Title Insurer to Pay $4.5 Million to Settle Complaint by State

LandAmerica Financial Group Inc. agreed Tuesday to pay $4.5 million to settle charges by the California Department of Insurance that it illegally rebated money from “captive” insurers to banks and builders to get more business.

The Richmond, Va.-based real estate insurance company, which specializes in title insurance, will refund $2.6 million to customers and pay $1.9 million in penalties and legal fees, California Insurance Commissioner John Garamendi said.

Garamendi called the payments by several companies owned by LandAmerica kickbacks and said they had given back nearly half the premium they collected to lenders, builders and real estate agents in return for referrals. As part of the agreement, LandAmerica will stop captive reinsurance agreements, he said.

A captive is a company created by another company to provide liability insurance for the parent. Reinsurers assume some of the risk and provide backup coverage for insurers.

“We have maintained from the start that our captive reinsurance arrangements complied with all known rules and regulations and that no consumer paid more under these arrangements,” said Theodore Chandler Jr., president and chief executive of LandAmerica. “For pragmatic reasons, we decided to resolve this matter with California in order to put it behind us.”

LandAmerica said in July that it had reached an agreement to settle with the California Department of Insurance, but it wasn’t finalized until Feb. 21. Two other title insurers -- First American Corp. of Santa Ana and Jacksonville, Fla.-based Fidelity National Financial Inc. -- agreed last year to settle the state’s complaints for a combined $23 million.