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CALIFORNIA DEPARTMENT OF INSURANCE
LEGAL DIVISION
Rebecca M. Westmore, Esq. SBN 148152
300 Capitol Mall, 17th Floor
Sacramento, California 95814
Telephone: 916/492-3186
Facsimile: 916/324-1883
Attorneys for the
California Department of Insurance		  

BEFORE THE INSURANCE COMMISSIONER
OF THE STATE OF CALIFORNIA
SACRAMENTO


In the Matter of the Licenses and Licensing Rights of:

FIRST AMERICAN TITLE INSURANCE COMPANY; and,
FIRST AMERICAN TITLE COMPANY,

Respondents.		  
File No. RC 7104-A
ACCUSATION
(Insurance Code §§790.03, 790.04, 790.05, 790.06, 12389.2, 12404, 12405, 12405.7, 12407, and 12408.5; and RESPA, 12 U.S.C. §§2607(a) and (d));
NOTICE OF NONCOMPLIANCE AND HEARING
(Insurance Code §§790.03, 790.05, 790.06, 12404, 12405, 12405.7, 12408.5, 12410, 12411, and 12928.6);
DEMAND FOR MONETARY PENALTY
(Insurance Code §§790.035, 790.08, 12409, 12414.25 and 12976; and 12 U.S.C. §§2607(d)(1) and (d)(2)); and,
RIGHT TO ISSUE ORDER TO SHOW CAUSE (Insurance Code §§790.05, and 790.06).

The Insurance Commissioner of the State of California ("Insurance Commissioner") in his official capacity alleges that:
JURISDICTION AND PARTIES
1. Respondent, FIRST AMERICAN TITLE INSURANCE COMPANY ("FATIC"), is licensed by the Insurance Commissioner to act as a title insurer in the State of California, pursuant to section 12340.1 of the California Insurance Code; 1
2. Respondent, FIRST AMERICAN TITLE COMPANY ("FATC"), is licensed by the Insurance Commissioner to act as an underwritten title company in the State of California, pursuant to section 12389 of the California Insurance Code. FATC is licensed to transact the business of title insurance in the counties of Alameda, Alpine, Amador, Calaveras, Contra Costa, Del Norte, El Dorado, Fresno, Humboldt, Imperial, Kern, Kings, Lake, Lassen, Los Angeles, Madera, Marin, Mariposa, Mendocino, Monterey, Nevada, Orange, Placer, Plumas, Riverside, Sacramento, San Benito, San Bernardino, San Diego, San Francisco, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Shasta, Sierra, Solano, Sonoma, Stanislaus, Sutter, Trinity, Tulare, Tuolumne, Ventura, Yolo, and Yuba;
3. In March 2006, the Department of Insurance ("Department") began examining the operations of FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY (collectively "FIRST AMERICAN"), pursuant to California Insurance Code sections 790.04 and 12407, after the Department received written complaints alleging illegal rebating activities by FIRST AMERICAN. These complaints raised the issue of whether certain activities implemented by FIRST AMERICAN, from February 2005 to February 2006, constituted violations of California's insurance laws. The examination occurred in FIRST AMERICAN'S San Bernardino county office. The investigation included an examination of the books and records of FIRST AMERICAN and interviews with employees of FIRST AMERICAN, as authorized by California Insurance Code sections 790.04 and 12407;
4. California Insurance Code section 790.035 states that "Any person who engages in any unfair method of competition or any unfair or deceptive act or practice... is liable to the state for a civil penalty to be fixed by the commissioner, not to exceed five thousand dollars ($5,000) for each act, or, if the act or practice was willful, a civil penalty not to exceed ten thousand dollars ($10,000) for each act. The commissioner shall have the discretion to establish what constitutes an act;"
5. California Insurance Code section 790.04 authorizes the Insurance Commissioner to "examine and investigate into the affairs of every person engaged in the business of insurance in the State in order to determine whether such person has been or is engaged in any unfair method of competition or in any unfair or deceptive act or practice prohibited by Section 790.03...;"
6. California Insurance Code section 790.05 states that "Whenever the commissioner shall have reason to believe that a person has been engaged or is engaging in this state in any unfair method of competition or any unfair or deceptive act or practice... and that a proceeding by the commissioner in respect thereto would be to the interest of the public, he or she shall issue and serve upon that person an order to show cause containing a statement of the charges in that respect, a statement of that person's potential liability under section 790.035, and a notice of hearing thereon...;"
7. California Insurance Code section 790.06 provides for the prosecution of unfair methods of competition and unfair and deceptive acts or practices in the business of insurance that are not defined in Section 790.03;
8. California Insurance Code section 790.08 states that "The powers vested in the commissioner in this article shall be additional to any other powers to enforce any penalties, fines or forfeitures, denials, suspensions or revocations of licenses or certificates authorized by law with respect to the methods, acts and practices hereby declared to be unfair or deceptive;"
9. California Insurance Code section 12389.1 states that "Before granting a license or a reissued license to act as an underwritten title company to any applicant, the commissioner shall consider the qualifications of the applicant in respect to the following subjects: ...(e) competency, character, and integrity of management; and... (g) fairness and honesty of methods of doing business...;"
10. California Insurance Code section 12389.2 provides that "After the issuance or reissuance of a license to act as an underwritten title company, the holder shall continue to comply with the requirements as to its business set forth in section 12389.1 and in the other applicable sections of this code, and in the other laws of this state;"
11. California Insurance Code section 12404 provides, in pertinent part, that "it is unlawful for any title insurer, underwritten title company, or controlled escrow company, to pay, directly or indirectly, any commission, compensation, or other consideration to any person as an inducement for the placement or referral of title business;"
12. California Insurance Code section 12404(b)(1) defines "person" as "any individual or entity who is any owner or prospective owner, lessee or prospective lessee of real property or any interest therein, any obligee or prospective obligee of an obligation secured or to be secured either in whole or in part by real property or any interest therein, or any person who is acting or who is in the business of acting as agent, representative, attorney, or employee of those persons" (hereafter collectively referred to as "12404 persons");
13. California Insurance Code section 12404(c) enumerates certain activities which are "deemed per se inducements for the placement or referral of title insurance business by any person, and are unlawful;"
14. California Insurance Code section 12404(g) states that "The Legislature hereby intends that this section, including the specific terms employed within it, shall be liberally construed for the purpose of protecting consumers of title business;"
15. California Insurance Code section 12405 provides, in relevant part, that "no underwritten title company shall make any rebate of any portion of the fee or charge" shown in its schedule of rates filed with the Commissioner;


22. California Insurance Code section 12928.6 provides that "Whenever the commissioner believes, from evidence satisfactory to him, that any person is violating or about to violate any provisions of this code or any order or requirement of the commissioner issued or promulgated pursuant to authority expressly granted the commissioner by any provision of this code or by law, the commissioner may bring an action in the name of the people of the State of California in the superior court of the State of California against such person to enjoin such person from continuing such violation or engaging therein or doing any act in furtherance thereof;"
FACTUAL ALLEGATIONS

STATUTORY ALLEGATIONS


28. The facts alleged herein demonstrate that FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY have made payments in the form of commissions, compensation, and/or other consideration to any person as an inducement for the placement or referral of title business, and constitute an unfair method of competition and/or unfair or deceptive acts or practices in the marketplace affecting title insurance competitors and consumers in this State, in violation of subsection (a) of section 790.06 of the California Insurance Code, and constitute grounds for the Insurance Commissioner to suspend or revoke the licenses and licensing rights of FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY pursuant to California Insurance Code section 790.08;
29. The facts alleged herein demonstrate that FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY have paid, directly or indirectly, any commission, compensation, or other consideration to any person as an inducement for the placement or referral of title business, in violation of California Insurance Code section 12404(a), and constitute grounds for the Insurance Commissioner to restrict or suspend the licenses and licensing rights of FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY pursuant to California Insurance Code section 12409;
30. The facts alleged herein demonstrate that FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY have paid, provided or offered to provide assistance with the business expenses of any person, in violation of California Insurance Code section 12404(c)(1), and constitute grounds for the Insurance Commissioner to restrict or suspend the licenses and licensing rights of FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY pursuant to California Insurance Code section 12409;
31. The facts alleged herein demonstrate that FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY have provided or offered to provide consideration for the benefit of any person, in violation of California Insurance Code section 12404(c)(2), and constitute grounds for the Insurance Commissioner to restrict or suspend the licenses and licensing rights of FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY pursuant to California Insurance Code section 12409;
32. The facts alleged herein demonstrate that FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY have furnished or offered to furnish all or any part of the time or productive effort of any employee of the title insurer and the underwritten title company for services unrelated to the title business, in violation of California Insurance Code section 12404(c)(6), and constitute grounds for the Insurance Commissioner to restrict or suspend the licenses and licensing rights of FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY pursuant to California Insurance Code section 12409;
33. The facts alleged herein demonstrate that FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY have paid consideration as an inducement for the placement or referral of title business not specifically set forth in this section, in violation of California Insurance Code section 12404(e), and constitute grounds for the Insurance Commissioner to restrict or suspend the licenses and licensing rights of FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY pursuant to California Insurance Code section 12409;
34. The facts alleged herein demonstrate that FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY have rebated portions of the fee or charge for a title policy, in violation of California Insurance Code section 12405, and constitute grounds for the Insurance Commissioner to restrict or suspend the licenses and licensing rights of FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY pursuant to California Insurance Code section 12409;
35. The facts alleged herein demonstrate that FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY have paid for or furnished the advertising or promotional material of a customer in connection with the sale or encumbrance of real property in violation of California Insurance Code section 12405.7, and constitute grounds for the Insurance Commissioner to restrict or suspend the licenses and licensing rights of FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY pursuant to California Insurance Code section 12409;
36. The facts alleged herein demonstrate that FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY have paid or offered to pay, either directly or indirectly, any part of the employee compensation to persons or entities as an inducement for, or as compensation for, any title insurance business, in violation of California Insurance Code section 12408.5, and constitute grounds for the Insurance Commissioner to restrict or suspend the licenses and licensing rights of FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY pursuant to California Insurance Code section 12409;
37. The facts alleged herein demonstrate that FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY have provided kickbacks for the referral of title insurance business in connection with transactions involving federally related mortgage loans, in direct contravention of RESPA, 12 U.S.C. section 2607(a) and 24 C.F.R. section 3500.14(g)(4), and constitute grounds for the Insurance Commissioner to assess monetary penalties against FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY pursuant to 12 U.S.C. section 2607(d)(1);
38. The facts alleged herein demonstrate that FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY have provided kickbacks for the referral of title insurance business in connection with transactions involving federally related mortgage loans, in direct contravention of RESPA, 12 U.S.C. section 2607(a) and 24 C.F.R. section 3500.14(g)(4), and constitute grounds for the Insurance Commissioner to assess treble damages against FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY pursuant to 12 U.S.C. section 2607(d)(2);
39. The facts alleged herein demonstrate that FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY have provided kickbacks for the referral of title insurance business in connection with transactions involving federally related mortgage loans, in direct contravention of RESPA, 12 U.S.C. section 2607(a) and 24 C.F.R. section 3500.14(g)(4), and constitute grounds for the Insurance Commissioner to enjoin FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY against further violations of these sections;
40. The Insurance Commissioner hereby notifies FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY that based upon the facts alleged herein, FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY are in violation of California Insurance Code sections 790.06, 12389.2, 12404(a), 12404(c), 12404(e), 12405, 12405.7, and 12408.5, and RESPA, 12 U.S.C. section 2607(a), and that FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY have ten (10) days to comply with the provisions of those sections, or FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY will be considered to be willfully failing to comply. If FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY are found willfully failing to comply, each company will be subject to an Order by the Commissioner prohibiting it from conducting its businesses for a period of not more than one year, and will also be subject to the suspension or revocation of its licenses and licensing rights by the Insurance Commissioner pursuant to California Insurance Code sections 790.08 and 12411;

DEMAND PURSUANT TO

CALIFORNIA INSURANCE CODE SECTIONS 790.035, 12409, and 12976

and RESPA, 12 U.S.C. 2607(d)(1) and (d)(2)


41. As a result of the actions of FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY, as set forth hereinabove, and pursuant to California Insurance Code sections 790.035 and 790.06, FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY are liable to the people of California in the amount of five million six hundred twenty five thousand dollars ($5,625,000.00), as a civil penalty for engaging in one thousand one hundred twenty five (1,125) acts of unfair methods of competition or unfair or deceptive acts or practices;


42. As a result of the actions of FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY, as set forth hereinabove, and pursuant to California Insurance Code section 12409, FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY are liable to the people of California in the amount of one million eight hundred fifty seven thousand four hundred fifty four dollars and fifteen cents ($1,857,454.15), which is five times the amount of the unlawful rebates of three hundred seventy one thousand four hundred ninety dollars and eight-three cents ($371,490.83);

43. As a result of the actions of FIRST AMERICAN TITLE INSURANCE COMPANY, as set forth hereinabove, and pursuant to California Insurance Code section 12414.25, FIRST AMERICAN TITLE INSURANCE COMPANY is liable to the people of California in the amount of five thousand dollars ($5,000.00), for its willful failure to comply with a final Order of the Commissioner, dated November 2, 2005, in File No. DISP05046622;

44. As a result of the actions of FIRST AMERICAN TITLE INSURANCE COMPANY, as set forth hereinabove, and pursuant to RESPA, 12 U.S.C. section 2607(d)(1), FIRST AMERICAN TITLE INSURANCE COMPANY is liable in the amount of ten thousand dollars ($10,000.00) as a monetary penalty for providing kickbacks and unearned fees to settlement service providers;

45. As a result of the actions of FIRST AMERICAN TITLE COMPANY, as set forth hereinabove, and pursuant to RESPA, 12 U.S.C. section 2607(d)(1), FIRST AMERICAN TITLE COMPANY is liable in the amount of ten thousand dollars ($10,000.00) as a monetary penalty for providing kickbacks and unearned fees to settlement service providers;

46. As a result of the actions of FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY, as set forth hereinabove, and pursuant to RESPA, 12 U.S.C. section 2607(d)(2), FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY are liable to the people of the State of California in the amount of one million one hundred fourteen thousand four hundred seventy two dollars and forty-nine cents ($1,114,472.49), which is three times the amount of the unlawful rebates of three hundred seventy one thousand four hundred ninety dollars and eight-three cents ($371,490.83);

47. Demand for eight million six hundred twenty one thousand nine hundred twenty six dollars and sixty-four cents ($8,621,926.64) is hereby made to FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY. Pursuant to California Insurance Code section 12976, FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY have ten (10) days to make payment;

ORDER TO SHOW CAUSE PURSUANT TO CALIFORNIA INSURANCE CODE SECTIONS 790.05 and 790.06


48. WHEREAS, the Insurance Commissioner has reason to believe that a proceeding by the Insurance Commissioner would be in the public interest, he shall bring an Order to Show Cause pursuant to section 790.05 of the California Insurance Code, containing a statement of the charges and FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY'S potential liability under section 790.06;
49. WHEREAS, the Insurance Commissioner has reason to believe, based upon the facts sets forth herein, that FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY have engaged in and are currently engaging in a method of competition and/or an act or practice in the conduct of its business that is not defined in California Insurance Code section 790.03, and that the method is unfair and/or the act or practice is unfair or deceptive pursuant to California Insurance Code section 790.06;
50. WHEREAS, the Insurance Commissioner reserves his right to bring, in the future, such Order to Show Cause against FIRST AMERICAN TITLE INSURANCE COMPANY and FIRST AMERICAN TITLE COMPANY for the acts set forth herein.
WHEREFORE, the Insurance Commissioner prays for the following:
Dated: November 6, 2006 JOHN GARAMENDI
Senior Staff Counsel

1 Unless otherwise stated, all references are to the California Insurance Code.

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Last Revised - December 07, 2006
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