LandAmerica has settled with California’s insurance commissioner for a total of $4.5 million in an alleged title insurance kickback scheme, a settlement that includes a $2.6 million refund to customers, state officials said this morning.
LandAmerica Financial Corp., the parent company ofCommonwealth Land Title Insurance Co., Lawyers Title Insurance Corp. and Transnation Title Insurance Co., agreed to a settlement of $4.5 million, which includes $2.6 million refunded to customers and $1.9 million in monetary penalties, including legal cost reimbursement, officials said.
LandAmerica was accused of setting up a captive reinsurance company to funnel illegal rebates to banks, builders and Realtors to steer business back to the title companies.
“We have maintained from the start that our captive reinsurance arrangements complied with all known rules and regulations and that no consumer paid more under these arrangements,” said LandAmerica President and CEO Theodore L. Chandler, Jr.
“However, for pragmatic reasons we decided to resolve this matter with California in order to put it behind us. With this resolution, our focus is squarely on the future and on offering LandAmerica’s customers the consistently superior service they’ve come to expect,” Chandler said.
Michael Oxley, chair of the House Financial Services Committee, on Jan. 24 asked the Government Accountability Office, a government watchdog, to open an investigation into title insurance practices nationwide.
The intense spotlight that shone on the title insurance industry in 2005 prompted Oxley’s call. 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 and Washington and other states.
In addition to the $4.5 million monetary settlement, LandAmerica Financial Corp. has agreed to stop captive reinsurance business arrangements, to cooperate with the California Department of Insurance in identifying potential reductions in title subdivision rates and to assist the department in improving consumer awareness of title insurance rates, officials said today.
In July 2005, the department served administrative accusations against nine companies, including Commonwealth Land Title Insurance Co., Lawyers Title Insurance Corp. and Transnation Title Insurance Co., alleging that nearly half of the premium they collected was ceded and paid to lenders, builders and Realtors in return for their referral of title insurance business.
“These illegal rebate schemes damage the trust of consumers and needlessly inflate the cost of purchasing and financing a home,” said California Insurance Commissioner John Garamendi.
“The costs of these illegal rebates are essentially passed on to consumers in the form of bloated rates. This practice gives a bad name to law-abiding title insurance companies, Realtors, lenders and contractors. This settlement should send a strong message to stop these illegal kickbacks,” Garamendi said.
According to the department, this settlement brings the total in major settlements between the department and title insurers to more than $37 million involving the title insurance groups of LandAmerica Financial Corp., First American Title Insurance Co., and Fidelity National Financial Inc.
California’s insurance commission has been active in the national investigations of title insurance practices. Fidelity National Financial and First American Title Insurance Co. last November agreed to pay a total of $22.7 million to consumers in final settlement agreements with California’s insurance commissioner over alleged rebate activities that violate the Real Estate Settlement Procedures Act and some state laws.
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