A former New Mexico legislator filed a lawsuit against First American Title Wednesday that seeks to strike down parts of the title insurance law and regulations in New Mexico.
Max Coll, a former Democratic state representative, filed a lawsuit seeking class-action status against First American and officials at the state Insurance Department and Public Regulation Commission. If successful, the suit could mean thousands of New Mexico residents who paid title insurance for mortgage financing could get money back.
First American says its practices follow state law. “First American Title Insurance Company’s business practices are in keeping with the applicable laws of the State of New Mexico. We are now reviewing the lawsuit prepared by Mr. Coll, but cannot offer further comment on the litigation at this time,” First American said in a statement.
Coll alleges that, “there have been a lot of people damaged over a long period of time…There’s no competition as to the price of title insurance because the Public Regulation Commission sets the rate to be identical. Title insurers charge exactly the same rate anywhere in the state, so there’s no competition as to the pricing,” resulting in overly high prices, Coll said.
According to the complaint, Coll and his wife, Catherine Joyce-Coll, bought a home in 2003 and paid $2,430 for title insurance. Two years later, they refinanced the home and had to pay $2,407 for another policy.
“What has happened during that two years is nothing,” the former representative said.
The title insurance industry came under an intense spotlight last year after Colorado’s Insurance Division in February 2005 investigated nine Colorado title insurers for alleged kickback schemes said to result in overcharges to consumers. The probe sparked dozens of investigations nationwide, in Florida, Washington, Hawaii, California, Oklahoma, Minnesota, Washington and other states.
Coll’s lawsuit seeks to strike down parts of the title insurance law and regulations in New Mexico, one of the few states where regulators set the rates that can be charged.
The New Mexico Public Regulation Commission’s Insurance Division sets uniform title insurance rates for all companies after holding a hearing each year, and Coll alleges that practice violates the New Mexico Constitution by not allowing companies to compete for business.
The lawsuit alleges that members of the PRC, state Insurance Superintendent Eric Serna and the First American Title Insurance Co. are engaging in price fixing and price gouging.
The New Mexico Public Regulation Commissioners said Coll’s lawsuit has prompted them to consider renewing efforts to amend the state laws to give the agency more authority over the Insurance Division and insurance rules.
“The New Mexico Public Regulation Commissioners are concerned the current state law that sets title insurance rules and rates limits competition and provides no elected official to whom consumers can appeal,” the agency said in a statement.
“I applaud Representative Coll’s efforts to help the people of the state of New Mexico. I invite Representative Coll to work with the Commission to amend the laws of the state to give the Commissioners additional authority over the Insurance Division,” said the group’s chairman, Ben Lujan.
New Mexico residents pay more for title insurance than property owners in nearby states, according to Coll’s complaint.
First American Title, the largest title insurer in New Mexico, reported to the state that it charged about $3.4 billion in premiums throughout the country in 2003, but paid out only $41.7 million, according to Coll’s complaint, reports said.
“In other words, First American Title paid out about one cent on every dollar it collected nationwide,” the lawsuit alleges.
“”What’s their risk?” Coll asked. “Your automobile insurance dollar, some 70 cents of that is paid back in expenses of some kind – hospital visit, fix the car. They seem to be doing pretty well with around a 25 percent margin. The title insurers have a 98 percent margin. I think it’s absolutely outrageous to see that kind of a skim-off.”
The lawsuit seeks to enjoin the defendants from engaging in what is described as illegal behavior, to award Coll, his wife and all members of the class compensatory and punitive damages, to require First American Title “to disgorge the amounts by which it has been unjustly enriched by its unreasonable charges and unlawful practices,” and to retain continued jurisdiction over the defendants to make sure they comply with the court’s judgment, among other things.
Title insurers in California and Coloradohave also been accused of overcharging customers, in those cases by passing along the costs of alleged kickbacks for business referred to them. First American Title Insurance Co. has already refunded $24 million to consumers, without admitting wrongdoing, in connection with these earlier investigations.
On March 2, New York’s attorney general and insurance department announced that they are investigating national title insurance companies for suspected illegal kickbacks.
Michael Oxley, R-Ohio, chair of the House Financial Services Committee, has asked that watchdog agency the Government Accountability Office investigate the title insurance industry.