The California Department of Insurance announced it has reached a settlement with Investors Title Company over practices the agency said inflated the cost of insurance for consumers.
Commissioner John Garamendi said the arrangement with Investors Title Company to end illegal rebating activities and pay a $1 million fine followed a six-month investigation by his department.
The inquiry followed accusations that the company was steering title business by using illegal rebate activities.
As outlined by Mr. Garamendi, the investigation, based on employee interviews and an examination of the company's books and records, found that Investors Title Company had used illegal rebate activities which included fabricating fraudulent receipts totaling more than $108,000.
The company, he said in a statement, also paid more than $145,000 for printing, postage, promotional materials and other business support services for the benefit of realtors, builders and lenders, totaling over $253,000 in illegal distributions.
"Illegal rebates add unwarranted costs to title business operations and artificially inflate the cost of premiums for policyholders," Mr. Garamendi said.
He promised his department would continue to investigate "these illegal rebate scams which foster unfair competition and cheat consumers. What title companies need to realize is these illegal rebates aren't worth it and we will uncover it."
According to Mr. Garamendi, the $1 million fine equals four times the amount of claimed illegal rebates. Additionally, the settlement suspends for 10 days the employees involved in the illegal rebate activities.
All told, since 2001 the department has collected $82.3 million in settlements, consumer refunds, penalties and costs from nine title insurers, one of which, Southland Title, was involved in two separate actions with the department.
In some of the more recent settlements title insurers were accused of paying kickbacks to developers and lenders to get their business and disguising the payments as premiums for reinsurance provided by captive insurers maintained by those businesses. Regulators said title coverage is such a low-risk business that the reinsurance was basically unneeded.
Spokesperson Carrie Beckstein said Investors Title did not use reinsurance payments, but in addition to rebates the company's practices involved gifting employees at companies with items like flowers and golf outings.
Investors Title, which transacts title business in Los Angeles, Ventura, Orange, Riverside and San Bernardino counties, and San Diego, was ordered to pay a $1 million fine, pay a $5,000 penalty for failure to comply with a previous order to cease and desist, and to reimburse $52,974 to the Department of Insurance for costs of the investigation.
Additionally, Investors Title Company agreed to cease and desist from engaging in illegal rebate activities and suspended all current sales and marketing employees, for 10 days, who were engaged in illegal rebate activities.
The department said the employee suspension included company sales managers that directed business development and marketing activities and the sales representatives who spent the kickbacks obtained as reimbursement on gifts, merchandise and entertainment for realtors, lenders and builders.
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