Erie Insurance files lawsuit against Maryland regulators over findings of discrimination [Baltimore Sun]

Erie Insurance is accusing state regulators of acting illegally in determining that the insurer engaged in insurance “redlining” of predominantly Black neighborhoods in Baltimore.

Erie said in a federal lawsuit that the Maryland Insurance Administration rushed an investigation of brokers’ complaints then released findings last month that illegally publicized confidential business information.

The lawsuit said the agency and insurance commissioner “suddenly, arbitrarily, capriciously and with improper motive surprised Erie by issuing the four public determination letters,” which ruled in favor of four Baltimore-area insurance brokers that filed complaints more than two years ago.

Three of the brokerage firms, all small businesses, filed separate complaints in January 2021 with the insurance administration; including Baltimore Insurance Network LLC of Bowie, Ross Insurance Agency of Windsor Mill and Welsch Insurance Group of Baltimore. All contract or had contracted with Erie as agents to sell auto insurance policies. A fourth brokerage, Baltimore-based Burley Insurance, filed a similar complaint in December 2021.

According to Erie’s lawsuit, filed Thursday in U.S. District Court in Baltimore, the insurance administration abruptly concluded what should have been a longer multi-year investigation because the businesses that complained grew impatient.

“From the outset, we have cooperated fully with the Maryland Insurance Administration and looked forward to presenting our case to the MIA,” said Matthew Cummings, an Erie spokesman, in an email Monday. “That expected opportunity did not happen, and we believe the MIA reached its conclusions based on inaccurate and incomplete information.”

The agency’s four separate but identical rulings makes public information that’s confidential, attorney-client privileged or work-product protected, the lawsuit says. Some documents appear to have been obtained through searches of Erie’s systems and did not come from the insurer, the complaint says.

“Each of the four Determination Letters contain highly damaging, and unfounded determinations by the Administration that Erie violated [state law] in its treatment of Ross, BIN, Welsch and Burley – based entirely on the confidential, privileged and protected documents that are illegally referenced,” the company says in the lawsuit.

Craig Ey, a spokesman for the insurance administration, said he could not comment on a matter in litigation.

The insurance administration had found that Erie unlawfully canceled or rejected business from brokers based on race or for other discriminatory or arbitrary reasons. The insurer also unlawfully canceled or changed agreements for qualified applicants based on “adverse loss ratio,” a measure of an insurer’s profitability, the state agency had said in the rulings.

“The loss ratio metrics that Erie adopted were designed to target agencies writing business in urban areas with large minority populations and to reduce the volume of business being written in those areas,” the agency’s determination letters said.

The state’s investigation found that Erie’s auto insurance business in Maryland was not profitable. But instead of adjusting underwriting eligibility guidelines and rates to improve profitability, Erie maintained its broad guidelines and set a secondary layer of eligibility standards that agents were expected to use to reject qualified applicants, the state said.

The insurer, a Fortune 500 company with more than 6 million home, auto, life and business policies, said it disagreed with the findings and requested a hearing with the agency to appeal. Erie, based in the Pennsylvania city of the same name, is seeking a trial by jury in the federal case.

Cummings said the company is “deeply troubled” by the brokers’ allegations because “we find discrimination of any kind abhorrent and inconsistent with the values that have guided our business for nearly 100 years. We are proud of the strong relationship and trust we’ve earned with our independent agents and customers in Baltimore and throughout Maryland.”

The four brokers original complaints had accused Erie, which underwrites policies sold by the firms, of denying services to residents of certain neighborhoods based on race or ethnicity. The complaints say Erie refused to underwrite policies based on a potential client’s race, ethnic origin, neighborhood and/or socioeconomic status.

Both Baltimore Insurance and Welsch said in their complaints that they felt pressure to increase profits by weeding out qualified clients, including by following the advice of other independent agents’ for Erie to not sell policies to people in Baltimore with “city sounding names.”

The state had found that Erie penalized brokerage firms that failed to engage in discriminatory practices by reducing commissions or terminating contracts. The agency ordered Erie to calculate and pay the agencies all amounts in commission that had been withheld between Dec. 1, 2019, and this May.

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