A six-year investigation of Orange Coast Title Co. by the California Department of Insurance has ended with the company agreeing to pay $800,000 but denying some charges that it engaged in illegal activities such as making false entries in its books.

The Department of Insurance began an investigation of Orange Coast in 2000, and in February 2006 said it was seeking $14 million in civil penalties for alleged kickbacks and 2,442 violations of the insurance code.

The agreement announced Tuesday requires Orange Coast to pay a $626,335 fine and reimburse the Department $173,664 for the cost of the investigation.

A spokesman for the Department of Insurance, Norman Williams, said the settlement was less than the penalties originally sought in part because some complaints turned out to be the same incident reported multiple times.

“When we get these types of complaints and do the preliminary work and categorization of complaints, we have to throw the whole kitchen sink into the accusation, otherwise we wouldn’t be able to present it later,” Williams said. The Department of Insurance’s investigation documented $167,230 in illegal activities, Williams said, and “we got five times that amount … in settlements. To us that’s a very good outcome.”

In announcing the settlement agreement, the department said it had “unearthed numerous violations,” including “false entries in financial books, illegal payments to induce more title business, payments for furnishings and other supplies to induce title business,” and illegal rebates.

Orange Coast issued a statement denying the company had placed false entries in financial books or provided payments for furnishings.

Williams said Orange Coast signed documents admitting the company had engaged in such practices. “It was part of the settlement. If they believe it was not true, I’m curious why they signed it,” Williams said.

Orange Coast’s president, John Marconi, said in the statement that it was “unfortunate” that regulators and the title insurance industry have to apply a “vague (anti-rebate) statute to determine what is permissible in the marketplace to assist customers. It is under this cloud of ambiguity we believed it best for our company to settle at this time.”

Williams said the statute used is not vague, and has been “used over and over again to stop this practice that is so harmful to consumers” because it makes it difficult to comparison shop for title insurance.

The agreement is the latest development in Insurance Commissioner John Garamendi’s ongoing investigation into an alleged lack of competition in the state’s title insurance industry. In November, Fidelity National Financial and First American Title Insurance Co. agreed to pay $22.7 million to consumers in settlement agreements with Garamendi’s office over alleged rebates.

Garamendi has proposed new regulations he says would cut title insurance rates by requiring insurers and the escrow companies they control to report their costs. The cost data would be plugged into a rate-capping formula.

A hearing on the proposed regulations is set for 10 a.m. Aug. 30 in the Department of Insurance Hearing Room, 45 Fremont St., San Francisco.

***

Send tips or a Letter to the Editor to matt@inman.com or call (510) 658-9252, ext. 150.

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