Senator to hold hearing on title insurance
|May 20, 2005|
Stewart Title to testify at Wisconsin meeting
By Janis Mara
A Wisconsin senator is holding a hearing on the state's title insurance laws and practices next Tuesday sparked by ongoing probes of alleged illegal title insurance activities in other states.
Stewart Title will testify at the hearing, which was organized by newly elected Sen. Dan Kapanke, R-La Crosse, chair of Wisconsin's Senate Committee on Agriculture and Insurance, a staff member for Kapanke confirmed.
"It's time for us to assess the industry and find out what's on the books and whether the industry and the regulators are comfortable with where it's at and whether we have problems the other states have," said Rose Smyrski, a Kapanke spokeswoman. "We don't want to open ourselves to problems other states are having."
Major national title insurance companies are under investigation by a number of states, including Colorado and California, for alleged phony reinsurance contracts between title companies and subsidiaries of real estate agents, developers and lenders.
Under these alleged elaborate schemes, the title insurers agreed to give about half of the premium on title insurance policies to captive reinsurance companies created by the other conspirators. The parent companies of those captives would allegedly in turn refer business to the title insurer.
The arrangements were designed to kick back a large share of the title-insurance premium in exchange for the referral of the customer to the title company, a violation of the law, and a practice that harms consumers by potentially forcing up title insurance rates, according to John Garamendi, California's insurance commissioner who is leading the state's investigation.
Part of the Wisconsin hearing, Smyrski said, is to educate Kapanke, who was elected in January, as well as Sen. Mark Miller, another newly elected committee member, and established Senate members new to the committee, on the state's title insurance laws and practices.
If "what we do for enforcement" is not adequate, it may warrant action, Smyrski said.
"A lot of these laws have been on the books for years. New practices, new business models come up, so it's time for us to take a look," Smyrski said.
Pam Kahn-Stein, agency counsel for Stewart Title of Wisconsin, confirmed that she would testify on behalf of Stewart at next week's hearing, but she didn't know what would be discussed.
Wisconsin's insurance commissioner began investigating Stewart in January of 2004 over concerns that the company's Stewart Express software might be violating Wisconsin's insurance code, Kahn-Stein said. The software helps put together affiliated business arrangements, which are partnerships between real estate entities such as title insurance companies, mortgage lenders and real estate brokers.
Affiliated business arrangements have come under fire in other state title insurance investigations because, investigators claim, they sometimes involve illegal fees paid for referrals.
As a result, Stewart Title Guaranty Co. "was ordered to comply with (the state administrative code) and all conditions in the stipulation, which include additional training for new agents, limitations on commissions, and requiring agents to perform certain functions," according to a report. "This action was based on allegations of the Stewart Express program violating title insurance laws."
Stewart Title of California in April was fined $750,000 by the California Insurance Commissioner for alleged involvement in elaborate kickback schemes.
Mike Skalka, general counsel, Stewart Title Guaranty Co., in a previous statement responded by saying, "A Stewart representative responded by saying that, "Stewart strives to follow all applicable federal and state laws regarding business practices on marketing activities; unfortunately, the California Department of Insurance has not clearly defined what constitutes a violation...Stewart has a strong reputation for integrity. We continue to seek guidance from governing bodies concerning lawful marketing activities."
Copyright 2005 Inman News