General’s opinion should hardly have been necessary given the obviousness of the proposition. It is, as I suggested, not a matter over which people — particularly lawyers who can read a statute — could reasonably disagree. Perhaps the weight of the Texas Attorney General behind the proposition will, however, put to rest claims by some coastal legislators that the matter was debatable.  The AG opinion likewise vindicates Texas Insurance Commissioner Eleanor Kitzman who made the same assertion last year and who, for thereby calling into question the financial stability of TWIA, was threatened with a criminal investigation by Texas State Representative J.M. Lozano. Perhaps Representative Lozano will now issue an apology?

So, TWIA policyholders take note.  As it stands, there is no cavalry coming over the hill when a tropical cyclone empties TWIA.  Your insurer will not have money to pay your claim in full.  The State of Texas will not pay your claim. The Texas Property and Casualty Insurance Guarantee Association will not pay your claim. No one with money will have legal responsibility to pay your claim under your TWIA policy. You are very likely to be under a blue tarp and coping with a ruined house for a long time. Unless and until the legislature acts, whether in a special session or a regular session two years hence, the restoration of your property and your life may well depend on the kindness of strangers.

Photo of Katrina survivors in the Houston Astrodome

The kindness of strangers the last time a major hurricane left many people homeless

5 thoughts on “Attorney General: Texas not obliged to pay for excess TWIA losses

  1. 1. Failed funding system 2.In receivership 3. Relying on Short term bridge loans(Not Approved) and bonds that can’t be sold. 4. Promise of Superman in the form of coastal legislators and some post event special session to fund losses. I think the A.G. just dropped a load of Kryptonite….

  2. My advice to coastal policyholders is to go with a private-market insurer. You get what you pay for and TWIA policies are junk.

  3. Not much happening in the Gulf yet. A little disturbance in the Western Caribbean which likely won’t head our way. Our luck is holding so far. Luck is all that is protecting Texas from a hurricane strike and the overwhelmed TWIA that would result.

  4. I’m a Insurance Agent in Harris County. The problem is no private market insurer will insure wind in Galveston/Chambers, Jefferson counties. I have trouble just finding carriers in Eastern Harris County as well. A handful of major carriers still carry wind for existing customers, but Farmers and Allstate have already non renewed customers to exclude wind thus forcing these folks to go to the only place possible “TWIA” to get coverage. The you get what you pay for comment is a wrong take as the rates in TWIA are higher than what the private market is charging. That’s the dilemma, rates have already doubled or more in the last 5 yrs. You can’t fix the problems on premium alone. There are 400,000 homes insured thru TWIA, Is the State really gonna leave 400,000 holding the bag, after paying their premiums to the only place available to get Wind coverage on the coast?. What a tragedy that would be. Look, TWIA has worked fine for the past 40 yrs until the last 3-4 yrs. What has happened is politics,mismanagement, and legal defense and settlement fees have stripped away the basic safeguards that TWIA was built upon. The Insurance market has been deregulated which gives the private carriers way too power and thus the assessments were written away.

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