The IBNR problem: the plot thickens

Two new pieces of data have emerged on the IBNR problem and any ability or obligation on the part of TWIA to make a supplemental assessment against insurers to pay for claims arising out of 2008’s Hurricane Ike and reduce the odds of TWIA being put into receivership or conservatorship.

1. A learned student has pointed me to section 311.031 of the Texas Government Code. This is a kind of “meta-statute” on how to interpret statutes. It reads:

Sec. 311.031.  SAVING PROVISIONS. (a) Except as provided by Subsection (b), the reenactment, revision, amendment, or repeal of a statute does not affect:…

(2)  any validation, cure, right, privilege, obligation, or liability previously acquired, accrued, accorded, or incurred under it.

The student suggested that this provision might mean that liabilities acquired under section 2210.058 before it was repealed might persist after its repeal by section 44(2) of HB 4409 enacted in 2009.  Unfortunately, I think my learned student, though brilliant in finding this Government Code provision and thinking it was applicable, is wrong. I don’t think “liability” means the potential for liability.  It means an incurred liability.  Thus, if Allstate had not paid its assessment under the 2008 assessment, the fact that the statute permitting assessments was repealed would not relieve Allstate of its obligation to pay the pre-existing assessment.  It would, however, I think prevent TWIA from creating new liabilities for Allstate to pay.  Again, am I 100% certain of this?  No. But it strikes me that there is a difference between the potential for a liability and a liability itself.

2. Alex Winslow of TexasWatch suggested in an Austin American Statesman article today that TWIA might still be able to assess under the old law.  I don’t always agree with TexasWatch but I take their thoughts seriously.  On balance, however, at least so far, I think he is incorrect. If Texas had not repealed 2210.058, he might have a better case that the law in effect at the time of the disaster permitted late assessments.  But, the legislature repealed the statute authorizing assessments.  Much as it might be appealing to some to at least forestall TWIA implosion, it looks to me, for the reasons cited in this post and its predecessor, as if a supplemental assessment on insurers is not authorized under the law.

One more note.  Yesterday, catrisk had its highest hit day ever.  Looks like people are interested/scared about TWIA’s financial condition. They should be concerned. And that’s true even if something is done to bandaid TWIA for the coming storm season.

Second note: Even though I don’t agree with the student, he/she received a high grade on the assignment. Creative lawyering and excellent research are a powerful combination.

2 thoughts on “The IBNR problem: the plot thickens

  1. Pingback: Craig Eiland: TWIA can still assess insurers for Ike

  2. Pingback: The destructive power of legislative fantasies

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