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Texas Law Makers Seek Changes to Hurricane Insurance

On June 4, 2011, sources say Texas law makers approved substantial changes to the Texas insurance authority which covers some coastal residents for hurricanes. According to reports, the Texas House Insurance Committee passed a bill which overhauls the Texas Windstorm Insurance Association. The bill will now go to the full House for approval and if approved, on to the senate.

The Texas Windstorm Association is a state supervised organization which provides last resort insurance to people who cannot get private property insurance. Reportedly, the organization is supported with mandatory dues from large for-profit insurance companies.

Sources say that after past hurricanes, numerous allegations have arisen regarding collusion between claims adjusters and the Texas Windstorm Association. Reportedly, the association has been sued over 1,900 by policy holders for failing to pay for legitimate damages. Sources say the state placed the association under administrative oversight earlier this year.

Sources say the most controversial part of the bill would limit how much a property owner could win in punitive damages, or damages meant to punish a defendant, when the non-profit association doesn't fulfill its obligation for insurance coverage. Critics of the provision say it will eliminate claims for punitive damages.

The consumer advocacy group Texas Watch has stated the measures remove vital rights to sue that people with policies issued by for-profit companies can currently use to force insurers to fulfill their obligations under the policies. According to Texas Watch, punitive damages deter bad conduct, compel prompt payment and make it more likely that the policy holder will be made whole.

Supporters of the bill say the co-operative nature of the association means the only people punished by lawsuits are other policy holders. This is because the high cost of litigation is passed on to them.

Reportedly, disagreement during the regular legislative session ended the bill which prompted Governor Perry to add it to a special session. Sources say other changes to the association involve greater transparency, stricter ethics rules for staff and tougher regulations on who can serve in the association. Reportedly, the bill would also change the name of the association to the Texas Coastal Insurance Plan.