When a pipe burst and their house flooded in 2018, Deonne Burgess knew the cleanup was going to be chaotic. What she wasn’t expecting was a review by State Farm, her home insurer.
A State Farm claims adjuster tried to remove as many items as possible from a repair list of her home in Inglewood, a mostly black neighborhood in Los Angeles, Ms. Burgess said. The adjuster argued that State Farm didn’t have to pay to replace a door that was so damaged by the flood that it was no longer closed.
Ms. Burgess, the global payroll director for Wonderful Company, which makes packaged foods like pomegranate juice and pistachios, began to believe that she was treated with particular suspicion for being black. She told State Farm it was unlikely that policyholders would receive the same treatment in a white neighborhood.
“It was right after the Malibu fires and I said, ‘Nobody in Malibu would have to justify things like that,'” she said.
Ms. Burgess’ claims “are unfounded,” said Roszell Gadson, a state farm spokesman. “State Farm is committed to a diverse and inclusive environment in which all customers are treated with fairness, respect and dignity.”
Ms. Burgess could not prove that her experience with the state farm adjuster was racism. After all, the same insurer paid out a car insurance claim for their BMW 5 Series sedan, which was also destroyed by the flood; Another group of people took care of it and there wasn’t much to argue about. But Mark Young, the State Farm hired salesman who arranged for her walls and floors to be repaired, and Leonard Redway, the plumber Mrs. Burgess hired to fix a broken pipe, said Mrs. Burgess was treated worse than her white customers. Both are black too.
Redway said applicants in predominantly white, affluent neighborhoods would generally have a much easier time getting insurers to cover repair costs. “If I were in the year 90210, it would be almost like an open check,” he said, referring to the affluent Beverly Hills zip code. “Sometimes the adjusters don’t even come out to see it.”
Accusations of racism are often difficult to prove, but especially in homeowner insurance where insurers have a lot of discretion and don’t always provide detailed explanations as to why claims are denied. Because company representatives often review claims and assess an applicant’s credibility through home visits, face-to-face interactions, and other measures, biases can arise.
While claims disputes are hardly uncommon in the industry, many black customers say they feel they are being treated unfairly because of their race – something Jeff Major, a Manhattan-based public expert who haggles claims with insurance companies on behalf of policyholders, has testified to his work.
“You can actually tell a difference between a Caucasian family and an African-American, Hispanic, or Asian family,” Major said. “It’s kind of known. It is not talked about. It’s a culture. “
A tight grip on data
The insurers keep their policy sales and claims data firmly under control. They have long argued that the size and timing of disbursements, as well as the neighborhoods in which claims are registered and addressed, are proprietary information and that disclosure of this data would affect their competitiveness. They guard it so eagerly that even most regulators do not have detailed information on how insurers evaluate individual claims.
Michael Barry, a spokesman for the Insurance Information Institute, a trade group, said claims data is private because payouts are viewed as “losses” and that disclosing them would “put insurers at a competitive disadvantage”.
Where data is publicly available, such as auto insurance, researchers have found that policies discriminate against black drivers by charging them higher premiums. But homeowner insurance was opaque.
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Forcing insurers to segregate data can be difficult, in part because it is regulated by states, not the federal government. For example, federal laws that banned redlining for banks after the civil rights movement don’t apply equally to insurers. And by 2014, 17 states had no bans on racial discrimination by insurers, according to a group of university researchers.
In late September, the Federal Insurance Advisory Board, which includes top executives from the country’s largest insurers, voted against a proposal to investigate racist bias in the industry, fearing that the study would tarnish the distinction between the legitimate discretionary insurers’ claims Claimant and unfair bias.
Distrust and deposits
In order to assess the accuracy of their customers’ claims, insurers send adjusters to meet with applicants in person. This gives companies a lot of discretion in determining the extent of the damage and what information is potentially fraudulent.
“Whenever there is a lot of discretion, that discretion can be influenced by implicit or explicit bias,” said Tom Baker, a professor at the University of Pennsylvania Law School who examined insurance payouts to victims of Hurricane Andrew in 1992, found that among the victims Latino applicants have had significantly longer delays in obtaining funds from insurers than white applicants.
Lisa Thompson, a black homeowner in Toledo, Ohio, had been living with her daughter while the roof of her home was being repaired when thieves broke into that home, stripped it, took her kettle and appliances, and pulled down part of her roof. Ms. Thompson filed a lawsuit with her insurer, Allstate.
A adjuster posted by the company accused them of orchestrating the theft, Ms. Thompson said. In order to pursue their claim, Allstate agents would have to go to a firm’s law firm for a deposit. On December 9, 2019, Ms. Thompson spent nearly four hours answering questions about her employment history, family, and time at the home.
Allstate sent her a letter on June 8, saying that her claim is still being investigated and asked for an additional 180 days to complete the process. Shortly thereafter, she canceled her policy, saying her investigator had determined that Ms. Thompson did not qualify as a “resident” of her home because she was staying with her daughter. But Ms. Thompson found that her claim wasn’t denied until the New York Times contacted Allstate in November to inquire about her case. The insurer had sent the letter informing her of the denied claim to the address where Mrs. Thompson had not lived.
“We apologize for the failure of your client to receive this correspondence,” an Allstate representative later wrote to an attorney assisting Ms. Thompson with her claim. Your house will remain uninhabitable. She files a discrimination lawsuit against Allstate with the Ohio Civil Rights Commission.
Nicholas Nottoli, an Allstate spokesman, said the claim was denied “on the basis of facts after thorough investigation”. He added that the company has no record of its appraisal accusing Ms. Thompson of helping the thieves and that “race is not a factor in pricing, underwriting or claims settlement”.
“I’m so lost”
Mr. Young, the salesman hired by State Farm to arrange repairs to Ms. Burgess’ house, saw insurers knock down other black customers and lobby on their behalf – even though his Los Angeles company, Valley Green, which specializes in the repair of damaged houses, depends on insurers for companies.
He fought on behalf of Langston Phillips, who nearly lost his house during a fight with his insurer Pacific Specialty. Three years ago, Mr. Phillips’s kitchen had been flooded in a burst pipe and ruined parts of his three-bedroom house in Inglewood. A Pacific Specialty appraiser found that the company owed Mr. Phillips to repair costs of just over $ 11,000. Mr. Phillips’ contractor said his house needs far more extensive repairs.
Pacific Specialty asked Mr. Young to take a look. Mr. Young decided the repairs would cost more than $ 33,000. A battle ensued in which Mr. Young sided with Mr. Phillips despite being hired by Pacific Specialty.
Because of the dispute, the amount Pacific Specialty was willing to pay to pay Mr. Phillips even reached him, forcing him to move into a single hotel room with his two children while he waited for his kitchen to be rebuilt. On a particularly bad day, he emailed a Pacific Specialty representative asking for clarification on when some of that money would arrive. “I’m so lost,” he wrote.
“We strive to pay claims as quickly and fairly as possible in order to bring the insured back to their pre-loss standard of living,” said Kara Holzwarth, Pacific Specialty General Counsel. “We find that water leakage can be fraught with disagreement.” She said Pacific Specialty’s treatment of Mr. Phillips had nothing to do with his race.
After two years of fighting, Mr. Phillips gave up. Concerned about the loss of the house, he moved back in and started working on weekends to pay for the repairs – replacing the cabinets, floors, and plumbing – that he was doing himself. “I’m bone tired,” he said.
Mr. Young has since realized that most insurers are unwilling to work with him. He is currently suing 17 insurance companies in succession for discrimination after the companies refused to include him on their supplier lists. He has reached a confidential settlement in his lawsuit against travelers and has pending complaints against others.
“I’m the only one who rattles the cages,” he said, “and says why don’t you give minority sellers work?”
Niraj Chokshi contributed to the coverage.