Stewart Faces Millions in Fines
|September 25, 2006|
California Regulators Want $46.7 Million in Damages From Stewart Information Services
Dan Seymour, AP Business Writer
NEW YORK (AP) -- California regulators want $46.7 million in damages from Stewart Information Services Corp., which insures property titles, alleging the company's arrangements to buy reinsurance amounted to kickbacks to home builders in exchange for client referrals, the state said Monday.
The California Department of Insurance filed an accusation against Stewart, accusing the company of buying reinsurance from shell companies set up by home builders or lenders that referred clients to Stewart.
California regulators said Stewart's arrangements to buy policies from these reinsurers amounted to kickbacks because they rewarded the referrer for sending business to Stewart.
The state sued over payments totaling about $443,000 to captive reinsurers on policies affecting 3,650 homeowners in California, the state said. The reinsurers were captives of the mortgage lending arm of Wells Fargo & Co. and a handful of home builders including Lennar Corp., the state said.
"Stewart believes the allegations to be the result of a misunderstanding of Stewart's business," the company said in a statement. The company said it met with state regulators to respond to allegations.
The claim for $46.7 million in fines would exceed penalties and consumer refunds paid in the state by three other title insurers over similar accusations: First American Corp. ($20 million), LandAmerica Financial Group ($4.5 million), and Fidelity National Financial Inc. ($13.3 million).
Stewart said its reinsurance programs are different from the three competitors, and the company "intends to vigorously defend the propriety of its reinsurance purchases."
Shares of Stewart Information Services rose 58 cents to $35.39 in afternoon trading on the New York Stock Exchange.
Coopyright 2006 Associated Press