Black homeowners struggle to get insurance companies to pay the claims

When a poop burst and flooded her home in 2018, Deonne Burgess knew the cleaning would be messy. What you were not expecting was an audit from State Farm, the home insurance company.

Burgess said that a State Farm claims investigator sought to remove as many items from the repairs list as possible from her home in Inglewood, a predominantly black Los Angeles neighborhood. The officer argued that State Farm should not have to pay to replace a door that was severely damaged by flooding so that it is no longer locked.

Ms Burgess, global payroll manager for Wonderful Company, which makes canned foods like pomegranate juice and pistachios, began to think she was being treated with extra suspicion. Because it is black. She told State Farm that policyholders in a white neighborhood were unlikely to receive the same treatment.

“It was right after the Malibu fires, and what I said was, ‘No one in Malibu will have to justify such things,” she said.

Russell Gudson, a spokesperson for State Farm, said Ms. Burgess’s assertions were “baseless.” “State Farm is committed to providing a diverse and inclusive environment, in which all clients are treated with fairness, respect and dignity.

Ms. Burgess had no way of proving that her experience with the officer on the State Farm was racist. After all, the same insurance company paid the car insurance claim for its BMW 5 Series sedan, which was also destroyed by the flood; It was taken up by a different group of people, and there wasn’t much to dispute about it. But Mark Young, the vendor hired by State Farm who arranged to fix its walls and floors, and Leonard Redway, the plumber whom Mrs. Burgess hired to fix a broken pipe, said Mrs. Burgess was being treated worse than her white customers. They are both black, too.

Mr Redway said claimants in predominantly white, wealthy neighborhoods had a much easier time getting insurers to cover the costs of repairs. “If I were to be at 90210, that was almost like an open check,” he said, pointing to a wealthy Beverly Hills zip. “Sometimes the officers don’t even come to look at it.”

Allegations of racism are often difficult to prove, but especially in homeowner insurance, where insurance companies have a lot of discretion and do not always provide detailed explanations of why claims were denied. Since company representatives often verify claims and assess the credibility of the plaintiff through home visits, face-to-face interactions, and other measures, there may be room for bias.

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While claims disputes are not uncommon in the industry, many black clients say they feel so They are treated unfairly because of their race – Something that Jeff Major, a Manhattan general officer bargaining with insurers on behalf of policyholders over their claims, witnessed in his business.

“You can actually see a difference between a Caucasian family and an African American family of Hispanic or Asian descent,” said Major. “It’s kind of well-known. It’s not talked about. It’s a culture.”

Insurance companies keep a tight cover on sales of insurance policies and claims statements. They have long argued that the size and timing of payments, and the neighborhoods in which claims are recorded and processed, are proprietary information, and that sharing that data will harm their ability to compete. They guard it with such zeal that 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 claims data were private because the payments were considered “losses” and that disclosure of them would put insurers “at a competitive disadvantage to one another.”

When data is publicly available, such as auto insurance, The researchers found Policies discriminate against black drivers by charging them higher premiums. Homeowners’ insurance was vague, however.

It can be difficult to force insurance companies to give up data, in part because they are regulated by the states and not the federal government. For example, federal laws prohibiting the re-planning of banks after the Civil Rights Movement do not apply equally to insurers. And a group of university researchers found that as of 2014, insurance companies had not outlawed discrimination based on race in 17 states.

In late September, the Federal Insurance Advisory Committee, whose members include top executives from the nation’s largest insurers, voted on a proposal to study racial bias in the industry due to concerns that the study would blur the distinction between legitimate insurers that have to question claimant assertions and bias. Unfair.

To assess the validity of their clients’ claims, insurance companies send settlement experts to meet face-to-face with claimants, giving companies broad discretion in determining the extent of damage and the claims that can be classified as fraudulent.

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“Anytime there is a great deal of discretion, there is room for that estimate to be affected by implicit or explicit bias,” said Tom Baker, a professor at the University of Pennsylvania Law School who studied insurance payments to victims of Hurricane Andrew in 1992. Using data obtained from victims, it was found that Hispanic claimants faced significantly longer delays in receiving money from insurance companies compared to white claimants.

Lisa Thompson, a black homeowner in Toledo, Ohio, was staying with her daughter while fixing the roof of her home when thieves broke into that house, stripped it of the house, took her water heater and appliances and took out part of her roof. Ms. Thompson filed a complaint with her insurance company, Allstate.

Thompson said an officer sent by the company accused her of masterminding the theft. To pursue her claim, Allstate representatives told her, she would have to go to the offices of a law firm the firm had hired to obtain certification. On December 9, 2019, Ms. Thompson spent nearly four hours answering questions about her career history, family, and time at home.

Allstate sent her a letter on June 8 saying that she was still investigating her claim and requested another 180 days to complete the process. Shortly thereafter, she rescinded her policy, saying her investigator had determined that Mrs. Thompson was ineligible to be a “resident” of her home, because she was staying with her daughter. But Ms. Thompson only discovered her claim was dismissed when the New York Times called Allstate in November to ask about her case. The insurance company sent the letter notifying it of the rejected claim to the address it determined Mrs. Thompson was not living.

The Allstate representative later wrote to an attorney assisting Mrs. Thompson with her claim: “We apologize for not having received this correspondence for your client.” Her house is still uninhabitable. She is filing a discrimination suit against Allstate with the Ohio Civil Rights Commission.

Allstate spokesman Nicholas Notoli said the allegation was dismissed “based on facts after a thorough investigation”. He added that the company had no evidence of accusing Mrs. Thompson of aiding the thieves, and that “race is not a factor in pricing, underwriting, or demanding settlements.”

Mr. Young, the vendor hired by State Farm to arrange repairs to Ms. Burgess’s home, has seen insurers pull back on other black clients and lobby on their behalf – even though his Los Angeles company, Valley Green, which specializes in repairing damaged homes, relies on insurance companies for the business. .

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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 was flooded after a tube burst, destroying parts of his three-bedroom home in Englewood. An officer from Pacific Specialty determined that the company owed Mr. Phillips just over $ 11,000 in repair costs. Mr. Phillips’ contractor said his home needed more extensive repairs.

Pacific Specialty asked Mr. Young to take a look. Mr. Young decided that the repairs would cost more than $ 33,000. A fight ensued, with Mr. Young siding with Mr. Phillips even though he was hired by Pacific Specialty.

Because of the disagreement, even the amount of Pacific Specialty who agreed to pay Mister Phillips reached him in increments, forcing him to move into one hotel room with his two children while he waited to rebuild his kitchen. On a particularly bad day, send an email to a Pacific Specialty representative, asking for an explanation when some of the money will arrive. I am so lost, he wrote.

“We aim to push claims as quickly and fairly as possible to bring the insured back to their pre-loss standard of living,” said Kara Holzwarth, General Counsel for Pacific Specialization. “We found that water leakage losses can be fraught with controversy.” Phillips has nothing to do with his race.

After two years of fighting, Mr. Phillips surrendered. Fearing losing the home, he returns to it and begins work the weekends to pay for the repairs – replacing the cabinets, floors, and plumbing – that he was doing himself. He said, “I’m so tired.”

Meanwhile, Mr. Young noticed that most insurance companies were not willing to work with him. He is now suing 17 insurers, one by one, over discrimination, after companies refused to add him to vendor lists. He reached a classified settlement in his lawsuit against the travelers and has complaints pending against others.

He said, “I’m the only one who knocks the cages and says why don’t you give the minority-owned vendors any work?”

Niraj Shakshi Contribute to reporting.

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