Stewart Title Guaranty and a subsidiary, Electronic Closing Services, have agreed to pay $1.5 million to settle allegations by California regulators that they hired an unlicensed company to help prepare more than 2,000 title insurance policies.

Richmond Title Services, the Tennessee-based company accused of operating as an unlicensed underwritten title company, was not a party to the settlement.

Stewart Title and Electronic Closing Services did not admit to the allegations but agreed to settle them to “avoid the expenses, uncertainty and distraction of litigation,” according to the June 29 settlement agreement.

California regulators allege Electronic Closing Services — which does business as E-Title — contracted with Richmond Title Services to perform title searches, examinations, reports, certificates and abstracts.

Under an initial December 2004 contract, Richmond Title was allegedly paid $710 per title insurance policy issued for such work, plus 100 percent of search revenue. The contract said E-Title would employ Richmond Title in issuing policies in California, Colorado, Nevada and Pennsylvania, on behalf of Stewart Title..

The contract was allegedly amended in March 2005, reducing the payments to $519 per order but also expanding the program to Kansas, Maine, Missouri, Montana, Nebraska, New Hampshire, New Jersey, North Carolina, Rhode Island, Vermont, Virginia, Washington, D.C., West Virginia and Wisconsin.

Stewart Title allegedly issued 2,173 title insurance policies on California properties through E-Title based on work performed by Richmond Title, a violation of California’s insurance code because neither Richmond Title nor E-Title were licensed by the insurance commissioner.

Stewart Title and E-Title agreed to stop issuing title insurance policies on California properties based on searches and examinations performed by Richmond Title, and E-Title agreed to refrain from preparing or writing title policies in the state.

The settlement agreement required Stewart Title and E-Title to pay $1.48 million in fines, plus $21,423 to reimburse the Department of Insurance for the costs of its investigation.

The California Department of Insurance continues to pursue legal action against Richmond Title, which did not respond to a request for comment from Inman News.

The company’s Web site states it provides “settlement and/or administrative services … in all 50 states.”

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