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Chicago Title Insurance Co. v Washington State Office of Insurance Commissioner

Case No. 40752-3-II (WA Ct. App., Feb. 29, 2012)

Chicago Title seeks reversal of an Office of Insurance Commissioner (OIC) ruling, arguing that the ruling erroneously imposed vicarious liability on Chicago Title for the regulatory violations of Land Title Insurance (Land Title) merely because Chicago Title underwrites Land Title’s title insurance policies. We hold that the OIC did not have statutory, inherent, or common law authority to impose vicarious liability on Chicago Title for regulatory violations Land Title committed. We reverse the OIC judge’s decision and reinstate the Administrative Law Judge’s (ALJ) order granting summary judgment to Chicago Title.


I. Title Insurance

Title insurance insures owners of real property against loss by encumbrance, defective title, or adverse claim. RCW 48.11.100. Consumers typically select title insurance in connection with a “middlem[a]n,” (i.e., their real estate agent, builder, banker, etc.) who may exert great influence on the consumer’s decision. Administrative Record (AR) at 470, 472. In 1988, Washington State’s OIC adopted a rule to protect consumers by limiting the gifts or inducements that a title insurance company or its agent could offer to a middleman in return for steering customers into buying title insurance from specific companies. Former WAC 284-30-800.

Chicago Title provides title insurance nationally. In eight Washington counties, Chicago Title maintains direct operations, meaning that it researches title, proposes the policy, underwrites the policy, offers escrow and closing services, and markets all these services to customers. In smaller counties, Chicago Title maintains no direct operations and instead only underwrites the policies generated by independent title insurance companies, also known as underwritten title companies (UTC).


Judge(s): Jill Johanson
Jurisdiction: Washington Court of Appeals
Related Categories: Administrative Law , Business Organizations , Contracts
Court of Appeals Judge(s)
Robin Hunt
Jill Johanson
Marywave Van Deren



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insurance code is silent regarding both the scope of agency generally and vicarious liability (no. 6). chicago title refused to sign the order. 14 1 emphasize that land title is a local company performing title insurance and escrow and closing means by which the work and the desired result was to be accomplished. hollingbery v. dunn, no. 40752-3-ii utcs, insurance code violations will go unregulated. we note, however, that nothing in this (1) in accordance with usual customary practices and procedures authority, and in its reply brief, chicago title responded fully to the oic’s apparent authority we reverse the oic judge’s decision and reinstate the alj’s order granting summary party’s right to control). additionally, the oic misplaces its reliance on kamla because that customers. in smaller counties, chicago title maintains no direct operations and instead only b. common law vicarious liability washington state office of the 8 “insurance agent,” our supreme court applied common law agency principles to determine that participated or knew of the violations but indicated that land title acted as chicago title’s agent. policies.5 the oic judge’s findings of fact and conclusions of law, asserting the doctrine of apparent judgment motion without filing a cross motion for summary judgment. common law agency,” and instead adopted the conclusion that the insurance code determined the with a “middlem[a]n,” (i.e., their real estate agent, builder, banker, etc.) who may exert great we agree. in january 2008, the oic filed a notice of hearing, proposing disciplinary action against have agreements with several underwriting title insurance companies and underwriting title a case-by-case common law analysis to establish vicarious liability and we reject that argument. agree that the insurance commissioner has authority to enforce provisions of the insurance code 4 other act for principal not expressly authorized herein. argues that chicago title is vicariously liable for land title’s marketing because the pertinent name of the principal in any advertising or printing other than to indicate the issuing agent is a utcs or state that underwriting insurance companies would be liable for violations the utcs chicago title underwrites title insurance policies for 11 independent utcs in washington, authority to impose vicarious liability on chicago title for land title’s marketing nor does it of law not only the existence of an agency relationship in the insurance context but also a scope of . . . parties never affirmatively disclaimed having the right to control land title but merely disclaimed the oic also argues that the legislature need not have expressly granted the oic authority to 5 both small and larger insurance companies because rcw 48.29.020(3) requires that title insurers kitsap county. land title makes no mention of chicago title in its marketing materials, which written contract, naming land title as the issuing agent and chicago title as the principal. the summary judgment on the vicarious liability issue.3 “in reviewing a superior court’s final order on review of a board decision, an appellate that the law authorized the oic to assess penalties for violations. the advisory did not mention disputed” by the oic and she deleted or revised them. ar at 122. the oic judge also deleted or johanson, j. — chicago title seeks reversal of an office of insurance commissioner no. 40752-3-ii we review an agency’s interpretation or application of the law de novo. heal, 96 wn. argument that the oic judge properly found chicago title vicariously liable under a strict cas. co. v. backstrom, 47 wn.2d 77, 81, 287 p.2d 124 (1955) (after determining that an 68 wn.2d 75, 80-81, 411 p.2d 431 (1966). when the superior business party has retained no circumstance is not present here. see d.l.s., 130 wn. app. at 98. additionally, the oic’s the agreement between chicago title and land title, which appointed land title as an ar at 499. boldface omitted). the alj ruled that, although the insurance code provisions of washington closing service, for which land title retains all of its fees and receives 28 percent of its total common law agency analysis. see stephens v. omni ins. co., 138 wn. app. 151, 183, 159 p.3d exchange for a percentage of the title premiums. generally, the underwriting title insurance above. . . . agent shall not be deemed or construed to be authorized to do any the scope of agency for insurance transactions as a pure issue of law. although the day court van deren, j. address. aspect of land title’s marketing. because land title’s alleged violations of the anti-inducement washington state’s oic adopted a rule to protect consumers by limiting the gifts or inducements insurance on its behalf. if authorized so to do, an agent may effectuate insurance v. influence on the consumer’s decision. administrative record (ar) at 470, 472. in 1988, gross premium and “[c]omply with all federal and state, municipal ordinances, statutes, rules and when the facts are not in dispute and not susceptible to more than one interpretation, we policy, (4) the type of policy, (5) the premium paid, and (6) the amount of liability. utcs may the alj granted summary judgment in favor of chicago title’s motion and issued a that by implication, the legislature authorized the insurance commissioner to declare one insurance [chicago title] does not play any role in or exercise any control over land title’s title insurance insures owners of real property against loss by encumbrance, defective no authority supports the oic’s argument that the insurance code eliminates the need for manifestation. ranger ins. co., 164 wn.2d at 555 (power of attorney to post bonds on behalf of services. land title and chicago title have no relationship regarding land title’s escrow and insurance contracts, if authorized by the principal, and to collect premiums on those insurance policy issuing agent of the principal.” ar at 520. in the agreement, the parties allocated losses the oic also argues that the legislature expanded the insurance code after the day rely upon the belief that another is the principal’s agent. d.l.s. v. maybin, 130 wn. app. 94, 98, 10 (2007), aff’d, 166 wn.2d 27, 204 p.3d 885 (2009). by designating that chicago title was responsible for loss connected with any failure of the title noted that the legislature passed the insurance code “for the purpose of clearly defining the 3 president of land title included that: the office of administrative hearings (oah) granted chicago title’s request to transfer the no. 40752-3-ii decision. chicago title appeals. authorized insurer, 507, 886 p.2d 160 (1994)). the apparent authority doctrine protects third parties who justifiably 4. . . . issuing agent shall: 13 title’s behalf. the oic’s identified regulatory marketing violations did not involve the insured 119-20, 52 p.3d 472 (2002). but kamla does not support the oic’s strained argument (that a revised the alj’s conclusions of law, and rejected the alj’s reliance on “the principles of input in, or oversight of, land title’s marketing practices or procedures. no. 40752-3-ii show that vicarious liability is proper under the common law.10 insurance companies may have agreements with several utcs. this arrangement is beneficial to person but involved the use of marketing practices that attempt to induce realtors and other no. 40752-3-ii specialized expertise in dealing with such issues, but we are not bound by an agency’s the regulatory violations of land title insurance (land title) merely because chicago title administrative law judge’s (alj) order granting summary judgment to chicago title. ins. co., 164 wn.2d at 555. former 48.17.010 (1985) defines an “agent” and permits an agent to “effectuate” (2) in full compliance with instructions, rules and regulations of agency that makes the principal vicariously liable for the agent.4 the oic opposed chicago title’s summary hearing oral argument, the oic judge, ruling de novo, denied chicago title’s motion for summary with the commissioner on forms as prescribed and furnished by the commissioner, opening brief, it conceded that argument. but in its opening brief, chicago title assigned error to effectuated. right to control land title’s marketing. the insurance agent’s knowledge would be imputed to the principal), see also miller v. united the oic hearings unit accepted oic’s petition for review of the alj’s ruling. after whence the actionable negligence flowed.’” kroshus v. koury, 30 wn. app. 258, 264, 633 p.2d chicago title petitioned for review and the superior court upheld the oic judge’s final in 2007, the oic investigated land title for violations of the anti-inducement regulation objective manifestations of the agent’s authority ‘to a third person.’” ranger ins. co. v. pierce legislation (heal) v. cent. puget sound growth mgmt. hearings bd., 96 wn. app. 522, 526, we do not defer to the agency’s interpretation. hunter v. univ. of wash., 101 wn. app. 283, (1) each insurer on appointing an agent in this state shall file written notice thereof former rcw 48.17.160 provides for the appointment of agents: 5 matter to an alj. by principal and only on real property located in the county or counties listed procedure act’s “error of law” standard, which allows us to substitute our view of the law for mistaken belief to its detriment. d.l.s., 130 wn. app. at 98. the innocent third party’s and found multiple violations. the oic did not contact chicago title during its investigation of no. 40752-3-ii no. 40752-3-ii proposes the policy, published opinion countersign and issue principal’s title assurances on forms supplied and approved judgment to chicago title. despite maintaining that a common law analysis is superfluous, the oic alternatively “agent” means any person appointed by an insurer to solicit applications for johanson, j. relying on day v. st. paul fire & marine insurance company, 111 wash. 49, 53, 189 p. county, 164 wn.2d 545, 555, 192 p.3d 886 (2008) (quoting king v. riveland, 125 wn.2d 500, chicago title provides title insurance nationally. in eight washington counties, chicago 979 p.2d 864 (1999). we review the oic judge’s legal determinations using the administrative the oic does not show a basis upon which to impose vicarious liability, neither on the oic’s argument relies on kamla v. space needle corp., 147 wn.2d 114, 10 that a title insurance company or its agent could offer to a middleman in return for steering the required oic fee to make land title its issuing agent does not constitute a specific objective exercise any control over land title’s marketing practices or procedures. pac. cas. ins. co., 187 wash. 629, 638-39, 60 p.2d 714 (1936). i. title insurance principal given to issuing agent. the larger title insurance companies are disinclined to maintain title plants in smaller counties, determined that the oic can hold chicago title responsible for land title’s regulatory violations of $114,500 for land title’s alleged violations, (3) submitting to a compliance plan, which 9 hold insurers vicariously liable because it provided the commissioner with authority “reasonably chicago title and the oic agreed to bifurcate the proceedings into two phases. in phase the oic also argues that, because chicago title did not address apparent authority in its title, or adverse claim. rcw 48.11.100. consumers typically select title insurance in connection acts. larner, 93 wn.2d at 804-05. the significance of the principal’s right to control the agent’s law of agency did not support such imposition. ar at 291-92. former rcw 48.17.010 defined ”agent” as: relate to the title insurance business.” ar at 521. the legislature intended to establish the scope of every relationship authorized by former rcw doctrines of actual authority nor apparent authority. neither does the law support the oic’s 6 land title. after concluding its investigation, the oic asked chicago title to sign an order (1) alleged violations of anti-inducement regulations.9 95 (1920), the oic argues that by enacting the insurance code in 1911, the legislature determined the innocent third party must believe they are agents; and (3) the third party must rely on that specifically. the oic argues that, because the written agreement preserves chicago title’s right to inspect title maintains direct operations, meaning that it researches title,2 the evidence shows that land title’s alleged violations of the anti-inducement regulation a strict common law analysis. finally, chicago title’s filing of the required oic form and paying 2. doctrine of apparent authority inherent, or common law authority to impose vicarious liability on chicago title for regulatory facts exercising that right.7 we concur: no. 40752-3-ii opinion, eliminating the need for an extensive, case-by-case common law analysis to establish chicago title argues that, because it could not and did not control land title’s marketing land title’s books, chicago title must affirmatively rebut the implication that it had a right to compliance with the inducement regulation. [chicago title] does not have any the theory of apparent authority8 (oic) ruling, arguing that the ruling erroneously imposed vicarious liability on chicago title for 121 p.3d 1210 (2005). the doctrine has three basic requirements: (1) the putative principal’s no. 40752-3-ii underwrites the policies generated by independent title insurance companies, also known as review denied, 82 wn.2d 1001 (1973)), review denied, 96 wn.2d 1025 (1982). that of the oic. verizon nw, inc. v. emp’t sec. dep’t, 164 wn.2d 909, 915, 194 p.3d 255 6 exceptions to coverage, and collects all fees and premiums. the underwriting insurance company ar at 519. the agreement further specified that land title pay chicago title 12 percent of the insurance agent, requiring filing with the commissioner and paying a fee.6 appellant, contracts. an agent may collect premiums on insurances so applied for or 8 manifestation that it authorized land title to violate the anti-inducement regulation. see ranger involve strictly marketing issues. the evidence also shows that chicago title did not control any division ii investigation inspected 11 title insurance companies, including chicago title, but not land title. insurance company’s duties and liabilities” as a matter of law, the opinion recognizes only that the issuing agent to potential insured persons, also precluded land title from marketing on chicago no. 40752-3-ii 136 wn.2d 38, 46, 959 p.2d 1091 (1998). where we review purely a question of law, however, 9 no. 40752-3-ii 909 (1981) (quoting jackson v. standard oil co., 8 wn. app. 83, 91, 505 p.2d 139 (1972), in the court of appeals of the state of washington regulatory violations. the parties merely reserved the question of land title’s regulatory distribution to the agent. the commissioner may adopt regulations establishing chicago title insurance co., an statutes granted the oic “broad authority” to take action against a title insurer directly for its own i. standard of review 292, n.3, 2 p.3d 1022 (2000), review denied, 142 wn.2d 1021 (2001). because chicago title’s compliance with the insurance code’s including land title of kitsap county. in 1992, chicago title and land title entered into a underwritten title companies (utc). violations, these code provisions did not authorize imposing vicarious liability where the common interpretation of a statute.” city of redmond v. cent. puget sound growth mgmt. hearings bd., opinion prevents the oic from holding the utcs solely responsible for complying with anti- through wac 284-29-260. these superseding regulations still prohibit excessive inducements. contracts with the utc to assume liability for title claims arising from the utc’s policies in chicago title (and not land title) for 13 alleged violations of the anti-inducement regulation agency, sitting in the same position as the superior court.” honesty in envtl. analysis & authority to comply fully with the terms and conditions of the [compliance] plan.” ar at 514 in 2006, the oic published a report on violations of the anti-inducement regulation. the ii. statutory provision of agency 2 in an underwritten title insurance agreement, the utc conducts its own marketing and argument. thus, chicago title has not conceded this argument. rap 10.3(c); spokane v. white, revenue. chicago title does not compensate land title for marketing expenses and does not violation for phase ii of the proceedings. and transferred the case back to the oah for phase ii of the proceedings. appointment of an insurance agent, eliminates the need for a case-by-case common law analysis. i, the alj would consider only whether chicago title could be vicariously liable for land title’s and prudent underwriting principles; and regulations.” ar at 519. the agreement also provided, “issuing agent shall not . . . [u]se the apparent authority argument depends on its statutory authority argument and does not constitute right of control over the subordinate business party and there is no reason to infer a right of determine vicarious liability in a business relationship as a question of law. larner v. torgerson, sales, maintains the title plant, performs the research for clients, determines the commitments and 11 business operations. [chicago title] does not provide any advice to land title on stipulating that land title’s conduct violated the inducement regulation, (2) agreeing to pay a fine 12 “issuing agency agreement” provided: judgment. the oic judge ruled that the alj’s “[u]ndisputed findings of fact” were “actually because we hold that the oic neither has statutory authority to impose vicarious liability nor title actually violated regulatory provisions of the insurance code. chicago title moved for number of “undisputed findings of fact” and conclusions of law. ar at 279 (capitalization and vicarious liability, but the most crucial factor is the right to control the manner, method, and regulation involve strictly marketing issues, the evidence does not support the oic’s alternative the firm, corporate, or sole proprietorship license. enacted a new regulatory scheme effective in 2009, rcw 48.29.210 and wac 284-29-210 subjective belief must be objectively reasonable based on the principal’s specific objective prompted by its investigation, the oic issued a technical assistance advisory to all washington the oic implies that, unless we hold title insurance underwriters vicariously liable for their we disagree. commissioner shall return the appointment of agent form to the insurer for company vicariously liable for another without a common law basis. alternative argument that the oic judge exceeded its delegated legislative authority and which generate less business and profit. insurance commissioner, the oic argues that the oic judge properly found chicago title vicariously liable under no. 40752-3-ii former wac 284-30-800 was in effect during the relevant period of this case. the legislature search and land title was responsible for other causes of loss. the agreement retained chicago title insurers and title insurance agents clarifying the regulation’s provisions and informing them 3. issuing agent . . . shall have authority on behalf of principal to sign, former rcw 48.17.160 (1994) describes the mandatory procedure for appointing an maintain sufficient capital. but small insurance companies generally lack the requisite capital and insurance code established a new method to determine who the law will consider to be an agent. or sole proprietorships who are empowered to exercise the authority conferred by insurer/insurance agent relationship. although stating it was not necessary, the oic judge added operation pertains particularly to the “‘control or right of control over those activities from individual was properly considered an agent because he conformed to the statutory definition of day, 111 wn.2d at 54. day does not address the scope of agency established between an respondent. 93 wn.2d 801, 804-05, 613 p.2d 780 (1980). we consider several factors before imposing 2 vicarious liability. but case law does not support the conclusion that by defining the term “agent” control, we will not hold the superior business party vicariously liable for the subordinate party’s 4 ii. procedure 7 documents recorded for real property in that county and indexes them by legal description or alternative appointment process for individual within licensed firms, corporations, app. at 526. “we accord deference to an agency interpretation of the law where the agency has land title employs sales personnel who market its services to potential customers in no. 40752-3-ii and shall pay the filing fee therefor as provided in rcw 48.14.010. the argument that the insurance code, which defines and establishes the mandatory procedure for the committed solely by land title. the notice of hearing did not allege that chicago title 102 wn. app. 955, 963, 10 p.3d 1095 (2000), review denied, 143 wn.2d 1011 (2001). hunt, p.j. analysis, including the theories of actual authority and apparent authority. the oic judge control land title. but evidence that chicago title retained general contractual rights does not implied from the provisions” of this code. br. of resp’t at 11; rcw 48.02.060 (1). although we 3 to the findings of fact that chicago title was vicariously liable under a strict common law underwrites land title’s title insurance policies. we hold that the oic did not have statutory, insurance company and its appointed agent. day neither states nor implies that per se vicarious party who fails to disclaim expressly the right to control, thereby acts affirmatively to establish the analysis involved direct, not vicarious, liability, which entails a different test. 1. right to control middlemen to influence referrals for marketing purposes. undisputed testimony from the “an agent has apparent authority to act for a principal only when the principal makes liability should attach to the principal for an agent duly appointed under the statute. washington’s title’s right to examine “all accounts, books, ledgers, searches, abstracts and the records which the apparent authority doctrine is inapplicable here because that doctrine’s purpose is to analysis on appeal, the oic erroneously suggests that chicago title “stipulated” to land title’s inducement regulations. (2008); see rcw 34.05.570(3)(d). practices, it cannot be vicariously liable for land title’s marketing practices under common law. commit. support the oic’s assertion that chicago title retained the specific rights at issue here, i.e., the shows that vicarious liability is proper under the common law, we do not reach chicago title’s disagree. company does not receive documents associated with closing or information about the policy or finally, the oic fails to explain why land title should not be solely accountable for its own 48.17.010. instead, case law supports vicarious liability only on a common law basis. am. fid. & underwrites the policy, offers escrow and closing services, and markets all these services to procedure to appoint an agent objectively manifested that land title acted on its behalf. we customers into buying title insurance from specific companies. former wac 284-30-800.1 7 included specific tracking and auditing provisions, and (4) declaring that chicago title has “the actions. depending on the outcome of phase i, in phase ii the alj would consider whether land and to make reasonable rules and regulations according to rulemaking procedure, we disagree court applies the standards of the administrative procedures act directly to the record before the the oic argues that when read together, the insurance code statutes establish as a matter commitment except for (1) the policy number, (2) the internal file number, (3) the effective date of principal does not constitute an objective manifestation of authority to redirect funds). violations land title committed. we reverse the oic judge’s decision and reinstate the provide judicial recourse for innocent third parties whose reliance has harmed them, which title search requires that title companies maintain or subscribe to a title plant, which collects all a. statutes do not provide vicarious liability we hold that the oic has neither statutory b. receive and process applications for title assurances actions must lead a reasonable third party to conclude that the actors are employees or agents; (2) no. 40752-3-ii effectively promulgated a de facto regulation. 10

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