Richard Burnett, Orlando Sentinel

Citing a regulatory mandate and a potentially crippling volume of claims, K.E.L. Title Insurance Group — owned by the partners of Orlando’s KEL law firm — has withdrawn from the title insurance business and is trying to get into a state “rehabilitation” program for troubled insurers, the company confirmed Wednesday.

With its cash reserves faltering, K.E.L. Title stopped issuing policies Monday and severed its ties with agencies that had sold its policies and performed real estate closings, the company said. It said it had been “instructed” by the Florida Office of Insurance Regulation to take those actions.

Company officials said the business’ cash-surplus reserve had fallen below the state-required minimum; meanwhile, they were negotiating with insurance regulators over terms of entering “rehabilitation” — a sort of state-led business restructuring.

“The company is not insolvent, but its financial condition is impaired,” said Craig Lynd, a K.E.L. Title executive and a partner in the high-profile KEL law firm. “This is not about the amount of cash you have on hand — we have enough cash and assets for our business. It has to do with the surplus falling short based on a projection of future claim costs and business expenses.”

The Office of Insurance Regulation confirmed it is in talks with K.E.L. Title but would not comment further.

In the state’s “Rehab and Liquidation” program, if a title insurer can’t pay its claims, the state raises cash to cover them by imposing a statewide surcharge on policies sold by other title insurers. The only way an insurer can emerge from the program intact is to be acquired by another insurer, something that has not happened in the program’s history, a regulatory spokeswoman said.

Lynd blamed K.E.L. Title’s woes mostly on a South Florida-based title-agency worker whom he accused of stealing hundreds of thousands of dollars in escrow money while fabricating real estate sales documents. The title company was blindsided by the scam, he said, which took place more than three years ago but was discovered only this year during certain foreclosure litigation.

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