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Texas Windstorm Insurance Association: Part 4

Texas’ government-operated property insurance agency — TWIA — found “hazardous to the public” in the wake of Texas Watchdog’s reporting

February 28, 2011
By Steve Miller, Texas Watchdog

An investigation by the Texas Department of Insurance has found that the state’s government-operated property insurance agency “is in a condition that makes its continuation in business hazardous to the public or to its policyholders.”
In finding the Texas Windstorm Insurance Association guilty of numerous infractions, the state insurance oversight agency has placed TWIA under administrative oversight. The action was announced today at an emergency meeting of TWIA’s 10-member board of directors.

The Texas Department of Insurance, in a two-page letter, said an investigation conducted over the past five days found that TWIA paid outside claims adjusters for work that was not performed, and that TWIA was aware of this and failed to report it to the appropriate state fraud unit. The department of insurance also found that “TWIA has failed to adequately address issues identified through the recent financial examination and subsequent financial analysis indicating a lack of adequate controls over accounting, personnel, and material decision affecting the day-to-day operations, as well as communications with staff, the board of directors and the Department.”

Following its review, the state insurance department contacted the Travis County District Attorney’s office regarding possible fraud charges, Garry Kaufman, the chairman of the TWIA board, said.

Kaufman added that last week’s legislative hearing before the House Insurance Committee over questionable actions at TWIA, including the murky circumstances regarding the firing of two high ranking claims employees, was the catalyst for the TDI’s investigation.

That hearing was held in the wake of Texas Watchdog’s investigation into TWIA, which exposed the severance deals of those high-ranking employees.

See the Texas Watchdog story about those severance packages here.

See the Texas Watchdog story about other high-powered politicos who have profited from TWIA here.

“[TWIA General Manager] Jim Oliver testified for two hours and faced harsh criticism,” Kaufman said in a brief statement at today’s meeting. “Less than 24 hours, TDI was coming to the commission to begin a targeted examination of TWIA regarding the employment of two employees, Reggie Warren and Bill Knarr.”

Warren and Knarr were fired at the end of December according to committee member Craig Eiland, although Oliver has maintained they left voluntarily.

Warren received severance of a pickup truck and $114,000 in 20 payments, while Knarr got $47,000, records obtained by Texas Watchdog show.

At last weeks hearing, Oliver was asked for the circumstances of the firings, but claimed he could not discuss it because of a “confidentiality agreement” that was signed by both parties. He said the agreement was made in case the testimony of either employee would be needed down the road. TWIA is embroiled in numerous lawsuits regarding claims related to Hurricane Ike.

“When I was reviewing the issues that ultimately resulted in these two employees no longer working with TWIA, I sat down with claims attorneys and asked what would be the consequences of terminating these employees concerning ongoing litigation,” Oliver told the committee. “In discussing that, it was clear I needed to take action that I took. However it was also clear that we needed the cooperation of these two in the event that we needed them for depositions, trial and in Mr. Warren’s case, on policy issues he may have been involved with during Hurricane Ike and Dolly.”

Oliver said the truck and payments to the departed employees were “not uncommon” and overall, the payments and the confidentiality agreement “was the correct action.”

Also in that committee hearing, Texas Insurance Commissioner Mike Geeslin testified regarding a TDI assessment of TWIA for a period of Jan. 1, 2006 to Dec. 31, 2008, that found the agency had numerous problems.

The report found problems with personnel management documentation, poorly kept board minutes, mismanaged oversight of Oliver’s expenditures, failure to maintain a required log of claimant complaints, and a disaster recovery program that failed to outline the responsibilities of senior management.