Two Ohio homeowners are suing Fidelity National Title Insurance Co. for allegedly failing to give them a title insurance discount when they refinanced their home, and are seeking to have their suit certified for class-action status.
Jerry and Dianne Randleman of New London, Ohio, are suing Fidelity National Title Insurance in U.S. District Court in Toledo, Ohio. When the two refinanced their home in 2004, they paid the same amount for title insurance as if they were buying the home from someone else, the lawsuit alleges.
Under rates filed by their insurer with the Ohio Insurance Department in Columbus, the Randlemans were entitled to a discount because their house was already covered by a title insurance policy purchased when the couple first closed on their home, the two contend. The suit accuses Fidelity of purposely not disclosing this to the Randlemans and many others.
Fidelity did not return a call asking for comment this morning.
News of the lawsuit comes on the heels of a call for a federal investigation of the title insurance industry. Michael Oxley, chair of the House Financial Services Committee, on Jan. 24 asked the Government Accountability Office, a government watchdog, to open an investigation.
Oxley’s call was prompted by the intense spotlight that shone on the title insurance industry in 2005. Colorado’s Insurance Division in February 2005 investigated nine Colorado title insurers for alleged kickback schemes said to result in overcharges to consumers. The probe sparked dozens of investigations nationwide, in Florida, Washington, Hawaii, California, Oklahoma, Minnesota and Washington and other states.
“Defendant has knowingly and routinely overcharged its customers,” the Ohio lawsuit alleges. The complaint, filed last week, seeks class-action status on behalf of Fidelity customers in Ohio.
“We think this (alleged overcharging) has been going on for quite a long time,” said Mark Koberna of Cleveland law firm Sonkin & Koberna, which is representing the Randlemans. Koberna said the practice is the subject of lawsuits against Fidelity and other title insurance companies in Ohio and elsewhere.
“It’s widespread,” Koberna said. “We are seeking to certify a class on behalf of all residents in the state of Ohio who were overcharged.” According to Koberna, overcharges average $100 to $250.
Mr. Koberna and his partner, Rick Sonkin, are collaborating on the case with three of the nation’s top law firms. The team includes plaintiff firm Motley Rice LLC, of Mt. Pleasant, N.C.
The Toledo suit seeks more than $5 million in damages. It accuses Fidelity National of breach of contract and fraud.
“Unknown to most customers is that the title insurance industry as a whole, including defendant, employs a multi-tiered pricing structure. The so-called ‘Original Rate’ is the full price for title insurance. However, under certain circumstances, customers who purchase title insurance, whether in connection with the original purchase of their home or in connection with a refinance transaction, may be entitled to a significant discount on the Original Rate,” the complaint alleges.
“Reissue rates are significantly lower than full title insurance rates because title companies perform less work in preparing a reissue policy and insurance companies insure against less risk,” the complaint alleges.
Refinancings usually happen when there is no change of ownership of a property and a short period of time has elapsed between the purchase of the original property and the refinance, the legal papers allege. Hence, it costs the title company less to do the title search and the consumer should be charged less.
Such discounts are mandated by law in Ohio and by Ohio Rev. Code section 3937.03, the pleading says, and are known as “reissue,” “refinance,” “prior policy” or “substitution” rates.
Though Fidelity was aware of this, the company did not disclose it to the Randlemans and thousands of other like them who have purchased property in Ohio since 1995, according to the complaint. Hence, the consumers were “deliberately overcharged,” the legal document accuses.
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