MARYLAND INSURANCE ADMINISTRATION

MARYLAND INSURANCE ADMINISTRATION MARYLAND INSURANCE * REVIEW OF A RECOMMENDED ADMINISTRATION * DECISION ISSUED BY EXREL GX-H * DAVID HOFSTETTER Complainant * AN ADMINISTRATIVE LAW JUDGE v. * OF THE MARYLAND OFFICE OF LAWYERS TITLE INSURANCE * ADMINISTRATIVE HEARINGS CORPORATION and INTEGRITY * TITLE, ESCROW & SETTLEMENT * CORPORATION * OAH No.: MIA-CC-33-11-07633 Licensee * MIA No.: MIA-201 1-02-005 * * * * * * * * * * * * * FINAL ORDER Pursuant to Md. Code Ann., Ins. 2-210(d) and COMAR 31.02.01.1O-2H, the undersigned Maryland Insurance Commissioner, hereby issues this summary affirmance of the proposed decision below. On April 13, 2011, this case was heard by Administrative Law Judge ( AU ) Hofstetter. On May 13, 2011, the AU issued a Proposed Decision, and on the same date the Office of Administrative Hearings mailed the Proposed Decision to the Complainant, G.Y-H., to Lawyers Title, to Integrity Title and Escrow Settlement Corporation, to Fidelity National Title Group and to P. Randi Johnson of the Maryland 1

Insurance Administration. Attached to the Proposed Decision were the Appeal Rights advising all parties that pursuant to Md. Code Ann., State Gov t 10-220 and COMAR 31.02.01.10-1, they were given an opportunity to file written exceptions with the undersigned, within twenty (20) days from receipt ofthe Proposed Decision. No Exceptions were filed by any of the parties. I have carefully evaluated the documentary record in this case, and the Proposed Decision by AU Hofstetter. In consideration thereof, and pursuant to COMAR 31.02.01.10-2D, I am persuaded that the result reached by the AU is correct. A Proposed Decision summarily affirmed under COMAR 31.02.01.10-2H is not precedent within the rule of stare decisis in other cases. THEREFORE, it is hereby ORDERED that the Proposed Decision of AU Hofstetter be adopted as the Commissioner s Final Order, and it is further ORDERED that the complaint made by the Complainant be DENIED AND DISMISSED; and it is further ORDERED that the records and publications of the Maryland Insurance Administration reflect this decision. It is so ORDERED this th 8 day of July, 2011. THERESE M. GOLDSMITH Commissioner Signature on file with Orignal Deputy Comm issioner -2-

MARYLAND INSURANCE * BEFORE DAVID HOFSTETTER, ADMINISTRATION, * AN ADMINISTRATIVE LAW JUDGE EX REL.: * OF THE MARYLAND OFFICE, * OF ADMINISTRATIVE HEARINGS COMPLAINANT * OAH No.: MIA-INS-33-11-07633 * MIANo.: 2011-02-005 LAWYERS TITLE INSIJRANCE * CORPORATION and INTEGRITY * TITLE, ESCROW & SETTLMENT * CORPORATION, * LICENSEES * * * * * * * * * * * * * PROPOSED DECISION 1 STATEMENT OF TUE CASE ISSUE SUMMARY OF TUE EVIDENCE FINDINGS OF FACT DISCUSSION CONCLUSIONS OF LAW PROPOSED ORDER STATEMENT OF THE CASE On March 19, 2010, the Maryland Insurance Administration (MIA) received a complaint 1 Under the relevant statute and regulations, the Insurance Commissioner may, on a case-by-case basis, delegate to the Office of Administrative Hearings (OAR) the authority to issue: (a) proposed or final findings of fact; (b) proposed or final conclusions of law; (c) proposed or final findings of fact and conclusions of law; or (d) a proposed or final order. Md. Code Ann., State Govt 10-205 (2009); Code of Maryland Regulations (COMAR) 31.02.01.04-1(A)(2). Here, the Commissioner has delegated to OAH the authority to issue proposed findings of fact, proposed conclusions of law and a proposed order.

from (Complainant) alleging unfair claims settlement practices by Lawyers Title Insurance Corporation (Lawyers Title) and Integrity Title, Escrow & Settlement Corporation s (Integrity) arising from errors in the recording of the deed for property she purchased in Upper Marlboro, Maryland in 2005 (Lawyers Title and Integrity will be referred to collectively as the Licensees). After an investigation, the MIA found no violation ofthe Maryland Insurance Article by the Licensee, and notified the Complainant and the Licensees of its finding by a letter dated December 13, 2010. On December 29, 2010, the Complainant requested a hearing. Md. Code Ann., Ins. 2-210 (Supp. 2010). On February 22, 2010, the MIA referred this matter to the Office of Administrative Hearings (OAH) for a hearing. Md. Code Ann., State Govt 10-205 (2009). In its delegation, the MIA directed the hearingjudge to pay specific attention to sections 10-126 and 27-303 of the Maryland Insurance Article. I held a hearing on April 13, 2011 at the OAH in Hunt Valley, Maryland. Md. Code Ann., State Govt 10-205(e) (2009). The Complainant appeared without representation. Carson Mills, Esquire, represented Lawyers Title. Despite proper notice, Integrity failed to appear for the hearing. 2 The contested case provisions ofthe Administrative Procedure Act, the procedural regulations for MIA hearings, and the Rules of Procedure of the OAH govern procedures in this case. Md. Code Ann., State Gov t ~10-201 through 10-226 (2009 & Supp. 2010); Code of Maryland Regulations (COMAR) 31.02.01; and COMAR 28.02.01. 2 Integrity s license was revoked by the MIA on September 9, 2009 for matters unrelated to the present case. MIA Ex. 33. The company is apparently out of business. 2

ISSUE Did each Licensee s refusal to pay the Complainant s claim based on the failure to properly record a deed constitute an unfair claim settlement practice? SUMMARY OF THE EVIDENCE Exhibits I incorporated the entire MIA file, consisting of 35 exhibits, into the record. Neitherthe Licensee nor the Appellant offered additional exhibits. Ihave attached a complete Exhibit List as an Appendix. Testimony The Complainant testified on her own behalf. Carson Mills, Esquire, presented argument on behalf oflawyers Title. FINDINGS OF FACT I find the following facts by a preponderance ofthe evidence: 1. In 2005, the Complainant contracted to purchase a home at 16611 Village Drive, Upper Marlboro, Maryland (the Property). 2. On November 15, 2005, Integrity Title conducted the settlement for the purchase of the Property. 3. In conducting the settlement, Integrity Title acted as the agent for Lawyers Title, which provided title insurance concerning the transaction. 4. The transaction involved two deeds and two deeds of trust which were all to be recorded with the Prince George s County Land Records Division. 3

5. The first deed was a quitclaim deed between the Seller and the Seller s sister, vesting title in the Seller. That deed was dated October 15, 2005 and was properly recorded on February 27, 2006 6. A second deed, this one from the Seller to the Complainant, was dated October 22, 2005. (The Yarborough-Hall Deed.) The Yarborough-Hall deed was prepared by Integrity Title. 7. Two deeds of trust from the Complainant to Argent Mortgage Company were each dated November 15, 2005 and were each properly recorded February 27, 2006. 8. Shortly after the settlement, Integrity presented for recording all four deeds at the Prince George s County Department offinance. All four deeds were stamped and payment was made for county transfer and recordation taxes. Integrity received receipts for the submitted deeds. Only three deeds were recorded, however; the Yarborough-Hall Deed was apparently lost and was not recorded. 9. Following the settlement on the property and prior to 2007, a portion ofthe Complainant s mortgage payment was designated for payment of her property taxes and the property tax bill was paid by the mortgagee. In February 2007, the Complainant re-financed her mortgage with a new lender and the property taxes were no longer paid by the mortgagee. 10. After re-financing her mortgage in February 2007, the Complainant received tax bills from the county, but the bills were in the name ofthe seller s sister, rather than in the Complainant s name. 4

11. After re-financing her mortgage in February 2007, the Complainant stopped paying real estate taxes on the Property because the tax bills were not in her name. 12. Prince George s County will accept real estate tax payments from any source, regardless of the name on the tax bill. 13. As a result of the Complainant s failure to pay real estate taxes on the Property, the Property went to a tax sale in April 2009. 14. At some point afterthe tax sale, the Property was redeemed by the Complainant by paying her back tax bills. 15. Upon learning ofthe matter in June 2009, Lawyers Title took steps to resolve the matter, including locating the Seller, acquiring and reviewing all relevantrecords, and interviewing all relevant parties, including employees of Prince George s County. 16. As a result of its efforts, Lawyers Title obtained a replacement deed from the Seller. The replacement deed, dated July 31, 2009 was recorded on October 22, 2009. 17. Lawyers Title paid the Complainant approximately $2,321.76 to reimburse her for payments associated with redeeming the tax sale and associated legal fees. 18. No dispute currently exists concerning payments or any other matter between the Complainant and Lawyers Title. 19. At some point prior to the successful recording of the replacement deed on October 22, 2009, the Complainant retained attorney Donald M. Zimmerman to review the matter. The Complainant paid Mr. Zimmerman $250.00 in legal fees. 5

The Complainant has not received reimbursement from any source for this payment. DISCUSSION The burden of proofin this case is by a preponderance of the evidence, Md. Code Ann., State Gov t 10-217 (2009), and rests with the Complainant, as the party asserting the affirmative on the issue of an unfair claim settlement practice. Garrett v. State of Maryland, 124 Md. App. 23, 28-29 (1998). When the MIA referred this case to OAH, it directed the Administrative Law Judge conducting the hearing to pay particular attention to Md. Code Ann., Ins. 10-126 and 27-303 (Supp. 2010). The Complainant asserts that the Licensees violated that statute by engaging in unfair claim settlement practices. Section 10-126(a)(1), in relevant part, provides that the Connnissioner of Insurance may suspend or revoke the license of a licensee which has willfully violated this article or other another law of the State that relates to insurance. Section 27-303(2) prohibits an insurer or nonprofit health service plan from refusing to pay a claim for an arbitrary or capricious reason. Neither the statute nor any regulation promulgated by the MIA defines the arbitrary or capricious standard in the context of an administrative review of an insurer s refusal to pay a claim. In Berkshire Life Insurance Co. v. Maryland Insurance Administration, 142 Md. App. 628 (2002), however, the Court ofspecial Appeals quoted the following discussion of the meaning of arbitrary and capricious by the Maryland Insurance Commissioner in Gabler v. American Manufacturers, Order of Remand at 6-7, MIA No. 60-7/97 (March 11, 1998): [A] claimant must prove that the insurer acted based on arbitrary and capricious reasons. The word arbitrary means a denial subject to individual judgment or discretion, Webster s II New Riverside University Dictionary 121 (1984) and made without adequate determination ofprinciple. Black s Law Dictionary 55 6

(Abridged 5 th Ed. 1983). The word capricious is used to describe a refusal to pay a claim based on an unpredictable whim. Webster s at 227. Thus, under [Insurance Article] 27-303, an insurer may properly deny a claim if the insurer has an otherwise lawful principle or standard which it applies across the board to all claimants and pursuant to which the insurer has acted reasonably or rationally based on all available information. 142 Md. App. at 671. The Berkshire Court clarified and approved the Insurance Commissioner s interpretation of arbitrary and capricious as applied to the facts of the Berkshire case. Id. at 672. In this case, the Complainant s troubles began when the deed transferring the Property to her was not recorded. After the settlement on November 15, 2005, Integrity properly delivered all four relevant deeds to the Prince George s County Department of Finance for recording in the Land Records Division. The appropriate fees and taxes were paid and Integrity received a receipt for the deeds. For reasons that are not known (or at least not apparent on the record), the Deed was never recorded. While the failure to record the deed was clearly a problem requiring correction, the Complainant compounded her difficulties by deciding not to pay her property taxes after she refinanced her mortgage in February 2007. Prior to the refinancing, the tax payment had been part of the Complainant s monthly mortgage payment, but thereafter it became her responsibility to pay the taxes directly to the county. The tax bill that the Complainant received during this period did not have her name on it, however. Because ofthe failure to record the deed, the tax bill was mailed with the name ofthe seller s sister (the ownerbefore the transaction intended to transfer ownership to the Complainant.) Because the tax bill was not in her name, the Complainant believed that she did not have to, or should not, pay the tax bill. (Of course, the county would have acceptedpayment from any source and the fact that the bill incorrectly identified the owner did not exempt the Complainant from her obligation to pay taxes 7

on the Property.) As a result ofher failure to pay property taxes, the Property went to a tax sale and the Complainant had to pay her back taxes as well as certain other costs to redeem the property. The Complaint Against Lawyers Title and Integrity Lawyers Title became aware of the title problem in June 2009 and acted promptly and reasonably to remedy it. Lawyers Title located the seller, acquired and reviewed all relevant records from the Complainant, Integrity, Prince George s County authorities and other sources, and interviewed relevant parties. Lawyers Title communicated regularly with the Complainant and kept her apprised as all developments in the case. As a result of its efforts, Lawyers Title obtained a replacement deed from the Seller and, on October 22, 2009, that deed was properly recorded. Lawyers Title argues that it acted properly and cites Paragraph 9 of the relevant policy in this matter which provides that [i]f the company establishes the title, or removes the alleged defect, lien or encumbrance... in a reasonably diligent manner by any method... it shall have fully performed its obligations with respect to that matter and shall not be liable for any loss or damage caused thereby. MIA Ex. 33. While this particular policy provision is not controlling in this case, it is clear that Lawyers Title did act diligently to establish title in the Complainant and, therefore, did not act in an arbitrary, capricious, or otherwise illegal fashion. Without admitting any wrongdoing concerning the Complainant s complaint, Lawyers Title nevertheless reimbursed the Complainant $2,321.76, which represents the total fees to redeem the tax sale and associated legal fees. Indeed, the Complainant is satisfied with Lawyers Title s conduct and stated at the hearing that she does not now consider herself to have any dispute with or complaint 8

concerning Lawyers Title. Based on these factors, it is clear that the Complaint against Lawyers Title must be denied and dismissed. As to the complaint against Integrity, there is no evidence as to why the l Deed was not recorded. Nothing in the record establishes (or even suggests) that the failure to record this deed was as a result ofany act or omission on the part ofintegrity. Although Integrity may have shown bad faith by failing to appear at the hearing in this matter, the burden ofproofremains with the Complainant and thereis no evidence that Integrity engaged in an unfair settlement practice concerning the Complainant s claim. 3 CONCLUSIONS OF LAW I conclude as a matter of law that the Complainant did not show that the Licensee Lawyers Title Insurance Corporation denied the Complainant s claim for an arbitrary and/or capricious reason based on all available information. I thus further conclude that the Complainant did not show that the Licensee Lawyers Title Insurance Corporation engaged in an unfair claim settlement practice under the Maryland Insurance Article when it denied the Complainant s claim. Md. Code Ann., Ins. 27-303(2) (Supp. 2010). 1 conclude as a matter oflaw that the Complainant did not show that the Licensee Integrity Title, Escrow & Settlement Corporation denied the Complainant s claim for an arbitrary and/or capricious reason based on all available information. I thus further conclude that the Complainant did not show that the Licensee Integrity Title, Escrow & Settlement Corporation engaged in an unfair claim settlement practice under the Maryland Insurance Article when it denied the Complainant s claim. Md. Code Ann., Ins. 27-303(2) (Supp. 2010). ~At the hearing, the Complainant testified that the only monetary relief she seeks from Integrity is reimbursement of the $250.00 in legal fees that she paid to Attorney Zimmerman.. 9

PROPOSED ORDER Upon the foregoing Findings offact, Discussion, and Conclusions of Law, I PROPOSE that the Licensee Lawyers Title Insurance Corporation not be found to have violated section 10-126 or section 27-303 of the Maryland Insurance Article, and that the charges made by the Complainant therefore be DENIED AND DISMISSED. Upon the foregoing Findings offact, Discussion, and Conclusions of Law, I PROPOSE that the Integrity Title, Escrow & Settlement Corporation not be found to have violated section 10-126 or section 27-303(2) of the Maryland Insurance Article, and that the charges made by the Complainant therefore be DENIED AND DISMISSED. I further PROPOSE that the records and publications ofthe Maryland Insurance Administration reflect this decision. May 13, 2011 Date Decision Mailed DH/rs #122079 Signature on file with Orignal David Hofstetter Administrative Law Judge RIGHT TO FILE EXCEPTIONS Upon receipt of this recommended decision, affected parties have twenty (20) days to file exceptions with the Insurance Commissioner. COMAR 31.02.01.10-1B(1). If they wish to have a transcript of the hearingbefore filing exceptions, they have ten (10) days to file with the Insurance Commissioner a copy of their written request to a private stenographer for preparation of a transcript. COMAR 31.02.01.10-1B(2). If a transcript is requested, the transcript must be filed with the Conimissioner within sixty (60) days of the request, and then the parties have thirty (30) days after the filing ofthe transcript to file exceptions with the Commissioner. COMAR 31.02.01.10-iD. Written exceptions and copies of requests for transcripts should be addressed to the Insurance Commissioner, Maryland Insurance Administration, 200 St. Paul Place, Suite 2700, Baltimore, MID 21202. The Office of Administrative Hearings is not a party to any review process. 10

Copies Mailed To: Lawyers Title Insurance Corporation Attn: Carson Mills, Esquire 9891 Broken Lane Parkway Suite 300 Columbia, MD 21046 P. Randi Johnson Maryland Insurance Administration 200 St. Paul Place, Suite 2700 Baltimore, MD 21202 Intgrity, Title Escrow Settlement Corporation Attn: Natasha Rones 1325 G. Street, Suite 500 Washington, DC 20005 Fidelity National Title Group Attn: Sara Seinrich 6601 Frances Street Omaha, NE 68106 11

MARYLAND INSURANCE * BEFORE DAVID HOFSTETTER, ADMINISTRATION, * AN ADMINISTRATIVE LAW JUDGE EX REL.: * OF THE MARYLAND OFFICE, * OF ADMINISTRATIVE HEARINGS COMPLAINANT * OAH No.: MIA-INS-33-11-07633 V. * MIA No.: 2011-02-005 LAWYERS TITLE INSURANCE * CORPORATION and INTEGRITY TITLE, ESCROW & SETTLMENT CORPORTATION, LICENSEES * * * * * * * * * * * * APPENDIX - EXHIBIT LIST I incorporated the entire MIIA file, consisting of 35 exhibits, into the record. Neither the Complainant nor the Licensees offered any additional exhibits. MIA Ex. 1 - DLLR Fax Cover Sheet to Jason Decker from Stacy Lewis, dated March 19 2010, with copy of complaint, dated February 27, 2010 MIIA Ex. 2 - Letter to the Complainant from David Zitterbart, datedmarch 24, 2010 MIA Ex. 3 - Letterto David Zitterbart from the Complainant, dated March 27, 2010, with 11 page attachment MIA Ex. 4 - MIA Ex. 5 - Letter to Sir/Madam from David Zitterbart, dated April 7, 2010, with three page attachment Letter to Carson Mills from David Zitterbart, dated April 7. 2010, with 14 page attachment

MIAEx. 6- MIAEx.7- MIAEx. 8- MIAEx.9- MIIAEx. 10- MIAEx. 11- MIAEx. 12- MIAEx. 13- MIAEx. 14 MIAEx. 15- MIAEx. 16- MIAEx. 17- MIAEx. 18- MIAEx. 19- MIAEx. 20- MIAEx. 21- MIAEx. 22- MIAEx. 23- MI[AEx. 24- E-Mails between Natasha Rones, Carson Mills, and David Zitterbart, dated April 14, 2010 Letter to Carson Mills from David Zitterbart, dated May 3, 2010, with attached Certified Mail Receipt and 16 page attachment Letter to David Zitterbart from Carson Mills, dated May 10, 2010, with 101 page attachment Letter to the Complainant from David Zitterbart, dated May 20, 2010, with three page attachment E-mail to the Complainant from David Zitterbart, undated E-mail to David Zitterbart from the Complainant, dated June 7, 2910 E-mails between the Complainant, David Zitterbart, on June 7, 2010, forwarding e-mails between Tamra Corp, Carson Mills and the Complainant in 2009 E-mail to the Complainant from David Zitterbart, dated June 18, 2010 E-mail to David Zitterbart from the Complainant, dated June 19, 2010 E-mail to David Zitterbart from the Complainant, dated July 29, 2010 E-mail to the Complainant from David Zitterbart, dated July 30, 2010 E-mail to Carson Mills from David Zitterbart, dated August 12, 210 E-mail to David Zitterbart from Carson Mills, dated August 12, 2010 E-mail to the Complainant from David Zitterbart, dated August 13, 2010 E-mail to David Zitterbart from the Complainant, dated August 15, 2010 Letter to David Zitterbart from the Complainant, dated August 16, 2010, with 16 page attachment Letter to Carson Mills from Davis Zitterbart, dated August 23, 2010, with one page attachment E-mail to David Zitterbart from the Complainant, dated August 29, 2010, with seven page attachment E-mail to David Zitterbart from the Complainant, dated August 29, 2010, with one page attachment 2

Fax to David Zitterbart from the Complainant, dated August 29, 2010, with four MIAEx. 25page attachment MIAEx. 26- E-mail to David Zitterbart from Sara Weinrich, dated August 30, 2010 MIAEx.27- E-mail to Sara Weinrich from David Zitterbart, dated August 30, 2010 MIAEx.28- E-mail to the Complainant from David Zitterbart, dated September 2, 2010 MIAEx.29- E-mail to David Zitterbart from the Complainant, dated September 3, 2010 MIAEx.30- E-mil to the Complainant from David Zitterbart, dated September 7, 2010 MIAEx. 31- Letter to David Zitterbart from Sara Weinrich, dated September 7, 2010 M[AEx.32- Letter to David Zitterbart from Sara Weinrich, dated September 7, 2010 and date stamped received September 9, 2010 MIAEx. 33- Letter to the Complainant from David Zitterbart, dated December 13, 2010, with 93 page attachment MIAEx. 34- Letter to Commissioner, MIA, from the Complainant requesting a hearing, dated December 27, 2010 MIAEx. 35- Letter to the Complainant, Carson Mills, and Natasha Rones from Dinetta Ingrssia, dated January 7, 2011 3