The Virginia Bureau of Insurance (the Bureau) recently issued an informational letter to all registered settlement agents who are title licensed regarding Virginia’s prohibition on rebating as an inducement to purchase an insurance policy. The letter states that the Bureau is of the opinion that either reducing or eliminating a settlement fee is considered a “thing of value” under Virginia’s rebating or anti-kickback prohibitions, and that if such a discount is offered as an inducement to purchase an insurance policy, it could violate Virginia law. The letter notes that both direct and indirect inducements or referrals of business are prohibited.
In discussing these restrictions, the letter cites three state statutory prohibitions: (i) the prohibition on any kickback, rebate, commission, “thing of value,” or other payment in exchange for title insurance business referrals in the title insurance laws (Va. Code § 38.2-4614); (ii) the prohibition in Virginia’s unfair trade practices statute of the insurance code on giving or receiving “anything of value” not specified in the insurance contract or included in the rating plan as an inducement to purchase an insurance policy, among other things (Va. Code § 38.2-509); and (iii) Virginia’s prohibition against paying or receiving a kickback, rebate, commission, “thing of value,” or other payment for referring business related to settlement services (Va. Code § 55.1-1009.1).
The Bureau’s letter notes that there are factual situations where a settlement fee that was reduced or eliminated does not constitute a rebating violation, but states that this would be determined on a case-by-case basis. The Bureau encouraged title settlement agencies and agents to maintain the records necessary to respond to questions the Bureau may have regarding fee reductions or eliminations, including advertisements, communications about fee reductions, and the documentation of any fee reductions.