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Virginia Supreme Court reverses $100 million redlining judgment against Nationwide

Nearly a year and a half after a Richmond, Va., jury ordered Nationwide Mutual Insurance Co. to pay $100 million in punitive damages for discriminating against minorities in the sale of homeowners insurance, the Virginia Supreme Court reversed that judgment with a 4-3 ruling on Jan. 14.

Housing Opportunities Made Equal (HOME), a Richmond, Va.,- based fair housing group, originally sued Nationwide for "intentionally pursu[ing] a strategy whereby the company avoids providing insurance in African-American neighborhoods." HOME was awarded $500,000 in compensatory damages in addition to the $100 million in punitive damages by the original trial court.

Nationwide Insurance vehemently denied the charges brought against it and objected to the verdict, calling it "outrageous" and "totally out of sync with the evidence as it was presented in court." Prior to the $100 million penalty, the largest judgment against Nationwide had been $4.5 million for redlining in Toledo, Ohio.

Redlining is the unethical practice of refusing to offer insurance to someone due to age, race, or location.

The Supreme Court's reasoning

The Supreme Court's four-justice majority opined that HOME did not have the standing to maintain a complaint against Nationwide because it "failed to establish that it was in any way 'aggrieved' by Nationwide's alleged discrimination against 'African-American neighborhoods' in the City of Richmond." An "aggrieved" person or institution must show that it was directly harmed by another's actions, according to the court.

The three dissenting justices noted, however, that "a litigant who comes before this Court armed with a jury verdict approved by the circuit court 'occupies the most favored position known to the law,'" and that "Nationwide used the racial composition of neighborhoods as a factor in its marketing strategies." According to the dissentors, HOME was within its rights "to seek redress in the courts for conduct which is proscribed by the Virginia Fair Housing Law."

The dissenting justices' opinion nothwithstanding, the Virginia Supreme Court overturned the original trial court jury's verdict and ruled in favor of Nationwide. HOME plans to file a motion for rehearing in front of the Virginia Supreme Court, says Susan Scovill, director of fair housing at HOME.

Nationwide to work at HOME?

Nationwide Insurance president and COO Galen Barnes is pleased that the verdict was overturned, but also extends HOME an olive branch in a statement. "It is our desire to work with [HOME] on our common agenda of enhancing urban market opportunities and making sure insurance products are accessible to urban residents," he says.

"We're obviously disappointed with the ruling," says Scovill. "It's not a decision based on the evidence, it is not a decision that says the evidence that Nationwide redlined isn't true."

Scovill says that the decision is based on a legal technicality that says HOME was not the right party to bring the suit. "We're concerned that the perception of this technicality will make Nationwide and other home insurers think they can discriminate and get away with it."

Although HOME lost the case, Scovill notes that Nationwide has made strides within Richmond's community as a result of the litigation. "Nationwide has done some marketing of its products in Richmond and they have made some changes, which have been good," she says.

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