• Chicago Title Ins. Co. v. Office of the Ins. Comm'r, - Wash.2D--, 2013 Wash. Lexis 615, 2013 WL 3946060 (Aug. 1, 2013)
  • November 11, 2013
  • Law Firm: McCormick Barstow Sheppard Wayte Carruth LLP - Fresno Office

    In investigating the practices of title insurance companies in Washington, the Office of the Insurance Commissioner ("OIC") found that violations of statutory prohibitions on gifts and inducements were "widespread and pervasive." One of the companies found in violation was Land Title Insurance Company ("Land Title"). Land Title was not an insurer itself but an "underwritten title company" that provided title abstracting work for Chicago Title Insurance Company ("Chicago Title"), and acted as an agent authorized to sell title insurance only from Chicago Title. Land Title and Chicago Title entered into an "Issuing Agency Agreement" which permitted Land Title to issue Chicago Title's title assurances, but prohibited Land Title from undertaking any other acts for Chicago Title which were not expressly authorized.

    In November 2007, the OIC approached Chicago Title with a "Consent Order Levying Fine" which proposed that Chicago Title stipulate that Land Title's conduct violated the inducement regulations and agree to pay a fine of $114,500 based on Land Title's violations, as well as enter into a compliance plan. Chicago Title refused to sign the consent order. The OIC brought administrative proceedings against Chicago Title and moved for summary judgment on the issue of whether it was vicariously liable for Land Title's actions. After an initial ruling in Chicago Title's favor by an Administrative Law Judge, which was reversed by an OIC review judge, Chicago Title sought review in state court.


    A 7-2 decision written by Justice Charles Wiggins found that Land Title's unlawful inducements constituted solicitation, for which Chicago Title was responsible as Land Title's principal.

    First, the Court found that the Washington Insurance Code "comprehensively governs the relationship between agent and insurer, specifically enumerating the duties and powers an agent possesses," including the power of solicitation, citing Rev. Code Wash. 48.17.010 which defines the duties and powers of insurance agents. Chicago Title conceded that Land Title was an agent but argued that it was a "limited agent" with no authority to market for Chicago Title, and thus Chicago Title should not be held vicariously liable for Land Title's marketing practices. The Court found that "the authority to solicit necessarily includes the authority to market." When Land Title approached a banker or real estate agent for the purpose of receiving an application for a Chicago Title insurance policy, the Court reasoned that Land Title was soliciting for Chicago Title, and thus engaging in marketing for Chicago Title.

    Chicago Title argued that the Issuing Agency Agreement between it and Land Title controlled over Rev. Code Wash. 48.17.010 and withdrew Land Title's authority to engage in solicitation. However, the Court found that this argument overlooked the fact that "solicitation is inherently part of Land Title's authority to sell title insurance." The Court stated "the insurance code creates a statutory standard of agency that agents and their principals cannot opt out of at their own discretion."

    Further, apart from the statutory scheme, the Court found that Land Title had the authority to solicit insurance for Chicago Title via Land Title's common law implied authority to perform "acts that are necessary steps to achieving the principal's objective or that are customary for agents performing the work." The Court found that unlawful inducements were the norm in the title insurance industry, and that Chicago Title was aware of the pervasiveness of unlawful inducements in the industry and took no affirmative steps to stop Land Title from engaging in unlawful inducements. Thus, Chicago Title was held to be vicariously liable for Land Title's acts under a common law theory of liability as well as statutory law.


    Chicago Title reaffirms the Washington Supreme Court's earlier decision in Pagni v. New York Life Ins. Co., 173 Wash. 322 (Wash. 1933) which held that "an insurance company is bound by all acts, contracts, or representations of its agent, whether general or special, which are within the scope of his real or apparent authority, notwithstanding they are in violation of private instructions or limitations upon his authority, of which the person dealing with him, acting in good faith, has neither actual nor constructive knowledge." While the Chicago Title decision related to a title insurer's agent, and the title insurance industry was subject to particular scrutiny due to a history of abuses, the Court's ruling appears to limit the ability of any insurer to reduce via contract its liability for the acts of its agents. Any activity by an insurance agent that falls within the statutory "duties and powers" of an insurance agent or within the common law implied authority of an insurance agent will likely be attributable to the insurer, notwithstanding the existence of any agreement between the insurer and agent purporting to limit the agent's authority.