When a pipe burst and flooded his home in 2018, Deonne Burgess knew that cleaning would be complicated. What she did not expect was the scrutiny of State Farm, her home insurer.
A State Farm claims expert tried to remove as many items from a repair list as possible from his home in Inglewood, a predominantly black neighborhood in Los Angeles, Burgess said. The expert argued that State Farm should not pay to replace a door that was so damaged by the flood that it did not close any more.
Burgess, director of global payroll at Wonderful Company, which makes packaged foods like pomegranate and pistachio juice, began to think she was being treated with extra suspicion because she was black. She told State Farm that policyholders in a white neighborhood were unlikely to receive the same treatment.
“It was right after the fires in Malibu, and what I said was, ‘No one in Malibu would have to justify things like that,'” she said.
Burgess’s claims “are without merit,” said Roszell Gadson, a spokesman for State Farm. “State Farm is committed to a diverse and inclusive environment, where all customers are treated with justice, respect and dignity.“
Mrs. Burgess had no way of proving that her experiences with the State Treasury appraiser resulted in racism. After all, the same insurer paid an auto insurance claim for its BMW 5 Series sedan, which was also ruined by the flood; a different group of people took care of that, and there was not much to discuss. But Mark Young, the salesman hired by State Farm who repaired his walls and floors, and Leonard Redway, the plumber Burgess hired to repair a broken pipe, said Burgess was being treated worse than his white customers. Both are also black.
Redway said claimants in predominantly white and wealthy neighborhoods generally find it much easier to get insurance companies to cover the cost of repairs. “If I were in 90210, it would be almost like an open check,” he said, referring to the rich zip code of Beverly Hills. “Sometimes, the adjusters don’t even go out to take a look.”
Racism claims are often difficult to prove, but especially in home insurance, where insurers have a lot of discretion and do not always provide detailed explanations as to why claims are denied. As company representatives often verify claims and assess a claimant’s credibility through home visits, face-to-face interactions and other measures, there may be room for bias.
Although claims disputes are not uncommon in the industry, many black customers say they feel unfairly treated because of their race – something Jeff Major, a Manhattan-based public adjuster who haggles with insurers on behalf of policyholders because of their claims, testified in his line of work.
“You can really see the difference between a Caucasian family and an African American, Hispanic or Asian family,” said Major. “It’s kind of known. It is not spoken. It is a culture. “
A firm grip on data
Insurers maintain strict control over policy sales and claims data. They have long argued that the size and timing of payments and the neighborhoods where claims are recorded and handled are proprietary information and that sharing that data would impair their ability to compete. They guard it with such zeal that even most regulators do not have detailed information on how insurers assess individual claims.
Michael Barry, a spokesman for the Insurance Information Institute, a trade group, said the claim data was private because payments were considered “losses” and that disclosing them would put insurers “at a competitive disadvantage with each other”.
Where data is available to the public, such as car insurance, the researchers found that policies discriminate against black drivers, charging them higher premiums. But home insurance has been opaque.
Business and Economy
It can be difficult to compel insurers to give up data, in part because it is regulated by states and not by the federal government. For example, federal laws that prohibited redlining for banks after the civil rights movement do not apply equally to insurers. And in 2014, 17 states had no prohibitions on race-based discrimination by insurers, a group of university researchers found.
In late September, the Federal Insurance Advisory Committee, whose members include senior executives from the country’s largest insurers, voted against a proposal to study racial prejudice in the industry due to concerns that the study would blur the distinction between legitimate discretion that insurers have to question the claimants’ claims and unfair bias.
Mistrust and testimonials
To assess the veracity of their customers’ complaints, insurers send evaluators to meet face to face with the claimants, giving companies ample freedom to determine the extent of the damage and which claims they will label as potentially fraudulent.
“Whenever there is a lot of discretion, there will be room for that discretion to be affected by an implicit or explicit bias,” said Tom Baker, a professor at the University of Pennsylvania School of Law who studied insurance payments for victims of Hurricane Andrew in 1992. Using data obtained in For victims, he found that Latin claimants faced significantly longer delays in receiving money from insurers than white claimants.
Lisa Thompson, a black housewife in Toledo, Ohio, was staying with her daughter while the roof of her house was being repaired when thieves broke into the house, leaving her naked and taking out her water heater and appliances and pulling out part of her roof. Mrs. Thompson filed a lawsuit with her insurance company, Allstate.
An appraiser sent by the company accused her of orchestrating the theft, Thompson said. To pursue her claim, Allstate officials said, she would have to go to the offices of a law firm hired by the company for a deposition. On December 9, 2019, Ms. Thompson spent nearly four hours answering questions about her job history, her family and her time living at home.
Allstate sent him a letter on June 8 saying he was still investigating his complaint and asked for another 180 days to complete the process. Shortly thereafter, he canceled his policy, saying that his investigator determined that Mrs. Thompson did not qualify as a “resident” of her home because she was staying with her daughter. But Thompson found that his complaint was only denied when The New York Times contacted Allstate in November to ask about his case. The insurer had sent a letter notifying her of the denied claim to the address where it determined that Mrs. Thompson did not reside.
“We apologize that your client did not receive this correspondence,” an Allstate representative later wrote to a lawyer who is helping Mrs. Thompson with her claim. Your home remains uninhabitable. She is filing discrimination action against Allstate with the Ohio Civil Rights Commission.
Nicholas Nottoli, an Allstate spokesman, said the claim was “denied on the basis of facts after a thorough investigation”. He added that the company had no record of its appraiser accusing Ms. Thompson of helping thieves and that “race is not a factor in determining prices, underwriting or claiming damages”.
$ 11,000 versus $ 33,000
Mr. Young, the supplier hired by State Farm to arrange for repairs to Mrs. Burgess’s house, saw insurers hurt other Black customers and lobby on his behalf – although his Los Angeles company, Valley Green, specializes in repairing damaged homes, depend on business insurers.
He fought on behalf of Langston Phillips, who nearly lost his home during a fight with his insurance company, Pacific Specialty. Three years ago, Mr. Phillips’ kitchen had flooded after a pipe burst, ruining parts of his three-bedroom house in Inglewood. A Pacific Specialty appraiser determined that the company owed Mr. Phillips just over $ 11,000 in repair costs. Phillips’ contractor said his home needed much more extensive repairs.
The Pacific Specialty asked Mr. Young to take a look. Mr. Young determined that the repairs would cost more than $ 33,000. A battle broke out, with Mr. Young siding with Mr. Phillips, although he was hired by the Pacific Specialty.
Because of the dispute, even the amount Pacific Specialty agreed to pay Mr. Phillips reached him in increments, forcing him to move to a single hotel room with his two children while waiting for his kitchen to be rebuilt. On a particularly bad day, he sent an email to a representative of the Pacific Specialty, begging for clarity about when part of that money would arrive. “I AM LOST,” he wrote.
“Our goal is to pay indemnities as quickly and fairly as possible to bring the policyholder back to their standard of living before loss,” said Kara Holzwarth, general counsel, Pacific Specialty. “We found that losses from water leaks can lead to divergences.” She said the treatment given to Mr. Phillips by Pacific Specialty had nothing to do with his race.
After two years of struggle, Mr. Phillips gave up. Worried about losing his home, he moved back in and started working on the weekends to pay for repairs – replacing cabinets, floors and plumbing – which he was doing himself. “I am tired to the bone,” he said.
Mr. Young, however, realized that most insurers are not willing to work with him. He is now suing 17 insurers, one by one, for discrimination, after companies refused to include him in their supplier lists. He has reached a confidential settlement in his case against Travelers and has pending complaints against others.
“I am the only one to shake the cages,” he said, “saying why don’t you give work to minority vendors?”
Niraj Chokshi contributed reporting.