On August 1, 2013, the Washington State Supreme Court confirmed that Chicago Title Insurance Co. (“Chicago Title”) was liable for the acts of its agent for violating the Washington State anti-inducement statutes. These statutes limit to $25 the amount that an insurer can spend to purchase prizes, goods, wares, or merchandise in connection with any individual marketing effort.
This decision should greatly change the way all insurers do business in the state of Washington as these insurers will now be held accountable and liable for all acts of their appointed agents.
In 2005, the Office of the Insurance Commissioner (“OIC”) launched an investigation into the marketing practices of several major title insurers operating in Washington. The OIC determined that the entire industry was “rife with practices gone haywire … [T]he consumer, who ultimately pays for coverage, is the only source of money for these illegal expenses.” Chicago Title was no exception. Chicago Title co-advertised with middlemen, bought food for hundreds of middlemen meetings and broker opens, sponsored golf tournaments, hosted receptions and hospitality suites, and on one occasion, purchased 26 seats at a Seahawks game.
Chicago Title, in an attempt to avoid mounting fines, blamed its agent Land Title Insurance Company (“Land Title”) for these acts. Land Title was Chicago Title’s agent for the purpose of soliciting and obtaining title insurance policies, Chicago Title argued that it had no right to control Land Title’s marketing practices and therefore could not be liable for the same. The Washington Supreme Court disagreed. The Court reasoned that when Chicago Title gave Land Title the authority to sell its insurance, it also gave Land Title implied authority to perform other acts necessary to the sale of insurance and to act in accordance with industry norms. The Court held that solicitation was necessary to effectuate Land Title’s authority to sell Chicago Title insurance under the agreement, and violating the anti-inducement provisions was customary in the title industry. In a decision written Justice Wiggins, the court found that Chicago Title could not skirt the fines assessed by the OIC by blaming Land Title for its illegal acts.
The official OIC blog, quoting Insurance Commissioner Mike Kreidler, wrote: “The ruling is a big win for consumers. If you allow someone to do business on your behalf, it only stands to reason that you can be held responsible for what they do.” The OIC has interpreted this decision to allow the OIC to go after other bad actors and insurance companies they represent among any industry lines. It is safe to say that other insurers might well suffer the same fate as Chicago Title in the months to come.