Fidelity National Financial has reached a settlement with the California Department of Insurance following the agency’s investigation into captive reinsurance practices in the title insurance industry, the company said today.

 

While admitting no wrongdoing, Fidelity agreed to refund approximately $7.7 million to those consumers whose California property were subject to a captive reinsurance arrangement and will also pay a penalty of $5.6 million.

 

“We have worked closely with the California Department of Insurance to resolve this issue in an amicable manner,” said Peter T. Sadowski, executive vice president and general counsel for Fidelity. “We are happy that this matter is now behind us and we remain committed to vigorous internal compliance policies. We will work informally with the department on issues of mutual interest to minimize the possibility of future misunderstandings regarding acceptable market conduct.”

 

The financial impact of the settlement has been accrued for in the first and second quarter financial results of Fidelity, the company said.

 

California Insurance Commissioner John Garamendi earlier this year launched an investigation into alleged kickbacks paid to captive reinsurance companies controlled by developers, lenders, builders and real estate firms. LandAmerica and Fidelity National, two title insurers that write roughly 60 percent of all the title insurance in California, testified in a daylong investigatory hearing headed by Garamendi in April.

 

Other companies subpoenaed in the overall investigation include William Lyon Homes, KB Home, RE/MAX, United Home Mortgage Corp., Shea Financial Services and Wells Fargo Home Mortgage, according to the California Insurance Dept.

 

Garamendi, who is also co-chair of the Title Insurance Working Group within the National Association of Insurance Commissioners, has worked with Colorado and Washington state insurance regulators to probe a series of alleged phony reinsurance contracts between title companies and subsidiaries of real estate agents, developers and lenders.

 

Under these alleged elaborate schemes, the title insurers agreed to give about half of the premium on title insurance policies to captive reinsurance companies created by the other conspirators. The parent companies of those captives would in turn refer business to the title insurer.

 

The alleged arrangements harm consumers by potentially forcing up title insurance rates, according to Garamendi.

 

 

***

What’s your opinion? Send your Letter to the Editor to opinion@inman.com.

Show Comments Hide Comments

Comments

Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
Prepare for this fall with top agents & brokers at Connect Now this Tuesday.GET YOUR TICKET×
Limited time: Get 30 days of Inman Select for $5.SUBSCRIBE×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription