Colorado State Archives
Executive Orders from the Administration of Governor Bill Owens 1999-2005
Dan Hopkins 303-866-6324
Mark Salley 303-866-6323
Erin Toll 303-894-7423
(DENVER) – Gov. Bill Owens today announced a settlement resulting from a three-and- a-half month investigation by the Colorado Division of Insurance into reinsurance premium kickbacks given to homebuilders, lenders and realtors by title insurers. The settlement with First American Title Insurance Company will result in premium refunds of approximately $24 million directly to consumers in Colorado and nationwide. First American also has agreed to end the pratice.
"It is clear that this reinsurance kickback arrangement harmed the consumer by keeping the cost of title insurance artificially high," Owens said. "Such arrangements violate Colorado and federal law. I'm pleased that Colorado has been the lead state investigating and taking action to curb these abuses."
In this kickback arrangement, homebuilders, lenders and realtors formed their own reinsurance companies, known as "captive insurers". They would then refer all of their title insurance business in a particular area to a specific title company if that company agreed to reinsure the title policy the "captive insurer" owned by the builder, lender or realtor. The title company forwarded premiums to the reinsurance company minus a processing fee. The Division of Insurance maintains these reinsurance arrangements are in fact premium discounts given to large builders, lenders and realtors in exchange for their business.
These types of premium discounts violate state law and the Federal Real Estate and Settlement Procedures Act (RESPA). The captive insurers were established and administered by Marsh Management Services, a branch of Marsh and McLennan. Marsh and McLennan has been the subject of investigation for other insurance improprieties in New York. The Division will be conducting a separate investigation of Marsh's practices in the near future.
The Division is close to reaching another settlement with Fidelity Financial Company, which has six subsidiary title insurance companies also involved in a similar kickback arrangement. As a result of the investigation, Fidelity Financial Company has voluntarily terminated all such reinsurance arrangements nationwide.
LandAmerica, a title company with three subsidiaries, has refused to settle with the Division. The Division will most likely issue emergency cease and desist orders against the LandAmerica companies, and will refer the case to the Attorney General for further investigation.
Also, since the Division of Insurance has no jurisdiction over homebuilders, lenders or realtors, it will be turning its investigative files directly over to the Colorado Attorney General John Suthers and to the Federal Department of Housing and Urban Development for a determination of whether additional actions should be brought against any other entities.
"The Attorney General's office will review all of the information provided by the Division of Insurance, conduct whatever independent investigation is necessary, and determine whether any criminal or civil proceedings are warranted under applicable Colorado laws," Suthers said.
The Division of Insurance is part of the state Department of Regulatory Agencies. Tambor Williams, executive director of that department, stated, "This case proves the regulatory system works. This is a perfect example of the dedication and resourcefullnes of DORA and the Division of Insurance staff in protecting Colorado consumers."
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