Farmers Settles Redlining Suit In Ohio

The Farmers Insurance Group is moving forward with some new standard operating procedures in Ohio after reaching a settlement last month with plaintiffs who charged the Los Angeles-based homeowners' insurer with redlining minority urban neighborhoods in Ohio.

A consent decree was filed in the Lucas County Common Pleas Court on Oct. 11 in the consolidated cases of Toledo Fair Housing Center v. Farmers Insurance and Ohio Civil Rights Commission v. Farmers Insurance.

“The primary impetus for the lawsuits was Farmers' underwriting guidelines, particularly as they related to homeowners being unable to obtain the best insurance products if their houses were beyond a certain age,” explained attorney Stephen M. Dane of the Toledo-based firm Cooper & Walinski. The firm represented the two individual plaintiffs, Monica Holiday-Goodman and Justina Alsup, and the Toledo Fair Housing Center in the lawsuit.

Mr. Dane added that another challenged guideline was Farmers' determination of whether a home's replacement cost would exceed its market value. The two individual plaintiffs claimed that Farmers refused to sell them replacement-cost coverage because their homes were built before 1950.

Mr. Dane stated that the two underwriting criteria had been challenged in lawsuits elsewhere over the years and that “all” the insurance companies in Ohio except Farmers had dropped them.

However, Farmers' lead attorney, Andrew Sandler, stressed that the challenged criteria were legal because they had been approved long ago by Ohio regulators.

But because Farmers, like most if not all other homeowners insurers, had discontinued using the objectionable guidelines years before the lawsuits began, “a reasonable resolution made more sense than litigation,” added Mr. Sandler, a partner in the Washington, D.C., firm of Skadden, Arps, Slate, Meagher & Flom LLP.

The past two years were spent negotiating, with the parties not even reaching the discovery phase, Mr. Dane reported.

Mr. Sandler indicated that Farmers drew up revised guidelines that the Ohio commissioner approved even before the consent decree was entered. “Using the newer guidelines without question helps extend coverage in the urban core,” said Mr. Sandler.

Under the consent decree, Farmers agreed to an immediate $1.3 million cash payment to the plaintiffs for damages, including costs and attorney fees. Farmers further consented to contribute $3 million in loans and grants to several community programs designed to enhance the insurability of owner-occupied dwellings of four units or less in predominantly African-American and other minority neighborhoods.

Other features of the consent decree, in which Farmers admits to no wrongdoing or liability, include:

Letters from Farmers to rejected Ohio applicants and to cancelled or non-renewed policyholders, informing them about specific corrections and repairs to make their properties eligible for insurance.

Letters from Farmers to current customers informing them how to qualify their homes for replacement-cost coverage under the revised underwriting criteria.

Notice to and training of Farmers employees and agents on providing homeowners coverage on a non-discriminatory basis.

An increased Farmers presence in minority urban neighborhoods across Ohio.

Targeted ads and marketing that employ ethnically diverse models and actors.

One thing the consent decree does not require is oversight. Farmers merely has to provide the plaintiffs' attorneys with certain documentary evidence of compliance every six months for two years.

“This case does have a lot less interaction” between the plaintiffs and the insurance company “than there has been in prior settlements of this type of lawsuit,” Mr. Dane acknowledged.

“This just wasnt the kind of case that warranted oversight,” added Mr. Sandler.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 19, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Farmers Settles Redlining Suit In Ohio

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