Title Insurance Scheme Settlement In Fla.

Florida authorities said today that First American Title Insurance Company had agreed to pay $5 million in penalties and costs for allegedly securing business by paying "kickbacks" to builders, bankers, real estate agents and brokers.

Florida Chief Financial Officer Alex Sink's announcement said the activity alleged was in violation of the Florida Insurance Code and federal law.

The settlement was the latest in a long line of similar agreements reached with officials in other states by title companies throughout the nation after a probe into kickback activity started by the Colorado Insurance Division in 2004.

Among other settlements by First American, the company reached a $500,000 agreement earlier this year with Minnesota authorities and last year was part of a $4 million New York settlement that involved Fidelity National Title Group and required firms to drop rates 15 percent.

Ms. Sink's statement said Florida action followed a year-long investigation by her Department of Financial Services into the Santa Ana, Calif.-based firm.

Both the U.S. Department of Housing and Urban Development, and the Florida Office of Insurance Regulation were invited to join DFS in obtaining sanctions against First American, the statement said.

All three regulatory agencies reached an agreement with First American this week after concluding settlement negotiations.

Ms. Sink said she was proud "of the hard work of our title insurance investigators and lawyers, which resulted in today's settlement. We will not tolerate anyone who violates insurance laws designed to protect the public in order to gain an unfair advantage over their competitors."

The Florida investigation, it was explained, looked into whether First American had created and utilized limited partnership entities to act as sham title insurance agencies as a means of funneling prohibited payments for the referral of business.

The entities enlisted real estate agents, mortgage brokers, banks and homebuilders who referred business to First American's sham title insurance agencies, resulting in unfair financial gains to First American and its affiliated title insurance agencies.

Investigations of title firms in Colorado found that the kickback money was funneled through captive reinsurance firms operated by builders who were in league with title companies.

Under terms of the Florida agreement, First American is required to sever its business relationships with 87 of its limited partnership title insurance agencies in Florida, and to conduct future business activities under strict requirements subject to review of a monitor who will report inspection results on a monthly basis for a period of one year.