Pennsylvania-based Erie Insurance discriminated against a Black-owned insurance brokerage from Baltimore and ultimately against all Black city residents, according to a recent opinion by the Maryland Insurance Administration.
The property and casualty insurance company would require criminal background searches of potential clients who were Black; avoid insuring people with “city-sounding names”; and reject people who made repeated calls to the company because it would indicate that they lived paycheck to paycheck, according to a lawyer for the Baltimore Insurance Network, which brought the complaint. These practices were not applied to other potential clients, he added.
Erie Insurance’s actions were “arbitrary and capricious and unfairly discriminatory,” the Maryland Insurance Administration wrote in an opinion last month.
The MIA found that Erie Insurance violated Maryland law and that its business practices were “designed to reduce business, and did reduce business, in dense urban areas with high minority populations.”
Cary Hansel, a lawyer for the Baltimore Insurance Network, agreed with the state agency’s findings. ”It’s just an outrage to imagine, in this day and age, to allow blatantly racist practices,” Hansel said.
“It’s like so much of today’s racism. It’s cloaked,” Hansel added. “We don’t live in a world where people come to work wearing hoods. But today’s racism looks like this. Our clients went up and up and up the chain of command and naively believed that if they went up, a change would be made.”
Erie Insurance, which is based in Erie, Pennsylvania, “strongly disagreed” with the decision, according to John Simon, a company spokesperson.
“We look forward to a full and fair opportunity to defend our company against these claims and will request a hearing so the MIA can gain an understanding of both sides of this local agent licensing dispute,” Simon wrote in an email to The Baltimore Banner.
The complaint goes back to early 2017, but the complainants suspect that the discriminatory practices go back further than that.
”It takes a while to understand what’s happening. You don’t want to immediately say ‘It’s racism,’ you don’t want to be labeled as an alarmist,” Hansel explained. “They had to live it for a while.”
Kobi Little, NAACP Baltimore president, said the policies and practices exposed in the case are “prima facie evidence of institutional racism and structural inequity.”
“This is corporate policy violence and it is a root cause of the physical violence and economic decay that we see in urban centers with significant Black populations,” Little said. “The impact is devastating in terms of the economic loss suffered by the firms serving urban markets and those in urban markets who are denied coverage. This is modern-day redlining and this case is just the tip of the iceberg.”
Erie Insurance will now have to calculate damages for lost commissions, according to Hansel, who estimated that financial damages could exceed several hundred thousand dollars — if not more.
”These brokerages blew the whistle at great risk,” Hansel said. “Your relationship is all you have. If you are unable to sell because that relationship sours and they refuse to work with you, that’s your livelihood. “This is an example of a brokerage who refused to play ball. They had massive reductions for years. Even after the complaint was filed, Erie continued these practices until very recently. Our clients still haven’t been made whole for the past.”
But Simon said: “Erie Insurance is proud of the strong relationship we have with our independent agents in Maryland and the 13,500 licensed ERIE agents who serve customers in communities across our territory.”
“We are confident that the business goals and service expectations we set for our agents are appropriate and reasonable and that our underwriting practices comply with applicable state insurance laws and regulations,” Simon said.
Hansel said he believed that the approaches used by Erie are used by the company throughout the state and country.
”There’s no reason to think that these were not limited to one, or two or three agencies,” he said.
The MIA said in its opinion that it had undertaken “a market conduct examination of Erie.” Should that reveal “a larger pattern of conduct,” the agency said, “Erie may be subject to additional findings, orders and penalties.”
”It is indicative that there is likely more to come with their practices and steps the insurance agency might take,” Hansel said. “It’s discriminatory, it’s racist and it’s to be condemned in the highest terms. The victims are the people of Baltimore.”