Great American, former underwriter clash over claims

Stewart Title Guaranty Co. has filed a series of lawsuits against former agent Great American Title Co. accusing the Springfield-based company of negligence, breach of contract and failure to remit more than $500,000 in title insurance premiums.

Great American officials said the litigation is the result of a long-running dispute over Houston-based Stewart Title's request for reimbursement of at least $1.04 million in claims the underwriter paid out because of Great American's alleged negligence.

Great American President Peggy Barton said Stewart Title canceled its contract with her title company about a year ago without explanation. Within months, she said, Stewart Title was demanding that Great American cut a gargantuan check to "globally" settle the claims. Great American refused, and Springfield attorney Craig Lowther began negotiating with Stewart Title on Great American's behalf. Lowther said talks abruptly ended in December; three months later, Stewart Title filed four lawsuits against Great American in Greene County Circuit Court.

"It was very much a surprise," said Lowther, with Lowther Johnson Attorneys at Law LLC. "Quite frankly, I'm at a loss as to why they filed suit."

Going to court

Great American, which has offices in nine southwest Missouri counties, was an authorized agent of underwriter Stewart Title for 14 years. As an agent, Great American agreed to reimburse the underwriter for any losses due to fraud, omission or negligence, court records show.

In the suits, Stewart Title lays out a litany of alleged mistakes made by Great American. The underwriter has alleged that Great American breached its contracts by failing to discover or disclose deeds, mechanic's liens, judgments, easements and other restrictions during title searches conducted between 1999 and early 2008, court records show.

Barton acknowledged that some of the claims contained in the lawsuits are valid, but she said the mistakes represent a relatively small percentage of title searches performed by Great American in a 10-year period.

"If it never happened, nobody would need the product," she said. "Sometimes it's a searching error. Sometimes it's a filing. Sometimes you just flat-out miss it. ... I just want it to not happen again if it's something we can prevent."

While Great American is willing to take responsibility for some of those mistakes, the company takes issue with the timeliness in which other claims were submitted by Stewart Title.

Barton said her company was not notified about the majority of the claims in the lawsuits at the time they occurred, and was therefore unable to refer those claims to the company's errors and omissions insurance carrier.

"We have some problems on some of the claims that they have attributed to us that we're liable for," Barton said. "Some of them were handled very poorly by Stewart Title. We were not given notice to notify our (errors and omissions) carrier in most of the cases."

The largest single claim - $466,882 - occurred during a July 2001 title search for Missouri Mountain Properties, court records show. Stewart Title has alleged that Great American failed to discover mechanic's liens and a judgment against the subject property, a Branson theater. The underwriter said it settled claims with lien holders, incurred legal expenses and posted a bond stemming from Great American's alleged negligence.

Great American officials contend the claim could have been settled for $60,000 had the underwriter opted not to fight the claim in court.

Premium payments

Stewart Title's local attorney, J. Michael Bridges at Husch Blackwell Sanders LLP, did not return Springfield Business Journal's call, but Brian Russell, Great American's marketing manager, has a theory about the underwriter's decision to pursue claims that are several years old.

Russell said Great American was one of Stewart Title's five highest-producing agents in the country before the real estate market began to tank in 2007.

"Business was good in the real estate industry," Russell said. "As claims popped up, claims just got shelved. And when a divorce happens, the bill comes due, and that's what happened."

Bob Rutter, executive vice president of insurance services for Great American, said Stewart Title should have notified Great American as the claims arose. "There's something smelly there," he said.

In addition to more than $1 million in claims, Stewart Title alleged in the suits that Great American has failed to remit at least $506,000 in insurance premiums. Title insurance agents agree to write a certain percentage of policies for underwriters and to remit a specified premium on each policy.

At the time of the split, Great American had committed to write a number of policies for Stewart Title on real estate transactions that had not yet closed. Great American has refused to include the premiums in a global settlement as proposed by Stewart Title, Barton said.

"They want one check for claims and premiums," she said. "We want to separate it out."

As the litigation moves forward, Barton and Lowther have been dispelling rumors that Great American's dispute with its underwriter is similar to the case of former competitor Guaranty Title Co., which collapsed under the weight of an alleged check-kiting scheme in June 2007. The pending suits do not accuse Great American of fraud or commingling of funds, and Barton said recent audits have come back clean.

A total of 11 complaints have been filed against Great American since 2003, said Travis Ford, a spokesman with the Missouri Department of Insurance. Five remain unresolved, Ford said. Barton said none of the remaining complaints are related to Great American's dispute with Stewart Title.