Madeleine O'Neill//June 9, 2023
//June 9, 2023
Erie Insurance is suing the Maryland Insurance Administration in federal court over the agency’s recent determination that the Pennsylvania-based insurer pushed local agents to reject customers from majority-Black areas of Baltimore.
The lawsuit claims the Maryland Insurance Administration conducted an incomplete investigation into Erie’s practices and released confidential information in a May 24 determination letter that accused the company of unlawful discrimination.
Erie wants a federal judge to declare the MIA’s determination letters unlawful and find that the administration violated Erie’s constitutional rights.
In an emailed comment, Erie Insurance said it believes the MIA’s conclusions were based on “inaccurate and incomplete information.”
“In addition to formally requesting a hearing, we filed a federal lawsuit Thursday asking for a full and fair opportunity to present the facts to the MIA,” said company spokesman Matthew Cummings.
“We are deeply troubled by the claims made by a few of our agents because we find discrimination of any kind abhorrent and inconsistent with the values that have guided our business for nearly 100 years,” Cummings said.
The MIA had not provided a comment by early Friday afternoon.
The MIA’s determination letters claimed that Erie used pretextual metrics to justify rejecting eligible Maryland customers in urban areas with large minority populations. The regulator found that Erie unfairly penalized the Baltimore Insurance Network, an insurance agency that served some of the poorest areas of Baltimore.
The investigation into Erie began when the Baltimore Insurance Network and two other insurance agencies that had previously worked with Erie filed complaints in early 2021. Insurers are allowed to establish underwriting eligibility guidelines and set rates based on their appetite for risk. Those guidelines are subject to regulations and cannot be unfairly discriminatory.
“Erie’s case is a desperate attempt to hide the evidence of what the state has found to be Erie’s ‘capricious’ discrimination against people in urban areas with large minority populations,” Cary J. Hansel, of Hansel Law PC, and lawyer for the Baltimore Insurance Network, said exclusively to The Daily Record. “This is exactly the sort of case which federal courts rightly abstain from deciding and I expect it to be dismissed.”
Maryland law allows insurers to set different rates based on geographic location because claims occur far more frequently in urban areas than in suburban or rural areas. Once an insurer has set its eligibility guidelines and rates, though, it is not allowed to reject plans based on “adverse loss ratio,” which is essentially a measure of profitability.
The MIA found that Erie established a “secondary layer” of criteria in place of loss ratio to justify penalizing agencies that issued policies Erie did not want, even when those policies were otherwise eligible.
The Baltimore Insurance Network alleged that it faced pressure from Erie to reject certain policies based on the improper metrics.
The Baltimore Insurance Network’s complaint claimed that Erie referred them to a more profitable agency in the “urban market” for advice. According to the complaint, the other local insurance agent told the Baltimore Insurance Network that he increased his profitability by not writing policies to people with “city sounding names.”
The MIA letter did not directly address those claims, but found Erie unlawfully discriminated and ordered the company to pay restitution to the Baltimore Insurance Network for the reduced commissions it paid out while using improper metrics.
The new federal lawsuit claims that the MIA’s investigation was based on incomplete information.
The complaint also alleges the regulator misled Erie by claiming it was completing a broader “market conduct examination” into Erie’s practices. During the market conduct examination, the MIA’s investigation into complaints by the Baltimore Insurance Network and two former agencies was supposed to be on hold, Erie claims in the federal lawsuit.
Erie provided some information to the MIA while the regulator was purportedly working on the market conduct examination, according to the complaint, but Erie expected it would have additional opportunities to share information as the MIA investigation progressed.
Instead, the MIA suddenly released its determination letters last month — and cited information from the market conduct examination that was supposed to be kept confidential, Erie alleges.
The complaint claims Erie planned to provide more information to the MIA’s investigators and now cannot properly defend itself against the determination letters’ allegations because the letters rely on confidential information.
Erie is seeking a temporary restraining order that would block the MIA from disseminating the letters further and will also ask for a permanent injunction to force the MIA to withdraw the letters, according to court filings.
The complaint claims that Erie provided the MIA a copy of the new lawsuit and demanded the agency withdraw the letters, but the MIA refused.
“The MIA’s and the (MIA) commissioner’s acts have caused, and will continue to cause, irreparable injury to Erie for which Erie has no adequate remedy at law,” wrote the company’s lawyer, Alex J. Brown of Shapiro, Sher, Guinot & Sandler, P.A.i