Three Texas homeowners filed a federal racketeering lawsuit last week alleging that the Texas Windstorm Insurance Association fraudulently reduced claim estimates for properties damaged by Hurricane Beryl.
The lawsuit, filed in the U.S. District Court, Southern District of Texas, alleges TWIA partnered with a vendor who made significant alterations to the original claims estimate made by a field adjuster. TWIA then sent the estimate to the policyholder under the premise that the estimate was the original, the lawsuit says.
Plaintiffs allege that they lost tens of thousands of dollars due to the scheme. For one policyholder, the original field adjuster estimate was $91,000, but the altered estimate came out to $31,000, a reduction of 66%.
The plaintiffs are seeking a class action under the federal RICO Act. The lawsuit does not rely on violations of Texas insurance law as the predicate acts for the RICO claim.
Hurricane Beryl made landfall on the Texas Gulf Coast on July 8, 2024, as a Category 1 hurricane. TWIA, the state-created insurer of last resort for wind and hail, has reported $336 million in Hurricane Beryl claim payments to approximately 34,000 policyholders.
Aaron Taylor, a TWIA spokesman, said the organization’s practice is not to comment on active or potential litigation.
“The Association’s claim adjusting procedures are compliant with applicable Texas and federal laws,” Taylor said.
Lawsuit details
The lawsuit alleges a claims-production method where an out-of-state supervising adjuster would materially lower the estimate made by a field adjuster and then present the altered report as the field adjuster’s original report.
To handle the immense volume of claims that arose out of a major hurricane, TWIA used a common practice of hiring temporary personnel, outside contractors and approved vendors.
Leading Edge Claims Service, which now goes by Hansen, contracted with TWIA to furnish field-adjusting and claims-related services.
After the field adjuster prepared an estimate, an Ohio-based supervisor employed by Leading Edge assumed electronic control of the estimate and altered it to reflect a lower repair cost, the lawsuit alleges. The plaintiffs allege the supervisor wrongfully removed or reduced covered repairs.
TWIA accepted, approved and used the reduced estimate to calculate benefits while the claimant-facing document continued to identify the original field adjuster as the estimator, the lawsuit says. The revised estimate would then be submitted and processed through the claims system, according to the lawsuit.
The electronic audit information available within TWIA’s systems brought, or should have brought, the matter to the attention of TWIA supervisors and senior management, the lawsuit states.
The plaintiffs are seeking actual damages and treble damages.
Photo: FILE – Utility polls wait for repair after being damaged by Hurricane Beryl in Houston, July 10, 2024. Destructive storms like Hurricane Beryl that knocked out power to 3 million homes and businesses in Texas are growing more frequent and intense, and insurers are jacking up rates in response. (AP Photo/Maria Lysaker, File)
Topics Lawsuits Catastrophe Natural Disasters Fraud Hurricane
