Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, October 13, 1994 TAG: 9410140042
SECTION: BUSINESS PAGE: 7 EDITION: METRO
SOURCE: Associated Press
DATELINE: RICHMOND LENGTH: Medium
State regulators seized the Arlington-based HOW on Friday, freezing claim payments and saying the company would not take on any new commitments.
On Tuesday, state officials asked U.S. District Judge Robert E. Payne to shut down the company's operations outside Virginia.
Lawyers for the state told the judge it could be months before they sort out how to pay most of the company's liabilities.
``This company is $45 million insolvent,'' said Patrick Cantilo, a Texas lawyer and insurance receivership expert hired to help the bureau run HOW.
But Payne said the state's request raised difficult questions about federal and state jurisdiction, and he asked both sides whether they could work out a temporary agreement until a state court can rule on whether the company is in delinquency.
After negotiating for more than an hour with lawyers for HOW, state officials agreed to temporarily process some claims.
``We'll handle what I guess you could call emergency claims,'' Cantilo said.
James C. Roberts, the lawyer representing HOW, said the agreement would allow people needing repairs for major structural defects to have work done.
``You don't want to have someone with a collapsed roof, and the contractor saying he's going to stop work because he's worried about being paid,'' Roberts said.
Claims filed on an emergency basis both in and out of Virginia will be reviewed, State Corporation Commission spokesman Ken Schrad said.
The state will pay for claims with assets that exist for the insurance firm, Schrad said. He said the SCC is ``still assessing'' those assets and could not say if they would be enough to cover all emergency claims received.
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.
Cantilo said state officials would soon contact homeowners to tell them how the switch will affect them.
As part of the agreement, Roberts said, state officials also agreed to process new policies caught in the pipeline when they seized HOW.
That will allow people closing on new houses in the next few days to proceed, although HOW will add a warning to homeowners that its receivership could affect their ability to make claims under the warranty.
by CNB