News: 2007 Press Release

SACRAMENTO - Insurance Commissioner Steve Poizner announced today that the California Department of Insurance (CDI) has reached an agreement with Stewart Title Guaranty Company to halt illegal rebate activities and unfair practices and pay $1,000,400 in penalties. Stewart Title was accused of paying $500,196 in illegal kickbacks to various builders, lenders, and title agents in exchange for the referral of title insurance business.

"When referrals by homebuilders, realtors, lenders, or title agents are driven by kickbacks from title insurers, the consumer's best interests are compromised," said Insurance Commissioner Poizner. "These illegal rebate schemes damage the trust of consumers and drive up the cost of purchasing a home. This practice creates unfair competition and misleads consumers. I will continue to take aggressive enforcement action to ensure fair title insurance pricing for consumers."

Stewart Title Guaranty Company controls approximately 10 percent of the California title insurance market. Stewart's illegal rebate scheme involved 3,908 California homebuyers who purchased or refinanced a home between 1998 and 2006. CDI accused Stewart Title of paying a portion of the premium they collected to builders, lenders, and title agents in return for the referral of business. Prior to the administrative hearing, scheduled to commence August 27, 2007, Stewart Title agreed to a financial settlement and to accept a cease and desist order, bringing their rebating practices to an end.

Stewart Title Guaranty Company was accused of executing a sophisticated scheme camouflaged as "reinsurance" that channeled illegal rebates to various homebuilders, lenders, and title agents in exchange for the referral of title business to Stewart. These "reinsurance agreements" gave up to 50% of the title insurance premium to captive reinsurance companies specially created by the homebuilders, lenders, and title agents for purported "reinsurance." The amount of money "ceded" or paid to the captive reinsurance companies far exceeded the amount of recoveries that Stewart would expect to receive from the reinsurance companies based on its historical loss ratios.

Today's announcement reaffirms Commissioner Poizner's commitment to maintaining fair rates and legal practices in the title insurance industry. In the last five years, the Department of Insurance has collected more than $48 million in fines, costs and restitution from title insurers for alleged violations of the law.

Links to the Stipulation and Order.