Md. insurance regulators revoke licenses of Hal Katz, agency
Regulators say Katz put his insurance company at financial risk
Maryland insurance regulators likely would disagree.
Last week, Baltimore City Circuit Court placed two of his companies — Interstate Auto Insurance Co. and Katz's Insurance Agency — into receivership. And this month, regulators revoked the licenses of Katz and his agency.
Katz "demonstrated a lack of trustworthiness or competence" and put Interstate Auto at financial risk, regulators said in state documents.
Bonnie Heneson, a spokeswoman for Katz, said Thursday that Katz would not comment, on the advice of his legal team, which is representing him in several courts.
"Hal wants his policyholders to know that all the policies are in effect, all claims are being paid, and this has never affected our policyholders in any way. All money collected has gone to pay policies," Heneson said.
Vivian Laxton, a spokeswoman for the Maryland Insurance Administration, said Thursday that the receiver would pay claims on existing policies and advised customers to keep making payments so their insurance would not be canceled.
Katz's troubles with regulators started in April when the state began a routine exam of Interstate Auto, which is half-owned by Katz. The insurance company's policies are sold largely through Katz's agency and financed through Insurance Payment Plan Inc., or IPP, another Katz-owned company that caters to consumers who can't afford to buy insurance.
Regulators said they found that the insurer had failed to deposit premiums totaling $795,098 from Katz's agency. Interstate did not deposit the checks because Katz's agency didn't have enough money in the bank to cover them, regulators said. The agency's balance at the end of June was $70,899, state officials said.
State investigators also made a surprise visit to three Katz agency offices during the summer. At two, regulators said, they discovered some policies had been sold by unlicensed brokers.
Following these findings, Maryland regulators suspended the licenses of Katz and his agency in August. Katz and the agency originally asked for a hearing but withdrew the request. The licenses were revoked early this month.
Katz's three companies are struggling.
Last month, IPP's liabilities exceeded its assets by about $5.3 million, the state said. On Oct. 10, creditors, including a former board member of Interstate Auto, petitioned to force the finance company into an involuntary bankruptcy.
State regulators said IPP agreed last week to a state order to be liquidated through a court-appointed receiver.
Also last week, Invotex Inc. was named the receiver to oversee Katz's agency and Interstate Auto.
The debts of Katz's agency last month exceeded assets by about $4.73 million, the state said.
Last summer, Katz sold a 50 percent stake in Interstate Auto to the Woodlands Financial Group of Maryland, solely owned by Gordy Bunch, CEO of the Woodlands Financial Group in Texas.
Woodlands owns agencies with offices in 20 states, and its $1 million investment in Interstate Auto was the Texas-based company's first venture into owning an insurer, Bunch said.