Title Insurer Fined Over Agent Dealings

Insurance Commissioner John Garamendi fined Stewart Title of California $750,000 for allegedly making payments to real estate agents in exchange for client referrals, a practice that is illegal in California.

The fine is part of a settlement between Stewart and the state Department of Insurance, which uncovered the alleged kickback scheme during a 30-month investigation.

“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,” said Mike Skalka, general counsel of Stewart Title Guaranty Co.

Stewart Title is a division of Houston-based Stewart Information Services Corp.

“Let this latest fine be a warning: We will find these companies who continue to pay kickbacks, and I will do everything in my power to see that they are punished,” Garamendi said in a statement.

Stewart Title also was ordered to stop paying inducements to steer business its way. The investigation found that Stewart gave incentives worth $594,000 to Southern California real estate agents.

The gifts generally took the form of gift certificates and door prizes for agent events, making rent payments, funding special events and sponsoring broker activities.

Shares of Stewart Information Services fell 89 cents to $36.25 on the New York Stock Exchange.

Garamendi’s office also has been investigating the nature of referrals to title insurers by brokers, home builders, lenders, and others in the real estate business.

That probe is focused on the complex business affiliations known as captive reinsurance arrangements that allegedly allow the title insurers to share property buyers’ premiums with the other types of companies.