Two N.Y. Title Insurers Pay Penalties, Cut Rates

Two title insurance companies have agreed to pay $4 million in penalties and drop rates 15 percent to end a New York probe of their alleged illicit business practices, officials said last week.

Attorney General Eliot Spitzer and Insurance Superintendent Howard Mills said the agreement involved Fidelity National Title Group Inc. and First American Title Insurance Company, and the companies will seek rate reductions of 15 percent for all properties up to $1 million in New York. In exchange, New York will end its investigation of kickbacks and bid-rigging by the companies.

“This settlement should greatly benefit New York home buyers who for too long have paid too much for their title insurance,” said Mr. Spitzer in a statement.

“Today's settlement agreement is…an important milestone in our efforts to protect insurance consumers in this state,” added Mr. Mills.

Under the agreement, in addition to the rate reductions, the companies would each pay a $2 million penalty and cease the alleged improper activity.

As outlined by the attorney general, the two insurers, which together provide close to 56 percent of the title insurance in the state, were involved in schemes where real estate developers would receive free or discounted title insurance in other states in exchange for giving their New York business to the companies.

Homeowners and small businesses did not have access to the discounts, and ended up paying for the insurers' subsidies, Mr. Spitzer's office said. The investigation also found that the insurance companies paid illegal referral fees to their customers' representatives who did not perform any substantial services.

The companies agreed to ensure that home buyers are not subject to last minute “add-ons” at real estate closings and that Web sites would be established for consumers to calculate the New York regulated title insurance premium.

The investigation of other title insurers and title agents is continuing, the Attorney General's Office said. A spokesperson for Mr. Spitzer said that no other title insurer agreements are pending.

The companies admitted no wrongdoing in the agreement.

For its part, the Jacksonville, Fla.-based Fidelity National said in a statement that it was happy the investigation was behind it and that “only isolated errors or questionable industry practices” were found.

First American Title Insurance, based in New York, released no statement.

Mr. Spitzer said title insurers came under his radar screen when he began his investigation of the insurance industry back in 2004. Most recently, the title insurance industry was taken to task in a Congressional hearing on excessive pricing and questionable business practices.

Colorado Deputy Insurance Commissioner Erin Toll has led the probe into title insurer practices. New York is the latest state to make a settlement with the title insurers. Earlier agreements were reached with California, Colorado and others.