U.S. Attorney General Janet Reno announced Thursday a landmark settlement in a homeowners’ insurance redlining case filed on behalf of this city’s black homeowners against American Family Mutual Insurance Co.
American Family was alleged to have offered inferior coverage to blacks compared to the policies available to whites and to have avoided prospective clients who are black.
The agreement, mediated by the Justice Department, includes a payment of $16 million, the largest in any housing discrimination suit. It signals an intensifying focus by the federal government and fair-housing activists on the problem of underinsured homes in minority neighborhoods across America.
The Fair Housing Act already has been used to crack down on mortgage companies and banks. Now, for the first time, the law is being used to take on the insurance industry.”Risk discrimination is permitted. Race discrimination is not,” Reno said at the federal courthouse here after the agreement was filed.
The settlement “will be reviewed, I assure you, by every insurance company in America,” said Earl Shinhoster, acting executive director of the National Association for the Advancement of Colored People.
Steven Goldstein, a spokesman for the Insurance Information Institute, a New York-based trade group, agreed. “I’m surprised by the amount,” he said. “That sends a very strong message …”
The National Association of Independent Insurers, however, blasted the agreement, calling it “the ultimate affirmative action program.”
Jack Ramirez, executive vice president of the trade association headquartered in Des Plaines, Ill., said, “To avoid bludgeoning attacks by the government in the future, insurers will have to consider lowering the cost of urban insurance despite higher risks resulting from higher crime rates, older homes with deteriorating wiring or out-dated heating systems. … Consumers in other areas will pay the price.”