Lawsuit is using data in claiming bias by insurer
Jacqueline Huskey, a Black woman living in suburban Illinois, tried more than a dozen times to get help from State Farm after hail punched holes in her roof. Now, thanks to a broad study of how the insurer handles claims like hers, she has evidence indicating that her struggle is a common one for Black customers.
Huskey is suing State Farm, and the study is the basis of the lawsuit. It is the first of its kind to use company-specific data to highlight racial bias.
The suit also focuses on how State Farm’s fraud detection methods discriminate against Black customers when paying out claims. Filed in federal court in Illinois last week, it includes Huskey and hundreds of other as-yetunnamed plaintiffs and represents the insurer’s Black customers in six Midwestern states. All the plaintiffs had a harder time getting homeowners insurance claims paid out, compared with white customers, according to the lawsuit, which may seek hundreds of millions of dollars in damages.
“Our information from the survey told us that there was a problem here,” said Deborah Archer, director of the Center on Race, Inequality and the Law at the New York University School of Law, who created the study with Fairmark Partners, a law firm.
Archer said the survey showed that Black homeowners had to do more paperwork and navigate more interactions with claims adjusters, compared with white customers, before State Farm would agree to compensate them.
The study was conducted over nine months in 2021.
Representatives for State Farm were not immediately available for comment.
In response to previous questions about Black customers’ allegations that the insurer was discriminating against them because of their skin color, State Farm spokesperson Roszell Gadson said those claims did not “reflect the State Farm culture.”
Lawyers from Fairmark and a team led by Archer began work on the survey with more than 800 participants, seeking to show how State Farm treated its customers by the numbers.
The researchers looked at measurements such as the number of interactions claimants had with State Farm representatives, the length of time it took for a payment to be made after a claim was filed and the amount of extra paperwork that State Farm asked for before agreeing to pay a claim.
The findings, cited in the lawsuit, showed that Black homeowners had a significantly harder time by several measures.
For most white customers, the process typically took fewer than three interactions before claims were approved.
The study found that Black customers were 20 percent more likely to have to talk to a State Farm representative on at least three occasions before having their claims approved. They were also much likelier to have to submit extra paperwork.
Huskey, 57, is one of the plaintiffs who said she experienced racial discrimination by State Farm.
Huskey, who lives with her husband in Matteson, Ill., said her home was a place that used to fill her with “overwhelming joy.”
On June 12, 2021, hail broke the shingles on her roof, causing leaks in two of her bathrooms and her kitchen. She called State Farm for help. When a State Farm adjuster visited her home about six weeks later, he refused to climb onto her roof to look for damage, Huskey said.
“It was kind of windy outside,” she said. “He stated to me, ‘Oh, I’m not going up there. I’ll just assess the damage that’s inside the home.’”
No one else came for weeks, despite multiple calls from Huskey insisting that the insurer send someone to inspect her roof. State Farm sent a man who worked for an independent company but had been contracted. This visitor said it wasn’t clear that the damaged roof was the source of the leaks.
Since filing the claim, Huskey estimates that she has had 20 to 30 interactions with State Farm. She and her husband eventually paid $7,000 out of their own pocket to fix their home, which was defrayed only in part by a check State Farm eventually sent for $4,687.
State Farm doesn’t handle all the claims its customers make. The insurer relies on specialized technology companies to help process them. The lawsuit used the example of one such company, Duck Creek Technologies.
In the case of Duck Creek, once an insurance claim is made, the company uses software from the artificial intelligence firm FRISS to flag claims for potential fraud. According to the lawsuit, FRISS gives each insurance policyholder a “risk score” by running that customer’s information through its computer programs, which analyze the language in the claim narrative as well as the customer’s profile.
Each score is based on elements like — as FRISS puts it — “demographic data about the neighborhood, such as the degree of urbanization,” crime statistics and data harvested from social media.
Representatives of
Duck Creek did not immediately respond to requests for comment. Representatives of FRISS were not immediately reachable.
Far from removing racial bias from the process, the lawyers bringing the case against State Farm allege that FRISS’ methods are cloaking old racial discrimination tactics in a veil of technology.
“The term ‘urbanization’ is in the dictionary of dog whistles,” Archer said.
The New York Times reported in March that claims that are flagged for potential fraud by State Farm are investigated by a special unit in the company, where a whistleblower is claiming that managers have singled out Black neighborhoods as places were there is “a lot of fraud.”
Because Black neighborhoods are singled out for instances of potential fraud, Black homeowners have a harder time preserving the value of their homes, Archer said. Therefore, she added, Black neighborhoods continue to be devalued.