Travelers accused of discriminatory redlining in five cities
Five fair-housing groups filed a lawsuit on June 26 against Travelers Property Casualty Corp. and Citigroup Inc., accusing them of discrimination and redlining in five inner cities: Milwaukee, Wis.; New Orleans, La.; Richmond, Va.; Toledo, Ohio; and Washington, D.C.
Redlining is the unethical practice of refusing to offer insurance to someone due to age, race, or location.
In response to the allegations, Travelers released a statement saying: "We will not refuse to insure . . . the amount of coverage on a residential property, and its contents, in urban areas because of the location or age of the property." The company also boasts that in New Orleans, Richmond, and Washington, D.C., its market share of homeowners insurance policies in minority neighborhoods exceeds its nationwide market share by at least a 2-to-1 margin. In Milwaukee and Toledo, Travelers' urban home insurance market share is below its nationwide market share, but roughly equal to that of its market share in Wisconsin and Ohio. In short, Travelers contends it is not redlining.
Housing Opportunities Made Equal (HOME) — which recently received $17.5 million from Nationwide Mutual Insurance Co. in a redlining settlement dispute — joined forces with the National Fair Housing Alliance (NFHA), the Metropolitan Milwaukee Fair Housing Council (MMFHC), the Toledo Fair Housing Center, and the Greater New Orleans Fair Housing Action Center to survey Travelers' home insurance selling practices in those five inner cities after receiving a complaint from Lydia Washington, the lone individual plaintiff in the lawsuit, which was filed in U.S. District Court in Washington, D.C.
The plaintiff contacted several Travelers' agents in the Washington, D.C., area to apply for homeowners insurance. In each instance, the lawsuit alleges, Travelers' agents told Washington that they could not sell her home insurance because of her derogatory credit history — meaning her credit report allegedly included bankruptcies, foreclosures, or liens. Washington's credit history is not derogatory, according to the lawsuit, and the lawsuit alleges that Travelers refused to sell her insurance because she lives in a black neighborhood.
Testing for redlining
Washington's complaint to the fair-housing groups triggered the groups to send black and white representatives seeking home insurance to Travelers' agencies in each of the five cities mentioned in the court documents. The lawsuit alleges that in New Orleans and Washington, D.C., black representatives received quotes that were $200 higher than those provided to white representatives seeking the same insurance coverage.
Representatives also found that in Milwaukee, whites were eligible to purchase replacement-cost coverage, while blacks seeking the same coverage for a similar home were informed by Travelers' agents that they could not purchase replacement-cost coverage because of the age of the home. (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 practice by an insurer to deny coverage solely on the basis of the age of the home is illegal under the federal Fair Housing Act.
Keith Anderson, a spokesperson for Travelers, says that the fair-housing groups would not share their observations with his company and thus there's no way to verify the methodology of the tests. The statement issued by Travelers also says the tests were "unscientific" and produced "false findings."
One source familiar with redlining lawsuits tells Insure.com that courts have ruled repeatedly that testing for redlining by sending out representatives is a "valid form of evidence, and often is the best evidence to show the difference between the treatment of minorities and whites seeking home insurance." The source also says that insurance companies, such as Allstate Insurance Co. and Nationwide, have hired fair-housing groups to perform such testing of their agents to make sure their agents are not redlining.
Nonetheless, Travelers' statement says that the company will "vigorously fight this unwarranted lawsuit."