Judge Tosses Erie Lawsuit Over Maryland’s Handling of Redlining Allegations
A federal judge has dismissed an Erie Insurance complaint over how the Maryland insurance regulator has been handling allegations that the insurer unfairly discriminated against communities served by Black insurance agents in the Baltimore area.
On June 12, Judge Julie Rebecca Rubin placed a stay on the lawsuit and gave the insurer and the Maryland Insurance Administration 60 days to settle their differences but they failed to agree on terms by that deadline.
Erie maintains the parties had an agreement to its liking but in the end MIA refused to sign off on it. In July, Erie asked the court to lift the stay so that its lawsuit could proceed.
But after oral discussions with the parties, the judge last week declined to lift the stay and dismissed Erie’s lawsuit.
The ruling appears to leave matters where they began, which is in the MIA administrative system that Erie maintains has been unfair.
The insurer maintains that the regulator has not afforded it adequate opportunity to respond to redlining complaints by four Baltimore independent agencies. The insurer’s complaint also claimed that MIA has wrongly disclosed confidential business information.
MIA told Insurance Journal that it is in the process of scheduling hearings on the four cases as Erie has requested. No hearing dates are on the MIA schedule yet.
Erie declined to comment on the matter at this time.
Agencies’ Complaints
The dispute involves the handling of four administrative complaints filed with MIA alleging Erie engaged in discriminatory practices against low-income and minority communities in the Baltimore area. The complaints were filed by Baltimore Insurance Network, Burley Insurance & Financial Services, Ross Insurance Agency and Welsch Insurance Group
In their complaints, the agencies said that they were restricted from offering Erie’s policies to residents of primarily Black communities. They alleged that Erie threatened and penalized them for challenging what they maintain are Erie’s discriminatory redlining policies. The agencies claim the retaliatory actions hurt their business.
MIA opened two separate investigations into the complaints: a broad market conduct examination and a licensing investigation.
Erie provided written answers to five questions MIA gave it. According to Erie, shortly thereafter MIA told it the licensing investigation was being put on hold so that the department could first complete the market conduct exam. The insurer said it expected that there would be further discussions with MIA once the regulator resumed the licensing investigation but it never received any follow-up regarding the agents’ complaints.
Then, Erie maintains, without any notice, in May, 2023, MIA acted “arbitrarily, capriciously and unlawfully” in issuing what are known as determination letters against Erie in relation to the redlining complaints.
MIA concluded that Erie used improper underwriting standards and imposed penalties on agents in order to get them to reject eligible urban and minority risks it considered unprofitable, rather than adjusting its filed underwriting and rates to meet the risks. MIA explained that an insurer cannot legally refuse to issue a policy to someone who meets the guidelines and rates it has filed with the state.
Erie said it was surprised at the release of the letters since it had been told the licensing probe had been put on hold. It then became further concerned when it discovered that the four letters — and soon media reports — contained “highly damaging, and unfounded determinations” that Erie violated laws in its treatment of the four agents that were “based entirely on the confidential, privileged and protected documents” it had provided for the market conduct exam.