Two of the nation’s largest title insurers agreed to pay a total of $22.7 million to consumers in final settlement agreements over alleged rebate activities with California’s insurance commissioner, the Insurance Commission said late Wednesday.

Fidelity National Financial and First American Title Insurance Co. were accused of setting up captive reinsurance companies to funnel illegal rebates to banks, builders and real estate agents who in turn would allegedly steer business back to the title companies.

Earlier this year, the companies, along with LandAmerica Financial Corp., reached agreements in principle to resolve accusations from the Department. None has admitted wrongdoing. The LandAmerica agreement has not been finalized, the Commission said Wednesday.

“The illegal actions of these companies revealed not only that title insurance rates are bloated, but they damaged the trust that is an essential part of our insurance system,” said California Insurance Commissioner John Garamendi. “These agreements and penalties, totaling $33.3 million, should send a strong message that illegal rebating will not be tolerated in California.”

Fidelity will reimburse consumers $7.7 million within 120 days, pay monetary penalties of approximately $5.4 million, and pay $175,000 to reimburse the California Department of Insurance for the cost of its investigation. First American has already reimbursed consumers $15 million. It will pay monetary penalties of approximately $4.8 million and $175,000 in reimbursement costs to the Department of Insurance, the department said.

The Insurance Commission said that both companies agreed to stop captive reinsurance business arrangements; to cooperate with the department to identify and file for appropriate rate reductions; to cooperate with the department to improve consumer awareness of title insurance rates; and to work with the department to prevent illegal rebate activities.

Title insurance industry practices have been in the spotlight nationwide this year, with investigations of major title insurance companies taking place in Colorado, California and other states. The probes have centered on title insurance practices of paying kickbacks to real estate brokerages, lenders and others for referring large volumes of business to them.

In April, Stewart Title of California was hit with $750,000 fines and costs by the department for alleged illegal kickbacks to real estate agents.

Garamendi, co-chair of the Title Insurance Working Group within the National Association of Insurance Commissioners, has been working 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 arrangements were designed to kick back a large share of the title-insurance premium in exchange for the referral of the customer to the title company, a violation of the law, and a practice that harms consumers by potentially forcing up title insurance rates, according to Garamendi.

Consumers who may have been impacted by the illegal rebating activity can contact First American at 800-854-3653, or visit its Web site at Fidelity can be reached at 800-694-9787, or


Send tips or a Letter to the Editor to or call (510) 658-9252, ext. 140.

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