LandAmerica title insurance firm settles kickback case with $1M gift

Craig Harris
The Arizona Republic
September 9, 2005

The Arizona Department of Insurance has reached a settlement with a second major title insurance company over the insurer's payouts to real estate-related firms in return for referrals of home buyers.

But in this case, no money will be returned to consumers.

Instead, Virginia-based LandAmerica Financial Group, Inc. will donate $1 million to the Arizona chapters of the American Red Cross to benefit state residents and Hurricane Katrina refugees brought to Arizona.

"We got creative with this because LandAmerica absolutely would go to litigation and refused any (consumer) refunds," state Insurance Director Christina Urias said Thursday.

"We got LandAmerica to do it this way."

Lloyd Osgood, a LandAmerica spokeswoman, said the company would not issue refunds because it believed no consumer paid more for title insurance. She said the settlement was a way to "put the issue behind us."

The state also announced that it has started an investigation into business relationships between national title insurance companies and Phoenix-area real estate firms.

In July, The Arizona Republic disclosed that two title companies, First American Title Insurance Co. and Fidelity National Financial Inc., were paying the brokerages or their executives up to 50 percent of the profits from insurance policies in exchange for referrals of home buyers. Payments to some of the real estate partners exceed $500,000 a year.

Erin Klug, an Insurance Department spokeswoman, said the state launched its probe after reviewing agency records that had been requested by the newspaper.

Fidelity and its partner, West USA Realty Inc., voluntarily dropped its partnership with a firm called Liberty Title Agency on Sept. 1, saying it wasn't working.

Title Partners of America, which oversees five joint ventures between First American and five Valley real estate firms, said it was unaware of any state investigation. First American officials could not be reached.

Title insurance is based on the price of a home and protects a home buyer and lender against any future claims against the title. For a $250,000 home, the cost is about $1,700.

Regulators around the country this year have examined title insurance firms for kickback deals, saying they were illegal because federal and state laws prohibit inducements in return for referrals.

Some regulators believe the cost of title insurance could drop because of the increased scrutiny.

The settlement with LandAmerica comes on the heels of a $644,152 settlement with Florida-based Fidelity National Title Insurance Group, which will refund the money to nearly 4,000 Arizonans who bought title insurance from Fidelity firms. Neither company admitted wrongdoing.

In cases involving Fidelity and LandAmerica, the title companies were involved in reinsurance programs where the firms would partner with home builders, mortgage lenders and real estate brokers to create "captive reinsurance" companies.

After the title insurance company took a fee, it would provide nearly half of the premiums to the partners. First American earlier this year refunded $4.6 million to about 15,000 Arizonans for its role in reinsurance programs.

In addition to providing $1 million to the Red Cross, LandAmerica also will establish a $250,000 title insurance education fund to teach Arizonans about title insurance.

Neither LandAmerica nor the Insurance Department would disclose which companies were referring customers to LandAmerica and receiving kickbacks.
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