HUD No. 06-142
October 26, 2006
HUD CHARGES ERIE INSURANCE GROUP WITH RACE DISCRIMINATION
WASHINGTON, D.C. - The U.S. Department of Housing and Urban Development announced today that it has charged Erie Insurance Group and five agencies licensed to sell Erie insurance products with violating the Fair Housing Act by providing inferior insurance products to homeowners in African-American neighborhoods than to homeowners in white neighborhoods with comparable homes. Erie Insurance Group serves eleven states and the District of Columbia.
"When people walk into a store in America, the service and the offerings should not be determined by the color of their skin. That is exactly the type of discrimination we are talking about here," said Kim Kendrick, HUD's Assistant Secretary for Fair Housing and Equal Opportunity.
HUD's investigation found that Erie's agents did not provide African-American neighborhoods in Syracuse, N.Y., with the same level of insurance coverage they provided for similar homes in predominantly-white neighborhoods in Liverpool, N.Y. HUD's investigation also found that in New York State, overall, the more African-Americans there were in a neighborhood, the less likely Erie was to write an insurance policy there. In addition, Erie was less likely to appoint agents to neighborhoods with large African-American populations.
"Today, there are more minority homeowners than ever in this nation's history. We are committed to ensuring they have equal access to insurance for their homes," said Kendrick."We are not going to let the achievement of the American Dream for minorities become the American nightmare strictly because of race."
HUD started its investigation as the result of a complaint filed by the Fair Housing Council of Central New York (FHCCNY). The FHCCNY testers posed as first-time homebuyers with no insurance claims in the past five years. They called Erie insurance agents, seeking insurance for homes in either Syracuse (which is predominantly African-American) or Liverpool (which is predominantly white). The FHCCNY closely matched the properties for several characteristics, including but not limited to purchase price, age of the property, type of construction, square footage, number of bedrooms and bathrooms, distance to the fire department, presence of burglar and smoke alarms, and age and type of the siding, roof, and heating and plumbing systems.
In four tests, the Syracuse testers did not receive quotes for homeowners insurance despite specific requests, while the Liverpool testers received quotes by telephone or mail.
In four other tests, the testers seeking insurance for homes in Syracuse received quotes for Erie's second-broadest coverage, Extracover, but did not receive quotes for Erie's best insurance product, Ultracover. The testers seeking insurance in Liverpool received quotes for Ultracover. The Ultracover policy provides more extensive replacement cost coverage than the Extracover policy.
HUD's investigation revealed that in the 600 New York ZIP codes in which the African-American population is less than 1%, Erie has 49 agents, representing 2.7 agents per 100,000-population. In the 27 New York ZIP codes in which the African-American population is greater than 30%, Erie has two agents, representing 0.55 agents per 100,000-population. Erie does not market its products or appoint agents on Long Island, in New York City or in the suburban counties north of New York City.
"The numbers don't lie. Whether you examine Erie by ZIP codes or by families insured, the differences between black and white are clear," said Kendrick."This really is about African Americans being denied an equal opportunity to protect the biggest investment of their lives."
The five agencies licensed to sell Erie insurance products that were charged by HUD were R.K. Johnson & Associates, Salanger & Hayward Agency, Inc., CNY Insurance Associates, the Vacco Agency, Inc., and the Grimsley Agency, Inc.
The Fair Housing Act and its regulations make it illegal to refuse to provide hazard insurance for dwellings or to provide insurance differently because of race.
Housing discrimination charges heard before an administrative law judge carry a maximum civil penalty of $11,000 for each violation for a first offense, in addition to actual damages for each complainant, injunctive or other equitable relief, and attorneys' fees. Sanctions can be more severe if a respondent has a history of housing discrimination. Parties also have the right to elect to have their cases heard in federal district court.
People who believe they are the victims of housing discrimination should contact HUD at 1-800-669-9777. Additional information is available at www.hud.gov/fairhousing. Stay on top of the most up-to-date news regarding the Fair Housing Act by signing up for the FHEO RSS Feed.