“The risk pool situation in Texas, some would call it extortive,” according to prominent Texas attorney Marc Gravely, founder of Gravely PC and a specialist in high-stakes insurance recovery litigation. Gravely laid out serious legal concerns in a recent podcast surrounding the Texas Association of School Boards’ TASB Risk Fund that should alarm every taxpayer and legislator in this state. Gravely has represented school districts, municipalities, and policyholders across Texas, and what he described is not a theoretical issue—it is something he says he has seen firsthand.
What is being sold as voluntary cooperative alternative to private insurance by the TASB Risk Fund, increasingly appears to function as something else entirely: a system that may evade key legal obligations, suppress oversight, and expose taxpayers to significant financial harm.
By organizing as a “risk pool” rather than a traditional insurer, TASB may avoid being fully subject to the duties of good faith and fair dealing that Texas courts have long recognized as essential in insurance relationships. The result is a system where the entity holding taxpayer funds may not be bound by the same obligations as private insurers.
Gravely’s conclusion is blunt: The structure of these risk pools creates a system where “the powerful” dictate outcomes to the “powerless,” and in some cases, he believes the conduct may rise to the level of “extortive” and “unconstitutional.”
If these concerns about the TASB Risk Fund are substantiated, the implications are serious. Potential violations range from deceptive trade practices to unlawful claims handling—and, in the most troubling scenarios, misuse of public funds. At a minimum, this demands a full-scale investigation by state authorities.
Texas law is clear about how insurance is supposed to work.
Under Texas Insurance Code § 541.060, insurers are prohibited from engaging in unfair or deceptive claims practices, including misrepresenting policy provisions or failing to attempt a prompt, fair settlement. The Prompt Payment of Claims Act (§ 542.055–.060) imposes strict deadlines and penalties for delay.
And Texas courts have long recognized that insurers owe a duty of good faith and fair dealing. In Arnold v. National County Mutual Fire Insurance Co., 725 S.W.2d 165 (Tex. 1987), the Texas Supreme Court held that insurers cannot exploit their superior position to deny or delay valid claims.
But TASB is not a traditional insurer. It operates as a “risk pool,” and that distinction may allow it to sidestep some of these obligations.
Gravely identified several provisions in TASB policies that, if accurate, would be unthinkable in the private insurance market.
First, school districts may be effectively blocked from hiring public adjusters—licensed professionals who advocate for policyholders, the schools and taxpayers. The mechanism is subtle: policies prohibit assigning claim rights, which is how adjusters are typically paid.
The result?
School districts—run by educators, not insurance experts—are forced to negotiate complex claims against seasoned professionals without help—often leading to costly litigation and potentially significant losses due to TASB’s exemption from the good faith and fair dealing law.
As Gravely put it, “you’ve got somebody that’s super smart dealing with somebody that is not an expert… and they have to take what they’re given.”
Second, TASB policies reportedly eliminate neutral dispute resolution. In standard insurance contracts, disagreements over loss amounts are resolved through appraisal—a process recognized and reinforced by Texas courts. In State Farm Lloyds v. Johnson, 290 S.W.3d 886 (Tex. 2009), the Texas Supreme Court emphasized the importance of appraisal as a mechanism to resolve disputes over the value of claims.
But here, Gravely says, “the risk pool is the final decider on what the amount of the loss is.”
If true, that means the same entity responsible for paying the claim also decides how much it owes—with no neutral third party.
Perhaps most troubling is Gravely’s observation that many districts do not fully understand these policies until after disaster strikes.
“They don’t understand… until it’s time to pay for damage,” he said, noting repeated complaints from school leaders who discover claims are denied or underpaid only after losses occur.
That raises potential liability under the Texas Deceptive Trade Practices Act (DTPA). Under Texas Business & Commerce Code § 17.46(b), it is unlawful to misrepresent the characteristics or benefits of services. And under § 17.50, consumers—including, in some cases, governmental entities—may bring claims for unconscionable conduct.
Texas courts have recognized that unconscionability arises when one party takes advantage of another’s lack of knowledge to a grossly unfair degree.
If school districts are being sold policies they do not understand—policies that strip away fundamental protections other insurers provide—that is not just bad policy. It may be unlawful.
Gravely also raised concerns about the role of reinsurers—large financial entities that backstop risk pools and have a direct incentive to minimize payouts.
Based on his extensive insurance litigation experience, he believes reinsurers may be influencing how claims are handled and how much is ultimately paid. While he stops short of making definitive claims, his assessment is clear: “given the cases I’ve seen… I’m personally almost certain that’s what’s happening.”
If decisions about taxpayer-funded claims are being driven by external financial interests, that raises serious questions about accountability and transparency.
Here is the bottom line: When claims are underpaid, the damage does not disappear.
Roofs still need to be replaced. Buildings still need to be repaired. And when insurance or the TASB Risk Fund falls short, taxpayers make up the difference.
That means Texans may be paying twice—once into the risk pool, and again to cover what the risk pool does not.
To be clear, not every unfair system is illegal. But several aspects of this structure raise legitimate legal questions:
- Are policy terms being misrepresented in violation of the DTPA?
- Are contracts so one-sided that they are unconscionable and unenforceable?
- Are claims being handled in ways that would violate the Insurance Code if performed by a traditional insurer?
- Are taxpayer funds being improperly withheld, diverted, or misused?
- Does TASB Risk Fund’s conduct implicate criminal statutes such as Abuse of Official Capacity (Texas Penal Code § 39.02).
Texas cannot afford to ignore this.
An immediate, independent investigation should examine TASB’s policies, claims practices, financial flows, and relationships with reinsurers. Subpoena power should be used if necessary.
If the findings confirm what Gravely and others are raising, then the response must be swift:
- Public entities should immediately cease using taxpayer funds to participate in TASB or any affiliated programs engaged in unlawful conduct
- Lawmakers must close any loopholes allowing risk pools to evade basic insurance protections
- And where violations are found, those responsible must be held accountable—civilly or criminally
Texas taxpayers fund our schools. We deserve a system that protects those investments—not one that exploits them.
