Nationwide settles another redlining claim for $3.5 million

Nationwide Insurance Companies will pump $3.5 million into Toledo, Ohio neighborhoods aspart of a class action settlement in an insurance redlining lawsuit. The April settlementends ongoing litigation that asserted that Nationwide's sales practices and underwritingcriteria unfairly discriminate against urban Toledo's minority homeowners and homeseekers.

The class-action suit, filed in 1993 by the Toledo Fair Housing Center, soughtcompensatory and punitive damages for minority homeowners allegedly refused insurance, orgranted policies on different terms and conditions than their white counterparts. Theinvestigation of Nationwide in Toledo was partially funded by HUD's Fair HousingInitiatives Program.

The suit is one of several levied against Nationwide and other insurers accused ofredlining, which is the practice of refusing to sell homeowners insurance to entireneighborhoods based on racial makeup. The federal Fair Housing Act bans companies fromrefusing homeowners policies based on race.

Columbus-based Nationwide settled a similar lawsuit in Lexington, Kentucky for $500,000in March. (See May 1998 Advocate.) Two lawsuits alleging illegal insurance salesare pending in Cincinnati and Richmond, Virginia. Other suits brought by former Nationwideagents are also pending.

Though admitting no wrongdoing, Nationwide said it will continue to focus on urbanmarkets.

Justice Department probe yielded first of many large "reinvestmentsettlements"

In response to a Justice Department investigation, Nationwide last year agreed tochange the way it writes and sells homeowners insurance and invest $13.2 million inminority neighborhoods and inner cities in the next decade.

The company eliminated guidelines based on the age and value of homes. Many homes inminority neighborhoods fall far below Nationwide's threshold for coverage. Nationwide hasagreed to no longer consider the value of homes. Now, Nationwide evaluates soundness ofstructures and proximity to fire hydrants and fire stations, among other factors.

According to the Columbus Dispatch, last May the company donated an additional$10 million each to two national housing organizations Neighborhood Housing Services ofAmerica and National Equity Fund. The Toledo settlement includes:

  • A $2 million fund to compensate plaintiffs named in the suit: class members deniedNationwide policies and class members who held Nationwide policies for repair cost notreplacement cost between 1990 and 1997.
  • $500,000 available to class members through a Toledo bank for low-interest loans andhome-related expenses.
  • $500,000 for Fair Housing Opportunities of Northwest Ohio, Inc., which servesnorthwestern Ohio by investigating claims of discrimination in housing, insurance andmortgage lending.
  • $500,000 as a "community investment aid" to moderate and low-income urbanresidents to obtain or repair homes.

Nationwide has also agreed to pay attorneys' fees and expenses approved by thecourt, according to plaintiffs' attorney Stephen Dane. The plaintiffs' attorneys willrequest $1.5 million in fees and $350,000 in expenses.

Nationwide will add an agent and an office to urban Toledo neighborhoods

Nationwide also agreed to add an agent in urban Toledo within one year. Lisa Rice,director of the Toledo Fair Housing Center, told the Dispatch that the settlementbrought concessions from Nationwide that a prolonged lawsuit would not.

Rice explained why it was important to have an agent and an office in Toledo's urbanneighborhoods. "Where you have a physical presence, you make a concerted effort togrow your market," Rice told the Dispatch. If the lawsuit went before a judge,Rice said future partnerships with Nationwide and policy changes likely would not occur.

Shanna Smith, executive director of the National Fair Housing Alliance, saidNationwide's recent donations did not eliminate the problem. While fair housing groupshave filed a few suits against Nationwide, Smith said Nationwide agents allegedly firedfor writing policies in minority neighborhoods have brought 10 more. Managers thatreprimanded those agents remain at the company, she said.

"They still fail to deal with the crux of the problem: racial animosity inAfrican-American and Latino neighborhoods," Smith said in an interview concerning thecase.