Court Orders Rehabilitation for Home Value Insurance Co.

Home Value Insurance Co. was ordered into rehabilitation by an Ohio court on Aug. 31, 2012, and has been prohibited from selling insurance in the state due to its failure to maintain minimum capital and surplus.

The insurer, which originally launched in 2009 but pulled back and then reentered the insurance market in September of 2011, covers the loss in value if a homeowner sells a home for less than its appraised value at the time it was insured. The policy guarantees the present home value for up to 10 years and compensates policyholders in case of a market decline of up to 25 percent.

HVIC’s website (homevalueprotection.com) now redirects to the Ohio Insurance Liquidator site, which states the company was ordered into rehabilitation by the Court of Common Pleas of Franklin County, Ohio. The rehabilitation order says that HVIC failed to maintain the $5 million minimum capital and surplus that is required by Ohio statutes and is in a “hazardous” financial condition.

The rehabilitation was sought by Ohio Superintendent of Insurance Mary Taylor on Aug. 29. (Mary Taylor, Superintendent of Insurance v. Home Value Insurance Company, Case No. 12CV010970).

The Ohio insurance superintendent has been appointed as the receiver for HVIC.

The order appointing the rehabilitator says that as a result of HVIC failing to maintain the minimum capital and surplus required by Ohio law, it is “in such condition that its future transaction of business would be financially hazardous to its policyholders, creditors or the public.”

Information on the Ohio Insurance Liquidator’s site states that HVIC has 172 polices as of the date of the rehabilitation order and sold policies between September 2011 and June 2012 in Ohio, as well as in Oklahoma and Georgia. HVIC was also licensed to sell insurance in Arizona, Indiana, Louisiana, Oregon, and Texas but did not issue any policies in these states.

As of press time, the departments of insurance for the other states where HVIC has written policies – Oklahoma and Georgia – still listed the company as an active insurer, with no further information currently available.

UPDATE: The Indiana Department of Insurance told Insurance Journal that they were notified by the Ohio Department of Insurance that HVIC was going into rehab and deactivated their license.

When contacted, the Ohio Department of Insurance would not comment on the rehabilitation order except to say that “the company fell below Ohio’s minimum capital and surplus standards, which are in place to protect Ohio insurance consumers.” It directed further inquiries to a “Frequently Asked Questions and Answers Related To Home Value Insurance Company (HVIC) In Rehabilitation” document on the Ohio Insurance Liquidator’s website.

The FAQ document, dated Aug. 31, 2012, says that the HVIC’s board of directors agreed that rehabilitation is appropriate.

Nobody at HVIC could be reached and the company did not return numerous messages from Insurance Journal for comment.

The FAQ also states that the rehabilitator “cannot precisely determine HVIC’s exact assets and liabilities until she has completed her takeover and analysis of the overall financial condition of the company” but hopes to file for an approval of a rehabilitation plan within 30 to 90 days that addresses what will happen with HVIC’s policyholders and creditors.

However, the document later says, “At this point in time, the Rehabilitator does not expect that the Rehabilitation Plan will retain HVIC as a going concern.”

As far as what the rehabilitation means for current HVIC policyholders, HVIC appears to have more cash than current claims, despite being below the minimum $5 million capital and surplus. Any claims will be processed by the rehabilitator and should be directed to the Ohio Insurance Liquidator.

In addition, policies are not being cancelled by the order and it is not anticipated at this time that any policies will be cancelled prior to any rehabilitation plan being put in place.

The FAQ says policyholders should continue to pay their policy premiums and those who do not pay will have their HVIC policy cancelled according to the terms.

Agents may not continue to sell HVIC policies and any outstanding commissions are a liability of HVIC.

“Agents and brokers will be given written notice to file a claim for unpaid, earned commissions. This notice will be emailed or mailed to all agents and creditors as the rehabilitation proceeds,” states the FAQ document.

Going forward, the appointed rehabilitator will analyze the agent contracts and commission structure as part of her takeover and analysis of the company.

HVIC just entered Georgia in March of this year, followed by Indiana weeks later, and indicated then that it planned to proceed with its U.S. expansion.

Richard L. McCathron was executive vice president of distribution for Home Value Insurance Co. when it re-launched in Sept. 2011. He is no longer with the company according to his LinkedIn profile, but he told Insurance Journal at that time HVIC was planning to seek approval in at least 20 states through 2012, and eventually even more.

“[Home Value Insurance Co.] was specially formed to offer this product,” McCathron said of the company last year. “We are a monoline carrier focusing on what we know and our primary and only focus is this insurance product. Insurance companies should focus on what they know and what they do well and this is what we know and want to take it to a national audience.”

HVIC is headquartered in Columbus, Ohio, and had offices in Austin, Texas, and San Francisco.