On December 19, 2012, the Indiana Court of Appeals issued a reversal in a discriminatory rate case involving Ticor Title Insurance Company of Florida and the Indiana Department of Insurance. The case, styled Robertson, Insurance Commissioner of the State of Indiana v. Ticor Title Insurance Company of Florida, Case No. 49A02-1110-PL-971, upholds the previous administrative order filed by the IDOI Director against Ticor Title based upon its belief that the title insurer charged excessive premiums, failed to pay commensurate premium taxes and failed to properly monitor premium charging processes by its agents.
Since this case vindicates a concerted effort on the part of the IDOI to address premium rate charging mechanisms for Indiana title insurance agents, it is very important that all Indiana agents familiarize themselves with the case and the outcome.
In 2008, the IDOI commenced a market conduct investigation of Ticor Title concerning its rates charged in 2007. The audit was conducted by an outside auditing firm who interviewed the insurer’s representatives and its appointed agents and reviewed the insurer’s agency contracts, premium remittance reports, financial statements and HUD-1 Settlement Statements. As a result of its audit, the IDOI reported that the insurer 1) lacked proper governance and oversight over its duly appointed insurance agents, 2) the agents charged premium rates higher than Ticor’s contractual rates, 3) Ticor’s internal controls did not ensure that the agents charged rates in accordance with Ticor’s contractual duties, 4) Ticor did not audit its independent agents to determine the accuracy of premium remittances, 5) Ticor’s internal control program failed to identify premium remittance as a key risk area, 6) the internal control program failed to verify the accuracy of premium remittance, 7) Ticor failed to audit its independent agent’s compliance with RESPA, 8) the agents violated Indiana law by charging inconsistent premium rates, and 9) Ticor’s internal controls should ensure that its agents charge consistent premium rates.
In particular, the IDOI audit found that approximately 70% of all closings performed by selected Ticor agents in 2007 resulted in excessive premiums totaling $116,000.00 in title insurance premiums more than they were authorized to charge under Ticor’s contracted rate.
Ticor objected to the IDOI report and appealed the subsequent Administrative Order that required Ticor to refund all proceeds from title insurance policies issued in 2007 and fined the insurer over $60,000.00. The appeal of the Order was heard in the Marion County, Indiana Superior Court. The Marion County Superior Court reversed the Administrative Order stating that the auditor used flawed methodologies to determine the premiums to be charged by the Ticor agents and did not compare the rates charged to those charged by other companies to determine whether they were excessive or unfairly discriminatory under IC 27-4-1-4.
The IDOI appealed the trial court reversal to the Indiana Court of Appeals. The Appellate Court held that the title insurer’s agents charged rates that exceeded the rates listed in their contracted rate book and should have been charging its Indiana customers the same premium rates for the same amount of title insurance. The Appellate Court also found that the title insurer failed to properly analyze the premium remittance reports to verify whether the amounts charged corresponded with the contracted rate. In so holding, the Appellate Court reversed the trial court’s determination and reinstated the Administrative Order against Ticor Title.
What Does This Mean for Title Agents?
Title agents may not charge rates for title insurance that are excessive or unfairly discriminatory under Indiana law. When a title agent has an agency appointment with a respective title insurer and the terms of that appointment include a contract rate for title insurance premiums, the title agent must follow that contract rate. Title insurers have a duty to inspect the premium reports provided to the company to ensure that the correct title insurance premium is being collected by the title agent and to inform the agent of any material discrepancies.