Case of KEL law firm partners’ defunct title agency draws scrutiny [The Orlando Sentinel, Fla.]

June 27--After more than a year of scrutiny by The Florida Bar over complaints about their legal practice, the partners of Orlando's KEL law firm have run into trouble on another front: their title-insurance business.

According to state documents released earlier this month, Florida insurance-agency regulators ordered K.E.L. Title Insurance Agency Inc. to turn over its license, alleging major oversights by the title agency.

Law-firm partners Jeffrey S. Kaufman, Matt Englett and Craig Lynd, also principals in the insurance agency, agreed in March to give up the license for two years to settle allegations that the K.E.L. agency -- which the partners dissolved in 2010 -- had botched two loan closings years ago. They denied any wrongdoing and disputed the allegations but settled with regulators to avoid a legal fight over a now-defunct company, a spokesman for the law firm said earlier this month.

The Florida Bar said it, too, is investigating the matter, adding it to a list of complaints against the KEL law firm that allege problems with consumer-bankruptcy, loan-modification and other legal services. Some of those complaints have already been resolved in the firm's favor, while others are awaiting an outcome.

Loss of the title-insurance agency license, though temporary, would be a "death penalty" for most agencies because they would have no income from selling policies during that period, said Alan Fields, executive director of the Florida Land and Title Association, an industry trade group in Tallahassee.

But Kaufman, Englett and Lynd deflected the blow by phasing out the agency from late 2009 to September 2010 and moving its business into other, affiliated agencies that they own or control, such as Titan Title and Escrow LLC, according to state records and information supplied by the firm.

KEL's partners say they did not shift their title-agency business to new companies to avoid the state's enforcement action; they say the shift took place long before regulators told them in early 2011 that K.E.L. Title Insurance Agency was the subject of a formal complaint.

The changes, they say, were part of a business strategy to bring in new agency principals and to establish their own insurance company -- K.E.L. Title Insurance Group Inc. -- rather than continuing to operate just an agency that could only broker other companies' insurance.

Although KEL's partners say they were not informed of the state's regulatory complaint until early 2011, the conflict that led to the complaint actually dates from 2005, according to a lawsuit filed by Chicago Title Insurance Co., one of the insurance carriers for whom the now-closed K.E.L. agency once sold policies. Chicago Title sued the agency in March 2009, nine months after canceling its contract with K.E.L., and filed a complaint with the state in June 2010, according to court records and state regulators.

The Chicago Title lawsuit alleges that the K.E.L. agency committed major mistakes in its work on two closings seven years ago, and that K.E.L.'s negligence cost Chicago Title nearly $44,000 to cover the resulting losses. Chicago Title, which canceled its contract with the K.E.L. agency in June 2008, declined to comment on its complaints or on its suit, which is ongoing.

According to the March settlement with the state, regulators also blamed K.E.L. for the troubled 2005 closings. But Kaufman, Englett and Lynd contend that the settlement, and the surrendering of the former agency's license, do not constitute a sanction against them, because the state's enforcement case was settled without an administrative hearing.

"In the end, we elected not to go that route because, by that time, we hadn't been operating that company for nearly two years," KEL spokesman Christian Hertenstein said in an email. "It didn't make good business sense to continue to dispute the allegations."

So, in a quirk of the regulatory system, the state took away the license of a company that no longer exists, even as the defunct company's principals continue selling title-insurance policies, uninterrupted, through other corporate entities.

That raises serious questions about the state's regulatory authority, said Cliff Shepard, a veteran Orlando real-estate and title-insurance lawyer who also serves as legal counsel for the city of Maitland.

"Even if everything the KEL partners did was legal and above-board, this basically exposes a flaw in the disciplinary system," he said. "In the best-case scenario, the state received no punishment value from the action it took. In the worst case, what the partners did skirts the intent of the action, and I think the state would want to look at that very seriously."

State regulators say their reach is limited by Florida statute. Lawyers are exempt from such enforcement actions and subject only to oversight by The Florida Bar and the state Supreme Court, according to the Division of Agents and Agency Services.

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