Did Texas legislator take bribe from Farmers Insurance over "tort reform?"

The Austin (Tex.) Chronicle is reporting that Farmers Insurance paid approximately $300,000 to a Texas state legislator on a bogus insurance claim in order to obtain the republican state representative’s cooperation on proposed tort reform legislation. That legislator, Rep. Joe Nixon (R-Houston), is the sponsor of a controversial tort reform package that passed in the Texas state legislature this past spring.

According to the article, Nixon submitted claims under his homeownwers insurance policy. Adjusters from Farmers who were assigned to the claims determined that the policies in question did not provide coverage. However, Farmers’ executives allegedly "strong-armed" the adjuster, who was told to go ahead and pay the claim anyway in order to secure Nixon as a "friend of Farmers during the legislative session."

A Farmers’ employee, Isabel Arnold, complained to her supervisor about the situation, alleging that Nixon originally submitted a claim that was denied and then, after the company agreed to pay the claim despite the lack of coverage, demanded that Farmers pay even more. According to an e-mail that Arnold sent to her boss, and which was obtained by the Chronicle, Farmers’ executives agreed to pay even the additional amounts. In response to Arnold’s email, her boss, Jim Daues, admitted that three Farmers executives, Mark Toohey of the Los Angeles home office, Kevin Kelso, a corporate vice-president for finance, and John Hageman, head of Farmers’ operations for the state of Texas, "all suggested that an additional payment would be very helpful to the cause."

The Chronicle article states that the situation is being investigated by the Travis County Grand Jury. As for Ms. Arnold, Farmers has fired her. 

Meanwhile, the Houston Chronicle reported on August 13, 2003 that during the closing days of the Texas legislature this past spring a joint House-Senate conference committee stripped a proposed insurance reform bill of a provision which would have given the state insurance commissioner oversight of profitable "management fees" that Farmers Insurance charges its own affiliates in Texas.  These fees, which run from 12% to 13% of premiums collected, are passed on to policyholders and are highly profitibable to insurers, especially Farmers.  According to the article, the "management fees" are the subject of a lawsuit filed against Farmers by the Texas Attorney General. 

The Chronicle reports that the joint House-Senate conferees took the action favorable to Farmers while the bill's sponsor, Rep. John Smithee (R-Amarillo), was out of town for a few hours attending his daughter's graduation ceremony.  Smithee was reportedly so furious he took the floor of the House to accuse Farmers of treating the state legislature with "utter contempt."

To make matters worse, according the Chronicle, four members of the joint House-Senate conference received $10,000 in contributions from Farmers' political action committee.  Among the legislators involved - none other than Farmers' favorite policyholder/legislator, Joe Nixon, and, yes, he did receive a share of the $10,000 contribution.