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Press Release February 17, 2000 |
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FRESNO, CA - In an important victory for minority and low
income consumers, a Fresno Superior Court today rejected a request by
Farmers Insurance and USAA to bar public disclosure of important data
that could document discriminatory redlining by the companies.
Redlining is the practice of discriminating against consumers based
on their race or geography. Last month, the two insurance companies
filed a lawsuit against California Insurance Commissioner Charles
Quackenbush to block the release of redlining data filed because they
maintain the information constitutes a trade secret. On Thursday,
Superior Court Judge Stephen Kane rejected the companies' motion for
a preliminary injunction in the case, which would have prevented the
disclosure of the documents while the suit is litigated.
"Redlining is no secret in California's low income and minority
communities," said Mark Savage, an attorney with Public Advocates,
the law firm representing a group of community organizations that
intervened in the case. "We are pleased that the court rejected the
insurance companies' argument that this data should not be disclosed
because it is a trade secret."
Since 1995, companies that sell auto, homeowners, or small
business commercial insurance have been required to file redlining
data with the California Department of Insurance. The companies are
required to disclose detailed information about their sales practices
for each zip code in every county, including the race or national
origin and gender of each applicant; the number of applications
received for each line of insurance; and the number of applications
declined for each line of insurance.
The Department must issue an annual report summarizing the data
filed for the previous calendar year. The reports summarize each
insurer's record in all underserved zip codes combined, which makes
it difficult to pinpoint where individual companies may be engaged in
redlining. But even these summaries show great disparities between
the rate at which insurance companies write policies in minority and
low income communities versus the rates at which policies are written
elsewhere in the state. For example, the 1995 report shows that
while 16.6 percent of California's population lived in underserved
zip codes, the average insurer wrote only 5.57 percent of its private
passenger automobile liability policies, 6.62 percent of its
homeowners policies, and 9.55 percent of its commercial multi-peril
(non-liability) policies in these low-income, minority zip codes.
USAA and Farmers Insurance Exchange claim that this data is their
trade secret, even though the regulation implementing the disclosure
law makes clear that the information is expressly open to public
inspection.
Consumers Union, National Council of La Raza, Korean Youth and
Community Center, Oakland Chinese Community Council, and the Southern
Christian Leadership Conference intervened in the case because the
data would help the groups track redlining abuses by individual
companies.
"It is outrageous that insurance companies try to hide this
important information from the public," said Earl Lui, Senior Staff
Attorney for Consumers Union. "We hope the court's decision will
prompt the disclosure of redlining data for all companies so that we
can identify which insurers are violating the law."
There are a number of different lawsuits currently pending
concerning the redlining data disclosure regulation. In December
1999, State Farm sued Quackenbush after the Insurance Commissioner
released the company's data to consumer advocate Birny Birnbaum.
State Farm is trying to force Birnbaum to return the data and to
block Quackenbush from giving it to any other member of the public.
On December 13, a San Francisco Superior Court judge denied State
Farm's motion for a temporary restraining order. Despite State
Farm's setback, Farmers and USAA filed two similar lawsuits against
Quackenbush in Fresno Superior Court. Three more insurers then
intervened: Allstate, Firemen's Fund, and SAFECO. In late January,
the Fresno court issued a temporary restraining order in the case.
Back in November 1999, Consumers Union and other community groups
requested the redlining data for the five largest insurers in each of
the key lines of insurance covered by the regulation. Because of the
temporary restraining order in the Fresno case, Quackenbush has
stated that he will not release the data for the other insurance
companies covered in the November request, even though not all of
them have claimed that their data is a trade secret. In order to
resolve this issue, the community groups filed their own separate
lawsuit against the Commissioner in San Francisco Superior Court to
require him to release the data for these other companies.
Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization, serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health, nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.
