COMMONWEALTH LAND TITLE INSURANCE COMPANY, Appellant-Petitioner,
STEPHEN W. ROBERTSON, INSURANCE COMMISSIONER OF THE STATE OF INDIANA, in his official capacity only and not in his individual capacity, on behalf of the INDIANA DEPARTMENT OF INSURANCE, Appellee-Respondent
APPEAL FROM THE MARION SUPERIOR COURT. The Honorable Michael D. Keele, Judge. Cause No. 49D07-1112-PL-48514.
ATTORNEYS FOR APPELLANT: TODD L. PADNOS, DANIELLE T. KENNEDY, Sheppard Mullin Richter & Hampton, LLP, San Francisco, California; JAN M. CARROLL, SEAN P. BURKE, Barnes & Thornburg LLP, Indianapolis, Indiana.
ATTORNEY FOR AMICUS CURIAE INDIANA LAND TITLE ASSOCIATION, INC: THOMAS E. WHEELER, II, Frost Brown Todd LLC Indianapolis, Indiana.
ATTORNEYS FOR AMICUS CURIAE THE INDIANA LEGAL FOUNDATION: STEVEN M. BADGER, LEAH N. WILSON, Benesch Friedlander Coplan & Aronoff LLP, Indianapolis, Indiana.
ATTORNEYS FOR APPELLEE: WADE D. FULFORD, Indiana Department of Insurance, Indianapolis, Indiana; GREGORY F. HAHN, BRYAN H. BABB, KEVIN M. QUINN, JOEL T. NAGLE, Bose McKinney & Evans LLP, Indianapolis, Indiana.
ATTORNEYS FOR AMICUS CURIAE NATIONAL ASSOCIATION OF INSURANCE COMMISSIONERS: KARL L. MULVANEY, MARGARET M. CHRISTENSEN, Bingham Greenebaum Doll LLP, Indianapolis, Indiana.
ATTORNEY FOR AMICUS CURIAE UNITED POLICYHOLDERS: STEPHEN J. PETERS, Harrison & Moberly, LLP, Indianapolis, Indiana.
CRONE, Judge. BARNES, J., and PYLE, J., concur.
The Indiana Department of Insurance ("IDOI") conducted a targeted market examination of Commonwealth Land Title Insurance Company ("Commonwealth") to determine if it was in compliance with the Indiana Insurance Code. Following the examination, the IDOI issued an order ("the Administrative Order"), concluding that Commonwealth violated Indiana Code Sections 27-4-1-4(a)(7)(C)(i) ("the Rate Statute"), 27-1-3-4 ("the Unsafe Business Practices Statute"), and 27-1-18-2 ("the Gross Premium Tax Statute"), and ordered Commonwealth to take certain actions to cure its violations pursuant to Indiana Code Section 27-1-3.1-11 ("the Cure Statute"). Commonwealth petitioned for judicial review, and the trial court upheld the Administrative Order with one exception.
Commonwealth appeals the trial court's order, arguing that the IDOI's determinations that it violated the aforementioned statutes are unsupported by substantial evidence and that the cures the IDOI ordered are not authorized by the Cure Statute. We conclude that Commonwealth fails to carry its burden to show that the IDOI's determinations are unsupported by substantial evidence and that the cures are not authorized by the Cure Statute. Accordingly, we affirm the trial court's order.
Facts and Procedural History
Commonwealth is licensed to write title insurance in Indiana and has an administrative office in Jacksonville, Florida. During all times relevant to this appeal, Commonwealth marketed title insurance in Indiana solely through independent non-affiliated agents that sold Commonwealth's title insurance pursuant to written agency agreements.
On September 11, 2009, the IDOI issued an examination warrant to Commonwealth, informing it that it would be the subject of a Targeted Market Conduct Examination ("the Examination") covering its title insurance transactions occurring in Indiana from January 1, 2005, to January 1, 2010. The stated purpose of the Examination was to determine whether Commonwealth (1) "permitted excessive charges and/or unfair discrimination in the amount of premiums charged to Indiana policyholders by their agents," (2) complied with the Real Estate Settlement Procedures Act ("RESPA") involving consumer disclosure requirements on HUD-1 Settlement Statements ("HUD-1 Statement"), and (3) "accurately reported the premium tax due on title insurance charges to Indiana policyholders for title insurance." Appellant's App. at 331.
By way of background, the HUD-1 Statement is a disclosure form completed by the agent pursuant to the issuance of a real estate mortgage on which all charges imposed upon the borrower and seller by the lender are itemized. RESPA requires that the title insurance premium be disclosed on a HUD-1 Statement at mortgage closing. At all times relevant to this appeal, title insurance agents reported the title insurance premium on line 1108 of the HUD-1 Statement. Prior to January 1, 2010, the regulations governing the HUD-1 Statement permitted the amount reported on line 1108 to include costs for settlement services such as costs of researching the title or conducting the closing in addition to the premium for title insurance. Commonwealth refers to this undifferentiated amount as a "bundled charge." Appellant's Br. at 9. Indiana is in practice a "risk rate" state, which means that the title insurance premium does not include the costs for settlement services. Appellant's App. at 564. The risk rate traditionally includes a commission to the agent that sells the insurance policy.
Id. at 121. That is, the agent receives the premium from the policyholder, keeps a portion of it as a commission, and remits a portion to the insurer.
The IDOI appointed Bose Government Strategies, LLC ("BGS"), to conduct the Examination. BGS conducted the Examination pursuant to the standards and procedures approved by the IDOI and the National Association of Insurance Commissioners ("NAIC") as required by Indiana law. The NAIC is the United States standard-setting and regulatory support organization, created and governed by the chief insurance regulators from all fifty states, the District of Columbia, and five United States territories. Through the NAIC, state insurance regulators establish standards and best practices, conduct peer review, and coordinate regulatory oversight.
The Examination included a review of Commonwealth's operations and management, marketing and sales practices, underwriting and reporting practices, and producer licensing and agency relations. BGS interviewed key personnel and reviewed Commonwealth's manuals, bulletins, agency agreements, agent audit program, audit files, HUD-1 Statements, remittance reports, and sample transaction files. BGS contracted with Aon Global Risk Consulting ("Aon") to provide actuarial and statistical analysis.
During the Examination, Commonwealth produced a memo (" the CPT Memo" ) that described its " unique" program for pricing title insurance premiums, which it dubbed the " Cents Per Thousand" (" CPT" ) program. Id. at 473-74. The CPT Memo provided in relevant part as follows:
[Commonwealth] has implemented a [CPT] program where an agent agrees to adhere to a special rate chart that sets forth only " remittance rates" which are to be paid to the underwriter. An agent pays " remittance rate" dollars to the underwriter based on this chart rather than relying on a more traditional method of: 1) calculating " premium" for title insurance based on a " premium" rate chart; 2) calculating and deducting a certain percentage as the agent's commission; and 3) remitting the balance to the underwriter. ... Under [the CPT] program, the underwriter never knows the premium that the agent charged the customer -- the underwriter and agent only agree on a " remittance rate." ....
[Commonwealth] has successfully devised a [CPT] program that ... permits complete discretion and flexibility for an agent to set title insurance rates for transactions that it insures ... and reduces state premium taxes paid by the underwriter. ... [A]gency contracts in Indiana have been drafted to incorporate the term " remittance rate" as the only amount due to the underwriter. For purposes of reporting premium however, the agency channel has made a decision to report Indiana premium as a rate of $1.00 dollar per thousand. There does not appear to be any connection between [the] " remittance" rate which is the amount that the agent pays to the underwriter, and the fictional premium rate of $1.00 dollar per thousand. The $1.00 per thousand " premium" rate is not referenced in any agency contract, nor is it a reflection of any fee actually collected or charged for title ...