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Farmers Insurance allegedly redlining in Toledo
The Toledo Fair Housing Center (TFHC) and two individuals are suing Farmers Insurance for alleged redlining and other discriminatory practices. Redlining is the unethical practice of refusing to offer insurance to someone due to age, race, or location.
TFHC asserts that Farmers discriminates by offering less-attractive insurance policies to homeowners in predominantly African-American neighborhoods and by refusing to issue policies because of an applicant's race or the racial composition of the applicant's neighborhood.
Caught in the act?
Beginning in September 1996, the three plaintiffs sought insurance numerous times from Farmers' agents in the Toledo area. One plaintiff contacted a Farmers' agent on April 30, 1997, and again on May 1, 1997, in order to get replacement cost coverage for her home. The agent told her that Farmers has a company policy of not selling replacement cost insurance for dwellings built before 1955. (Replacement cost is the amount it would take to replace or rebuild your home or repair damages with materials of similar kind and quality, without deducting for depreciation.)
The second plaintiff visited the same Farmers Insurance agency on April 11, 1997, for replacement cost insurance on her pre-1955 house. The agent told her he could not sell the replacement cost coverage on her house because of its age.
On Feb. 4, 1998, TFHC sent one of its employees who posed as a homeowner to a different Farmers agency. The employee informed the agent that her house was built in 1915 and she desired replacement cost coverage. The agent refused, saying Farmers would not provide replacement cost insurance because the replacement cost of the house was "substantially higher than its market value." The plaintiffs cite eight other instances in which they were allegedly denied coverage because of the age of their home or because of their race.
The practice of denying coverage solely on the basis of the age of the home has been declared illegal under the federal Fair Housing Act.
"We were surprised that Farmers is still doing this," says Stephen Dane, attorney for the plaintiffs. Redlining and discriminatory practices were nipped in the bud by State Farm, Allstate, Nationwide, and American Family earlier in the 1990s, he says.
TFHC has been successful in working with insurance companies in the Toledo area to reduce discriminatory practices and redlining. However, Farmers Insurance's practices have "frustrated and continue to frustrate [TFHC's] efforts [to eliminate] . . . hinderances of freedom, segregated housing patterns, and the stigmatizing [of] African-American neighborhoods."
TFHC and the plaintiffs are seeking an injunction against Farmers' practices, compensatory damages in excess of $25,000 for each of the three plaintiffs, $25,000 for punitive damages, and court costs. TFHC says it would be happy to settle the case for less, but if Farmers decides to go to trial and the case is certified as a class action, "we'll be asking for multimillions of dollars," says Dane.
A similar case has already played out in Richmond, Va. There, Nationwide Insurance was ordered to pay $100 million for redlining and discriminatory practices on Oct. 26, 1998. The Richmond case was a benchmark that asked the question, "Let's see what the juries think about these cases," says Dane. "The juries have spoken. They get quite angry with insurance companies when they see what's happening in ther city."
Farmers Insurance has not returned calls for comment.
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