On Thursday, August 1, 2013, the Washington Supreme Court held a title insurer vicariously liable for an underwritten title company’s (“UTC”) violation of prior statutory and regulatory anti-inducement provisions. The Court based its holding upon theories of statutory and implied authority. The case, Chicago Title Insurance Company v. Washington State Office of the Insurance Commissioner, No. 87215-5 (Wash. Aug. 1, 2013) (en banc), concerned alleged violations of former WAC 284-30-800, which generally prohibited the giving of things of value exceeding $25 on an annual basis to “middlemen” as an inducement to the placement of title insurance business.
The Court rejected the underwriter’s reliance on the terms of its agency agreement with the UTC, which did not give the underwriter control over the UTC’s marketing practices. The Court stated that “the insurance code creates a statutory standard of agency that agents and their principals cannot opt out of at their own discretion.”
In a press release issued earlier today, Insurance Commissioner Kreidler called the decision “a big win for consumers,” a conclusion questioned by Justice Johnson in dissent, who wrote that the majority’s decision undermines the “bedrock principle” of freedom of contract and “will likely result in the reduced availability of title insurance in rural Washington counties.” The decision is likely to have significant implications in Washington beyond title insurance.