After two years of unsuccessful settlement talks, several fair housing groups have announced plans to sue a large insurance company for race discrimination in homeowners insurance coverage. The National Fair Housing Alliance announced the filing of the suit against Travelers Insurance Monday morning during its annual conference.
The suit, which was filed in federal district court, alleges the company violated the Fair Housing Act. In addition to NFHA, five other fair housing organizations and an African-American homeowner who was denied insurance coverage for her Washington, D.C., home are plaintiffs.
Aetna Insurance, which merged with Travelers recently, and Citigroup, which owns Travelers, are also named in the suit.
The plaintiffs make a wide range of allegations in the suit, most of them discovered through testing of the company. They allege Travelers agents:
- charged African American homeowners more than whites for the same or inferior coverage; required additional background information from applicants in minority neighborhoods;
- offered whites coverage that would replace their homes in the event of a fire or other total loss but denied the same coverage to African Americans;
- required inspection of homes in minority neighborhoods more frequently;
- more frequently failed to return calls or provide quotes to applicants in minority neighborhoods; referred callers from minority neighborhoods to other insurance companies; and
- maintained restrictions against writing coverage for homes that were older than a minimum age and below a minimum value.
Fair housing organizations employ testers that are volunteers from outside the organization and are paid a small stipend for their work. Testers are trained to play the role of homeseekers in order to help fair housing organizations determine how a company treats individuals in the ordinary course of business. Testing has been used as evidence in many fair housing cases and has been recognized by the U.S. Supreme Court as a valid method of gathering evidence.
NFHA Executive Director Shanna Smith said Monday that minimum age and value requirements for homes to meet in order to be insured have a harsher impact on black and Latino neighborhoods, which often have older homes with depressed property values. Such requirements, which most companies have abandoned, are based on the "insurance industry fiction" that a homeowner whose home is worth substantially less than the insurance policy would pay to rebuild the home has an incentive to burn it down, she said.
The plaintiffs also allege that Travelers' company policy of using an applicant's credit rating as a factor in determining whether to cover a home "looks like just another proxy for race discrimination," said David Berenbaum, executive director of the Equal Rights Center in Washington, one of the organizations suing.
Berenbaum said many companies who have abandoned minimum age and value requirements for insuring homes are exploring credit scoring as a way to perpetuate a "dual market" in which non-whites find it much more difficult than whites to get insurance. There is no real basis for the assumption that blemishes on one's credit report are an indicator of risk, he said.
Travelers uses credit scoring as "one factor" in determining whether to insure a home, Travelers spokesman Keith Anderson said in an interview Monday, but the company has done away with minimum-age and minimum-value requirements. Asked whether Travelers agents, who are independent agents not employed with the company, could be applying such guidelines incorrectly or otherwise departing from company policy, Anderson declined comment.
"I wouldn't want to speculate about individual situations," he said.
Berenbaum acknowledged that Travelers has probably departed from using minimum-age and minimum-value requirements but said the company has never provided the plaintiffs with proof. Regardless of the company policy, he said, agents who sell Travelers insurance appear to be poorly trained. In some cases, agents used minimum age and value requirements as a reason to refuse coverage for homes in minority neighborhoods but not in white neighborhoods.
Travelers has aggressively recruited minority agents and has worked with urban non-profits in an effort to better serve the minority market, according to the company's written statement. As a result, Travelers has achieved "an excellent record," the company said.
The news conference featured a colorful stunt spoofing Travelers' red umbrella trademark; white conference attendees sitting on one side of the aisle opened pristine new red umbrellas on cue, and African American and other conference attendees on the other side of the aisle opened shredded and tattered ones, illustrating the plaintiffs' contention that only whites can count on the quality coverage Travelers claims to provide to its policy holders.
"I didn't even get an umbrella," said one African American conference-goer as part of the demonstration.