MO ST Y N LA W F IR M

TEXAS
OFFICES IN H O US T O N , BE AUM ON T , AUS T IN AN D S AN ANT O NI O

February 21, 2014

Federal Coordination and Compliance Section - NWB Civil Rights Division U.S. Department of Justice 950 Pennsylvania Avenue, N.W. Washington, D.C. 20530 To Whom It May Concern: This letter addresses a pending investigation that the Texas Department of Insurance is conducting on Texas Windstorm Insurance Association for allegations of race-based claims handling. In accordance with the following facts, the Mostyn Law Firm believes that the United States Department of Ju st ice-C ivil Rights Division has proper jurisdiction and is better suited to conduct a fair and impartial investigation into this matter. The Mostyn Law Firm represents thousands of Texas homeowners , businesses, churches, and local government entities whose properties and lives have been damaged as a result of storms like Hurricanes ,Ike, Rita, and Dolly,. that savaged the Texas Gulf Coast. The firm ' s clients have seen their valid insurance claims wrongfully denied , delayed, and/or grossly underpaid by private insurance carriers , as well as by Texas Windstorm Insurance Association ("TWIA"). TWIA is Texas' statutorily created windstorm insurer of last resort. Among the Mostyn Law Firm's clients is the Brownsville Independent School District ("BISD"). Brownsville Independent School District is located in Camer on County, Texas, and serves a student population which is reportedly 97.7% Hispanic.' The county's population is over 88% Hispanic. In 2008 , Hurricane Dolly inflicted significant damages upon BISD's schools and buildings , spanning across the district ' s more than 50 campuses. After the storm, BISD filed a claim (00054854) with its insurer, TWIA. A limited investigation was conducted, and eventually BISD was denied coverage on its claim for damage. In fall of 2013, litigation discovery uncovered emails and other communications from TWIA managers, adjusters, and .other key. employees , contain ing offensive language, racist terminology, and evidence of race- based denial of legitimate claims in south Texas (See attached exhibit "A" titled " Racist Email Index'). On December 9, 2013, on behalf of our client , BISD, the Mostyn Law Firm submitted a formal complaint to the Texas Department of Insurance ("TDI"), requesting that TDI initiate a formal investigation into
3810 W. Alabama Street, Houston, Texas 77027 www.MostynLaw.com
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whether a culture of racism at TWIA played a role in claims - handling decisions by TWIA. ( See attached exhibit "B" titled "TDI Complaint'). Since submitting this complaint to the Texas Department of Insurance, the following events have occurred: i. On December 12, 2013, TWIA's defense counsel, Mr. Andrew McKinney, conceded in a Brownsville, Texas District Court that TWIA's handling of BISD's claim was unacceptable. Mr. McKinney stated, "[w]e did not do this the way it should have been done, and we intend to make it right. And we do not intend to ask for a release for making it right." Mr. McKinney also stated, "TWIA will pay those estimates and a twenty-three percent penalty going back essentially to the date of the adjustment, which is what's owed under the statute." (See attached exhibit "C" titled "Hearing Transcript" redacted for relevance). Mr. McKinney acknowledged on the Court's record that T WIA staff exhibited racially inappropriate attitudes, and that race could have played a role in claims handling. Mr. McKinney stated, "In my view, the fact that Bill Knarr was involved in this case and the fact that Bill Knarr is or was a racist, I think that puts .us on the bubble, maybe yes, maybe no, that ra cism pla yed a role in how this claim was handled." (See exhibit "C'). A bipartisan group of Texas state legislators, including Republican John Smithee, the Chair of t he Texas House Committee on Insurance, have called for an investigation into the potential culture of racism at TWIA."' After media coverage of this brewing scandal, TWIA's defense counsel - working under the Department of Insurance's oversight - attempted to pursue a misguided'" and ill-fated" legal strategy designed to intimidate members of the press from reporting on the matter. Finally, it has now come to our attention that a number of for mer TWIA employees - including some who were party to racist ema ils - are employed by TDI. Currently, Ms. Susan Schiller works for the Texas Department of Insurance. However, she was previously employed by TWIA, where she worked as a Supervisor assigned to the BISD claim. Even more troubling is the fact that Ms. Schiller sent an email to TWIA staff suggesting someone "dig a moat the length of the Mexican border" and "fill the moat with alligators." (See exhibit "A').

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The Texas Depa rtment of Insura nce receives over two million dollar s per year in federal funds to pay salaries and administrative costs related to inspecting and certifying homes for TWIA coverage."' Given the serious nature of this matter, the public manner in which the scandal has unfolded, and TDI's and TWIA's ongoing adversarial relationship with the Brownsville Independent School District, we believe the Texas Department of Insurance will fail to pursue a neutral and thorough investigation of the culture of racism at . TWIA. Consider ing the millions of dollars of federal funding appropriated through TDI for oversight and inspections for TWIA, we believe it is necessary and appropriate to request that the Federal Coordination and Compliance Section of the United States Department of Justice's Civil Rights Division begin an independent investigation into the culture of
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racism and race-based claims handling decisions that have taken place at Texas Windstorm Insurance Association. We look forward to your response on this important matter. Please do not hesitate to contact us should you require any additional information.

Respectfully Submitted,
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J. Steve Mostyn Mostyn Law Firm 3810 W. Alabama Street Houston, TX 77027

' http:// www.texastribune. org/public - ed/explore / brownsville-isd/#demographics " http:// quickfacts.census.gov /gfd/states/48/48061.html http://www.themonitor.com/news/local/article_8913307a-68f7-11e3-8b92-001a4bcf6878.htm1 '"http:// www.mystatesman.com/news /news /local/statesman- fights-subpoena- from-texas-windstormins/ncbLN/ http:// www. mystate sman.com/news /news /twi a- withdraws-statesman-subpoena/ncdqQ/ " http://www.tdi.texas.gov/reports/documents/ 13annualfin.pdf 3

U.S. Department of Justice Civil Rights Division Federal Coordination and Compliance Section

COMPLAINANT CONSENT/RELEASE FORM

Your Name: Address: ( k? v , a

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Please read the information below, check the appropriate box, and sign this form. I have read the Notice of Investigatory Uses of Personal Information by the Department of Justice (DOJ). As a complainant, I understand that in the course of an investigation it may become necessary for DOJ to reveal my identity to persons at the organization or institution under investigation. I am also aware of the obligations of DOJ to honor requests under the Freedom of Information Act. I understand that it may be necessary for DOJ to disclose information, including personally identifying details, which it has gathered as a part of its investigation of my complaint. In addition, I understand that as a complainant I am protected by DOJ's regulations from intimidation or retaliation for having taken action or participated in action to secure rights protected by nondiscrimination statutes enforced by DOJ. CONSE NT/RE LEASE CONSENT - I have read and understand the above information and authorize DOJ to reveal my identity to persons at the organization or institution under investigation. I hereby authorize the Department of Justice (DOJ) to receive material and information about me pertinent to the investigation of my complaint. This release includes, but is not limited to, personal records and medical records. I understand that the material and information will be used for authorized civil rights compliance and enforcement activities. I further understand that I am not required to authorize this release, and do so voluntarily. CONSENT DENIED - I have read and understand the above information and do not want DOJ to reveal my identity to the organization or institution under investigation, or to review, receive copies of, or discuss material and information about me, pertinent to the investigation of my complaint. I understand this is likely to impede the investigation of my complaint and may result in the closure of the investigation. F ]

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