The U.S. Department of Housing and Urban Development has charged Erie Insurance Group and five independent insurance agencies with violating the Fair Housing Act. HUD alleges that they provided inferior insurance products to homeowners in African-American neighborhoods compared to those offered homeowners in white neighborhoods with comparable homes in New York State.
Erie has called the charges “misguided” and blasted HUD for issuing an “inaccurate and inflammatory press release” without a fair hearing on a matter HUD has been looking into for five years.
“When people walk into a store in America, the service and the offerings should not be determined by the color of their skin. That is exactly the type of discrimination we are talking about here,” said Kim Kendrick, HUD’s Assistant Secretary for Fair Housing and Equal Opportunity in the HUD release announcing the action.
Kendrick said that HUD’s investigation found that Erie’s agents did not provide homeowners in African-American neighborhoods in Syracuse, N.Y., with the same level of insurance coverage they provided in predominantly-white neighborhoods in Liverpool, N.Y.
HUD also said its investigation found that in New York State, overall, the more African-Americans there were in a neighborhood, the less likely Erie was to write an insurance policy there. In addition, Erie was less likely to appoint agents to neighborhoods with large African-American populations, according to HUD.
According to HUD, its investigation was started as the result of a complaint filed by the Fair Housing Council of Central New York. Testers from FHCCNY posed as first-time homebuyers with no insurance claims in the past five years. They called Erie insurance agents, seeking insurance for homes in either Syracuse (which is predominantly African-American) or Liverpool (which is predominantly white).
According to HUD, FHCCNY closely matched the properties for several characteristics, including but not limited to purchase price, age of the property, type of construction, square footage, number of bedrooms and bathrooms, distance to the fire department, presence of burglar and smoke alarms, and age and type of the siding, roof, and heating and plumbing systems.
In four tests, HUD said the Syracuse testers did not receive quotes for homeowners insurance despite specific requests, while the Liverpool testers received quotes by telephone or mail.
In four other tests, the testers seeking insurance for homes in Syracuse received quotes for Erie’s second-broadest coverage, Extracover, but did not receive quotes for Erie’s best insurance product, Ultracover. The testers seeking insurance in Liverpool received quotes for Ultracover. The Ultracover policy provides more extensive replacement cost coverage than the Extracover policy.
HUD’s investigation claims that in the 600 New York ZIP codes in which the African-American population is less than 1 percent, Erie has 49 agents, representing 2.7 agents per 100,000-population. In the 27 New York ZIP codes in which the African-American population is greater than 30 percent, Erie has two agents, representing 0.55 agents per 100,000-population. Erie does not market its products or appoint agents on Long Island, in New York City or in the suburban counties north of New York City.
“The numbers don’t lie. Whether you examine Erie by ZIP codes or by families insured, the differences between black and white are clear,” said Kendrick.” This really is about African Americans being denied an equal opportunity to protect the biggest investment of their lives.”
The five agencies licensed to sell Erie insurance products that were charged by HUD were R.K. Johnson & Associates, Salanger & Hayward Agency, Inc., CNY Insurance Associates, the Vacco Agency, Inc., and the Grimsley Agency, Inc.
The Fair Housing Act and its regulations make it illegal to refuse to provide hazard insurance for dwellings or to provide insurance differently because of race.
Housing discrimination charges heard before an administrative law judge carry a maximum civil penalty of $11,000 for each violation for a first offense, in addition to actual damages for each complainant, injunctive or other equitable relief, and attorneys’ fees.
Parties also have the right to elect to have their cases heard in federal district court.
In response, Erie Insurance Group issued a statement saying the company “is proud of its commitment to fair and non-discriminatory business practices.”
The insurers said it “regrets that HUD fair housing staff yesterday issued a press release promoting its misguided claims against Erie and several independent insurance agencies.
According to Erie, the claims by HUD staff are based on several telephone calls to independent insurance agents made more than five years ago as well as on the claim that an insurer’s distribution of agents within a state must mirror the racial composition of each community within that state.
“It is always problematic when the same HUD staff that initiates a complaint decides whether the complaint should be pursued. It is especially troubling when that staff issues an inaccurate and inflammatory press release before its claims are presented to an impartial HUD judge,” said Erie’s counsel, Andrew Sandler of the Skadden Arps law firm.
He said Erie looks forward to “presenting its defense to these baseless charges and hopes that HUD staff, having already taken five years to pursue its claims, does not seek further delay in permitting Erie to obtain a fair hearing.”
Erie Insurance Group
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