Judge Gives Erie Insurance, Maryland Regulator 60 Days to Resolve Rift Over Bias, Document Disclosure

A judge has given Erie Insurance and the Maryland insurance regulator 60 days to settle their differences related to allegations that the insurer unfairly discriminated against Black insurance agents in the Baltimore area and that the regulator acted arbitrarily and wrongly disclosed confidential business information.

On June 8, Pennsylvania-based Erie went to court seeking a restraining order against the Maryland Insurance Administration (MIA) over letters MIA issued on May 24 accusing the insurer of illegal racial and geographic discrimination. The insurer alleges that MIA issued its findings without a full investigation of the complaints filed against it by four local agencies. The insurer also claims that MIA illegally disclosed confidential business information in issuing its findings.

Four days after Erie sued in federal district court, Judge Julie Rebecca Rubin indicated that Erie and MIA “are working to resolve their disputes” and have requested a stay of legal proceedings to allow them reach a resolution. She agreed to a stay for up to 60 days.

In January 2021 three Maryland independent insurance agencies filed administrative complaints with the MIA alleging Erie engaged in discriminatory practices against low-income and minority communities in the Baltimore area. The complaints were filed by Erie agency Baltimore Insurance Network, and former Erie agencies Ross Insurance Agency and Welsch Insurance Group. Burley Insurance & Financial Services filed a similar complaint in December 2021.

In their complaints, the agencies said they were restricted from offering Erie insurance policies to residents of primarily Black communities. They alleged that Erie threatened and penalized them for challenging what they maintain are Erie’s discriminatory redlining policies. The agencies claim the retaliatory actions hurt their business.

MIA opened two separate investigations: a broad market conduct examination and a licensing investigation into the complaints.

Erie said that in February and March 2022 it provided written answers to five questions MIA gave it. According to Erie, shortly thereafter MIA told it the licensing investigation was being put on hold so that it could first complete the market conduct exam. The insurer said it expected that there would be further discussions and interviews with the MIA once the MIA resumed the licensing investigation.

Erie says that it never received any follow-up concerning its 2022 responses regarding the agents’ complaints.

Maryland Insurance Agencies Accuse Erie Insurance of Discriminatory Practices

Then, Erie maintains, without any notice, on May 24, MIA acted “arbitrarily, capriciously and unlawfully” in issuing what are known as determination letters against Erie in relation to the redlining complaints that were the subject of the licensing investigation.

MIA concluded that Erie used improper underwriting standards and imposed penalties on agents in order to get them to reject eligible urban and minority risks it considered unprofitable, rather than adjusting its filed underwriting and rates to meet the risks. MIA explained that an insurer cannot legally refuse to issue a policy to someone who meets the guidelines and rates it has filed with the state.

Erie said it was surprised at the release of the letters since it had been told the licensing probe had been put on hold. It then became further concerned when it discovered that the four letters — and soon media reports — contained “highly damaging, and unfounded determinations” that Erie violated laws in its treatment of the four agents that were “based entirely on the confidential, privileged and protected documents” it had provided for the market conduct exam.

Erie maintains that MIA acted “arbitrarily and capriciously” and ignored its offer to provide additional information regarding the agency complaints. Instead, the insurer says MIA chose to fill in “factual gaps” by using confidential and protected information that was for the market conduct exam. The documents included an underwriting guide, a training session outline, a document containing notations of management concerns, and references to statements by Erie Erie’s attorneys, according to the complaint.

Erie’s legal action is not about the substance of the four administrative complaints that were filed against it with the MIA. Rather its complaint concerns what it believes are MIA’s unlawful decisions to “arbitrarily and capriciously cut short its administrative investigation of Erie and to then “fill the gaps” in the incomplete investigation by including “confidential, privileged and protected materials” in violation of Maryland law and long standing practice and procedure, and in violation of Erie’s rights in its attorney-client privileged and work product protected communications.

Erie provided the Administration with a copy of its lawsuit prior to filing and demanded that the MIA withdraw the determination letters but said MIA refused.

A Erie spokesperson said the company would not comment. When the MIA first announced it would investigate the agencies’ complaints, Erie told the Maryland Daily Record it was confident that the “business goals and service expectations we set for our agents are appropriate and reasonable and that our underwriting practices comply with applicable state insurance laws and regulations.”

MIA did not respond to a request for comment by press time.

Topics Legislation Maryland