Almost two years after Hurricane Ike nearly wiped out the town of Galveston, Texas, the Texas Windstorm Insurance Association has agreed to pay an estimated $189 million to policyholders whose homes were destroyed by the storm.

TWIA announced it had reached a settlement with lawyers representing about 2,400 Galveston County property owners covered by TWIA policies. The state-created windstorm insurer has faced lawsuits since the hurricane hit in September 2008 after homeowners realized they did not have sufficient coverage to cover their losses.

Part of the difficulty in taking care of claims was due to 1,500 adjusters who were brought in to help investigate losses but were not familiar with the unique form TWIA uses, the insurer said at the time. (See for details.)

In addition, disputes arose over how much damage to homes was caused solely by wind and how much was caused by flood. “These ‘slab’ claims were very complicated and numerous, and they required a great deal of time and analysis in determining the impact from wind and storm surge since TWIA policies only cover direct loss caused by wind,” Jim Oliver, general manager at TWIA, said in a statement.

The settlement–which TWIA said will resolve all “slab” cases in which little or nothing was left of a structure after the hurricane–includes:

o Thirty-seven percent of the home’s replacement value.

o Attorney fees.

o Twenty-five percent of the value of policyholders’ coverage for contents.

o Thirty-five percent of additional living expense coverage.

TWIA noted that the proposed settlement represents a compromise as a result of mediation.

If approved, TWIA said the settlement will compensate slab owners who are individually represented by lawyers. Slab owners who do not have attorneys will be compensated through a class-action suit that was also settled and is pending approval.

TWIA said in a statement that policyholders will be treated the same whether or not they hired an attorney.

“We are pleased that TWIA stepped up to the plate and resolved these cases so that [slab owners] may now get on with their lives,” Steve Mostyn, a plaintiff’s attorney in Houston, said in a statement.

The windstorm insurer said it had more than 100,000 claims in 2008 from hurricanes Dolly and Ike, and noted that losses resulting from the storms will total $2.1 billion.