New Mexico title insurance companies allegedly gave money to a nonprofit foundation co-founded by the state’s Superintendent of Insurance in an attempt to persuade him to set high title insurance rates, according to a lawsuit filed last week.
The class-action suit, filed in the First Judicial District Court in Santa Fe, N.M., alleges that various title companies operating in the state contributed nearly $48,000 to Con Alma, a nonprofit associated with Superintendent of Insurance Eric Serna, in 2003 and 2004.
The New Mexico Public Regulation Commission’s Insurance Division sets uniform title insurance rates for all companies after holding a hearing each year.
Serna denies the implication that the contributions led to favorable treatment.
“The implications they are trying to make don’t pass the test,” said Serna. “It’s a stretch to say that because they (title insurance companies) made contributions to the nonprofit private health foundation that serves underserved areas and poor communities there is special treatment.”
Serna said title insurance rates in New Mexico went down 6 percent or 8 percent last year and 4 percent or 5 percent this year.
“We in New Mexico are one of the few states that regulate (title insurance) rates. By law we must provide in transparent form a hearing after the various parties have had an opportunity to provide pre-filed testimony and the like. We had such a hearing, all the various sides of the issue testified and the staff made a recommendation,” Serna said.
The title insurance industry came under an intense spotlight after a February 2005 investigation of nine Colorado title insurers for alleged kickback schemes. Last week, the U.S. House Financial Services subcommittee held a hearing to air mounting concerns about the industry.
Earlier this month, Serna resigned as board president of Con Alma Health Foundation Inc., he said.
The lawsuit names Fidelity National Title, Chicago Title, Commerce Title, Commonwealth Land Title, Lawyers Title, Old Republic, Stewart Title, Ticor Title, Transnation Title and United General Title as defendants.
Lloyd Osgood, spokeswoman for LandAmerica, said, “Our legal team is reviewing the case and will respond accordingly.” Osgood said she could not comment further.
E. Ashley Smith, executive vice president and general counsel for Stewart Title Guaranty Co., said the company is aware that the lawsuit was filed. “However, Stewart deems it premature to comment about this case until its attorneys have received and had an opportunity to thoroughly review the complaint and documents filed by the plaintiffs in this case,” Smith said in an e-mailed statement.
Representatives of the remaining companies or their parent companies did not answer phone messages asking for comment.
The lawsuit alleges that New Mexico title insurers “contributed at least $21,750 to Con Alma” in 2003 and “at least $26,200 to Con Alma” in 2004. Tax documents filed by Con Alma do not list a specific person or business as a donor, media reports said.
“A primary purpose of these contributions was to influence defendant Serna, in his capacity as superintendent of insurance, to set unreasonably high rates for title insurance, and to restrain competition as to the price and terms of title insurance in New Mexico,” the lawsuit says.
Robert Desiderio, Con Alma’s executive director, said Con Alma in 2005 decided to stop accepting donations from any person or business regulated by Serna, the Santa Fe New Mexican reported.
In 2001, Serna helped found Con Alma with money generated from the sale of Blue Cross and Blue Shield of New Mexico. The nonprofit foundation has given millions of dollars to New Mexico health-care providers.