Colorado Ready To Sue Big Title Insurer

By Daniel Hays
National Underwriter News
March 11, 2005

Colorado will file suit against LandAmerica title insurance company, seeking payments to customers whose premiums were allegedly inflated to cover kickback costs, the state's insurance commissioner said.

"They were not willing to settle," explained Commissioner Doug Dean, referring to the Richmond, Va.-based title insurance giant.

Mr. Dean said that the case was referred for action by the state attorney general on March 7 and earlier--on March 4--his agency had issued a cease-and-desist order requiring the company to stop "these kickback arrangements."

The transactions that Colorado and California officials refer to as kickbacks are payments the insurers have made to pay for reinsurance contracts with captive insurers operated by developers and mortgage lenders. According to the authorities, the reinsurance monies were actually kickbacks for steering business to the title companies.

Mr. Dean said the even if there was an actual risk ceded to a reinsurer as Land America says, "the premium far exceeded the risk that was assumed."

LandAmerica was subpoenaed on March 10 as part of the ongoing California title insurance company kickback investigation.

Mr. Dean said Colorado offered the company two settlements in the form of monetary penalties. The firm, he noted "rejected the first offer and did not respond to another. Their position is they did nothing wrong, even though they've ceased the practice."

First American Title Insurance, based in Santa Ana California, settled with Colorado on Feb. 18, agreeing to a $24 million nationwide refund to consumers. Mr. Dean said the amount equaled "all the kickbacks they paid to the captive reinsurers"--with $150,000 going to Colorado homeowners--adding there was no monetary penalty assessed by the insurance division.

Mr. Dean said there were also negotiations underway with Fidelity National Title Company, "but it's looking less likely to reach a settlement."

Regardless of any settlement, he said all the division files on the case are being turned over to federal housing officials who administer the Real Estate Settlement Procedures Act--RESPA.

Don Weigel, LandAmerica's executive vice president, said the company had no notice of any lawsuit against it, and noting that the description of "kickbacks" by authorities was "their characterization."

He said the company entered into the reinsurance agreements with supervision from federal agency lawyers and based on the firm's our own analysis. They are, Mr. Weigel said, "designed as risk-sharing arrangements in compliance with RESPA."

Two weeks before the cease-and-desist order, he said, LandAmerica voluntarily terminated captive reinsurance agreements and notified the division, and "throughout the entire investigation we have always remained open to reaching a fair resolution to the issues. As one of our responses to the cease-and-desist order, we asked for a hearing to discuss issues raised and to arrive at a fair resolution.

He said he could not comment on how much of a settlement the company was willing to pay until there is "more serous dialogue with Colorado."

Copyright 2005 by The National Underwriter Company.

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