Struggle getting insurers to pay
Black homeowners who file claims say they are treated unfairly.
When a pipe burst and flooded her home in 2018, Deonne Burgess knew the cleanup would be messy. What she didn’t expect was the scrutiny from State Farm, her home insurance provider.
A claims adjuster from State Farm sought to strike as many items as possible off a list of repairs from her home in Inglewood, a predominantly Black neighborhood in Los Angeles, Burgess said. The adjuster argued that State Farm should not have to pay to replace a door that was so damaged by the flooding that it no longer closed.
Burgess, the global payroll director of the Wonderful Co., which makes packaged foods like pomegranate juice and pistachio nuts, began to think that she was being treated with extra suspicion because she is Black. She told State Farm it was unlikely that policyholders in a white neighborhood would receive the same treatment. “It was right after the Malibu fires, and what I said was: ‘No one in Malibu would have to justify things like this,’” she said.
Burgess’ assertions “are without merit,” said Roszell Gadson, a State Farm spokesman. “State Farm is committed to a diverse and inclusive environment, where all customers are treated with fairness, respect and dignity.”
Burgess had no way of proving that her experiences with the State Farm adjuster amounted to racism. After all, the same insurer paid out an auto insurance claim for her BMW 5 Series sedan, which was also ruined by the flood; a different set of people handled it and there was not much
to argue about. But Mark Young, the vendor hired by State Farm who arranged for her walls and floors to be repaired, and Leonard Redway, the plumber whom Burgess hired to fix a broken pipe, said that Burgess was being treated worse than their white customers. Both of them are also Black.
Redway said claimants in predominantly white, wealthy neighborhoods generally had a much easier time getting insurers to cover the costs of repairs.
Allegations of racism are often tough to prove, but especially so in homeowners’ insurance, where insur- ers have a lot of discretion and don’t always provide detailed explanations for why claims are denied. Since company representatives often verify claims and assess the credibility of a claimant through home visits, face-toface interactions and other measures, there can be room for bias.
While claims disputes are hardly uncommon in the industry, many Black customers say they feel treated unfairly because of their race.
A tight grip on data
Insurers keep a tight lid on their policy sales and claims data. They have long argued that the size and timing of payouts, and the neighbor- hoods where claims are registered and addressed, are proprietary information, and sharing that data would hurt their ability to compete. They guard it so zealously
that even most regulators don’t have detailed infor- mation about how insur- ers assess individual claims.
It can be hard to compel insurers to part with data, partly because they are reg
ulated by states and not the federal government. For example, federal laws that outlawed redlining for banks after the civil rights move- ment don’t apply equally to insurers. And as of 2014, 17 states had no bans on race-based discrimination by insurers, a group of uni- versity researchers found.
In late September, the Federal Advisory Committee on Insurance, whose mem- bers include top executives from the nation’s biggest insurers, voted down a proposal to study racial bias in the industry over concerns that the study would muddy the distinction between the legitimate discretion insurers have to question claimants’ assertions and unfair bias.
‘I am so lost’
Young, the vendor hired by State Farm to arrange repairs to Burgess’ home, has seen insurers lowball- ing other Black customers and lobbied on their behalf.
He fought on behalf of Langston Philli p s, who almost lost his house during a fight with his insurer, Pacific Specialty. Three years ago, Phillips’ kitchen had flooded after a pipe burst, ruining portions of his three-bedroom home. An adjuster from Pacific Specialty determined the company owed Phillips just over $11,000 in repair costs. Phillips’ contractor said his home needed far more extensive repairs.
Pacific Specialty asked Young to take a look. Young determined that the repairs would c ost more t han $33,000. A battle ensued, with Young siding with Phillips even though he had been hired by Pacific Specialty. Because of the dispute, even the sum Pacific Specialty agreed to pay Phillips reached him in increments, forcing him to move to a hotel while he waited.