Fidelity National Financial and First American will each pay a $2 million fine and cut their rates by 15 percent to settle a probe by New York’s attorney general, the official said Tuesday.
New York Attorney General Eliot L. Spitzer alleged that the two title insurers gave real estate developers free or discounted title insurance in other states in exchange for giving their New York business to Fidelity and First American. The companies have not acknowledged any wrongdoing.
Under the agreements, described as “first-of-their-kind” by Spitzer, Fidelity National Title Group Inc. and First American Title Insurance Co. will seek title insurance rate reductions of 15 percent for all properties up to $1 million in New York, according to Spitzer’s office.
“This agreement provides clarification and better enforcement of state regulations, which First American welcomes,” the company said in a statement. First American noted that under the agreement, it acknowledged no wrongdoing. “Neither the fines nor the rate reductions are expected to have a material impact on earnings of The First American Corporation,” the company said.
Fidelity National did not return calls seeking comment by press time. The attorney general acknowledged both companies’ cooperation in the investigation.
The title insurance industry came under an intense spotlight in 2005. Colorado’s Insurance Division in February 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.
Last week, a $27.5 million settlement with Chicago Title Insurance Co. of Missouri, Transnation Title Insurance Co. of Arizona, First American Title Insurance Co. of California and Lawyer’s Title Insurance Corp. of Virginia was approved in Michigan. The companies allegedly overcharged new-home buyers for title insurance, though they admitted no wrongdoing.
Speaking of the New York settlement, “This settlement should greatly benefit New York home buyers who for too long have paid too much for their title insurance,” Spitzer said in a statement. The attorney general said New York title insurance rates are the highest in the nation.
The attorney general and the superintendent began the investigation of title insurance industry practices in 2004 as part of their investigation of alleged bid rigging and steering in the property and casualty insurance market, according to the attorney general’s office.
The new probe allegedly revealed evidence of an illegal scheme by which real estate developers would receive free or discounted title insurance in other states in exchange for giving their New York business to the settling insurance companies, Spitzer’s office said.
These discounts allegedly were not available to home purchasers and small businesses, who in effect subsidized the so-called illegal rebates by paying the “full freight” of New York’s high title insurance rates, Spitzer said.
The investigation also found that the insurance companies allegedly paid illegal referral fees to their customers’ representatives who did not perform any substantial services, according to Spitzer.
Both companies agreed to end these allegedly illegal practices and also agreed to ensure that home buyers are not subject to last minute “add-ons” at real estate closings (last-minute charges from title agents), Spitzer said.
In addition, the companies will establish Web sites that will enable consumers to calculate the New York regulated title insurance premium for themselves, according to Spitzer.