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Baltimore City Paper

Kiss My Bumper? Senate Insurance in Bankruptcy, Called Ponzi Scheme

Senate Insurance bills itself as "a local company that looks out for you," not like those big nationwide insurance companies. Selling car insurance for 25 years out of an office in Laurel, the company is locally famous for its upbeat radio ads with the tagline "Kiss My Bumper." But Senate, owned and operated by Geary Katz, son of Katz Insurance founder Hal (

),  owes at least $50 million to its creditors, according to a pair of bankruptcy filings. Here's the one case, filed in December:

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Few punches are being pulled, it seems. Here's what the Doug Monsein Family Trust alleges in its January 9 filing, asking the judge to appoint a trustee over all of Katz's businesses:

State insurance regulators announced a consent order in 2012 between Senate Insurance and MAIF, the Maryland Automobile Insurance Fund, which underwrites insurance for drivers with poor records. [PDF

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] Katz began missing payments to his creditors, mainly a series of family trusts, last September, according to court filings. In December one creditor, Charles Steiner, filed an involuntary petition to force Senate into bankruptcy, saying that Katz "admitted that the Debtor has not filed its 2011 or 2012 tax returns, and is not sure whether it filed its 2010 or 2009 return." Earlier this month, Monsein filed a petition to force Katz into personal bankruptcy, saying that "it is clear the Debtor is unable to be a proper fiduciary. As time passes, the likelihood of a meaningful recovery to the creditors of the Debtor's and Senate Acceptance's estates diminish." There followed an "emergency motion" to appoint a trustee to oversee all of Katz's companies. That petition will be heard next Wednesday in federal bankruptcy court in Greenbelt. "Once that happens to the extent that he's the sole owner of these companies then the companies go under the trusteeship as well," H. Jason Gold, a lawyer representing Steiner in the other bankruptcy case, says

.

The creditors, some of which had been lending to the company for more than 20 years, mostly at interest rates of around 15 percent, list a dizzying array of related corporations including Senate Insurance Agency, Laurel Insurance, Senate Acceptance, Congress Acceptance, Presidential Acceptance, Congress Motor Club, and others. The business worked like this, according to the court file: Backed by MAIF, Senate offered car insurance for people unable to get it, usually for about $2,000 a year. Senate Acceptance financed the premium at 15 percent interest and took the initial down payment of 10 percent. About 40 percent of all customers default on their payments, at which time Senate cancelled the policy and collected the unused premium. In 2009 the Maryland Insurance Commission held that Senate—and eight other insurance companies—improperly calculated the amount of the premium it could keep. In the consent order announced in 2012, the Insurance Administration said Senate and Laurel, two of Katz's companies, had failed to make timely premium payments on 590 policies it had written. The investigators found that the companies had imposed cancellation charges on policies that were not cancelled, failing to give the required 10-day notice to customers for cancelled policies, and committed other violations of the regulations., Senate and Laurel were barred from writing new policies and Katz's companies were ordered to pay $35,000. How (or if) those sanctions relate to the inability of Senate to pay its private creditors is unclear. Katz, who is listed as his own lawyer on the bankruptcy filing, did not immediately return a phone call to his office from

City Paper

. The Senate Insurance office, though, was open.


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