THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Thursday, October 13, 1994 TAG: 9410130461
SECTION: BUSINESS PAGE: D6 EDITION: FINAL
SOURCE: ASSOCIATED PRESS
DATELINE: RICHMOND LENGTH: Medium: 53 lines
State officials are studying the assets of HOW Insurance Co. and will process emergency claims for policyholders in the company, which has been seized by state regulators.
The State Corporation Commission is still assessing whether those assets will be enough to cover major claims filed from policyholders in and out of state, SCC spokesman Ken Schrad said Wednesday.
Under an agreement reached Tuesday between state officials and lawyers for HOW, the Virginia Bureau of Insurance will process major claims until a court can decide whether HOW, the country's largest home warranty company, is insolvent.
``We'll handle what I guess you could call emergency claims,'' said Patrick Cantilo, a Texas lawyer and insurance receivership expert hired to help the bureau run HOW.
James C. Roberts, the lawyer representing HOW, said the agreement will allow people needing repairs for major structural defects to have the work done.
``You don't want someone with a collapsed roof and the contractor saying he's going to stop work because he's worried about being paid,'' Roberts said.
State regulators seized Arlington-based HOW on Friday, freezing claim payments and saying the company would not take on any new commitments.
On Tuesday, lawyers for the state asked U.S. District Judge Robert E. Payne to shut down the company's operations outside Virginia, arguing it could be months before they sort out how to pay most of the company's liabilities.
``This company is $45 million insolvent,'' Cantilo said.
But Payne said the state's request raised difficult questions about federal and state jurisdiction and asked both sides to work out a temporary agreement until a state court can rule on whether the company is in delinquency.
HOW insures nearly 1 million homes across the country for a total of $110 billion. It controls about 50 percent of the national market. About 30 percent of new homes nationwide are covered by warranties.
The company reported a capital and surplus base of $4.2 million, which would put it just above the $4 million state regulators require.
A consultant hired by the state, however, estimated that HOW's liabilities, including its obligation to pay claims in the future, exceeded its assets by $47.9 million as of June 30.
Cantilo said state officials would soon contact homeowners to tell them how the switch will affect them. by CNB