Law Articles : Fresno Superior Court Rejects Insurance Companies' Requests to Keep Redlining Data Secret
REQUEST TO KEEP REDLINING DATA SECRET
Court Decision Will Help Advocates Identify Which Insurance Companies
May Be Discriminating Against Minority and Low Income Communities
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.
