Texas Looks to Start Mediation Program for Hurricane Ike Claims

In order to "stay ahead of litigation," the Texas Department of Insurance said it is looking into mediation programs like ones used in other states, to settle claims from Hurricane Ike.

Department spokesman Jerry Hagins said the state is in the "very early stages of planning such a program," but it is looking at the possibility of one very seriously.

"This would just be a tool to try and bring homeowners and their insurance companies closer together in the settlement process," said Hagins. "No one would be bound by the mediation process but we're thinking it could only help to avoid some of the litigation."

Hagins said a third party would examine and attempt to resolve a claim between an insurer and homeowner but neither are bound by the decision. Litigation would remain an option.

Mediation programs exist in other hurricane-prone states such as Florida, Louisiana, Mississippi and North Carolina. In those states, the insurer usually pays for the mediation process, Hagins said.

The department has received about 2,000 complaints and expects more but the number is "not more than we thought," considering the amount of claims generated by the mid-September hurricane that struck Galveston, Texas. More than 730,000 claims have been filed with insurers since the storm.

In comparison, about 220,000 claims totaling $2.8 billion in insured losses were filed after Hurricane Rita in 2005, said Mark Hanna, spokesman for the Insurance Council of Texas, a trade group. The department of insurance received 1,928 complaints.

At a meeting with representatives from the top insurers in the state as well as trade associations, Hagins said the department asked for input from the industry about a mediation program. An internal goal for the department is to have some kind of proposal for a mediation program ready by January, in time for the state legislature to meet, Hagins said. There is no date or deadline for when such a program, if one were to be formed, would be available to the public, he said.

Ike is estimated to have caused roughly $10 billion in damage in Texas. Hanna said that insurance companies have settled between 60% and 80% of claims as of Dec. 10. Of the complaints made to the department of insurance, about 500 have been deemed justified, Hanna said.

In 2007, the top writers of homeowners multiperil in Texas, according to A.M. Best Co. state/line product information based on direct premiums written, were State Farm Group, with a 29.4% market share; Allstate Insurance Group, with 14.7%; Farmers Insurance Group, with 13%; USAA Group, with 7.6%; and Travelers Group, with 5.4%.