What's Next: The Plaintiff's Perspective - Title Insurers Face New RICO Exposure

Authored By: Larry Smith
February 3, 2010

In this regular feature, Bulletproof interviews top plaintiffs' attorneys for their perspective on the crises likely to affect businesses in the near future. Today we talk to Daniel Harris of The Law Offices of Daniel Harris in Chicago and Ann Miller of Ann Miller, LLC in Philadelphia, two of the lawyers representing plaintiffs in Coleman v. Commonwealth Land Title Insurance Co.

In late January, 2010 U.S. District Judge Joel H. Slomsky refused to dismiss class action RICO consumer suits alleging that defendants overcharged for title insurance by willfully ignoring mandated discounts. There have been numerous similar complaints in recent years, but this litigation marks the first time a court expressly affirmed that RICO claims are supportable in such cases.

Does this case make new law insofar as the agents and the insurers are being treated as distinct from one another, which is what the RICO statute requires? I don't believe there was precedent for that with respect to the insurance industry.

Daniel Harris: This case neither makes new law nor does it expand existing law. The court's decision simply follows existing law. Agents may be empowered to write coverage on behalf of the insurer, but they're agents - not employees, as the Judge noted. They're separate entities in an association-in-fact between insurers and title agents.

You'd have to ask the insurers what they think about the effects of this RICO dimension on their business and if it represents a developing industry-wide problem. I'd only emphasize that Judge Slomsky clearly said that we satisfied the minimum 'person' and 'enterprise' distinctiveness requirement.

Ann Miller: This case is about the systematic and willful overcharging of consumers and, therefore, exactly the sort of behavior that the civil RICO statute is meant to deal with. The defendants should be spending more time worrying about what they've done wrong, and how to rectify it in the future, rather than quibbling over technicalities. Theirs is a guilty man's argument.

The actual cause of action was failure to disclose discount entitlements. Would such disclosure requirements impose a new burden on businesses to ensure that customers are fully aware of any discounts to which they might be entitled?

Ann Miller: What's key here is that, under Pennsylvania law, title insurance rates are governed by a statute passed in August 2005 that calls for a 10 percent "reissue rate" discount under specific circumstances. It's not as if the title insurance companies were offering some sort of a blue plate special and the waitress forgot to mention it. These title insurance discounts are part of the actual regulated cost.

Daniel Harris: It's similar to how Medicare is set up, for example, where there may be a discounted price based on a particular schedule. People have gone to jail for willfully ignoring those discounts.

How would you sum up the message that this case sends to the title insurance industry?

Daniel Harris: Let me answer that in this way. The title insurance industry is part of the mortgage industry, which in recent years has been reckless, irresponsible, and lawless. The message is that we will continue to pursue these and other such causes of action until they start behaving prudently, responsibility, and lawfully.

Ann Miller: The problem with sending them a message is that they don't usually hear it. They get sued and sued and still don't change. You wonder what it takes, when litigation is apparently just a cost of doing business to them.

Larry Smith is Senior Vice President of Levick Strategic Communications, the nation's top crisis communications firm, and a contributing author to Bulletproof Blog. Connect with Levick on Twitter: @Levick.

Read more: http://www.bulletproofblog.com/2010/02/03/whats-next-the-plaintiffs-perspective-title-insurers-face-new-rico-exposure/#ixzz0ngcP1CWe