A suit filed by the Center for Race, Inequality, and the Law takes a new approach to proving racial bias in the insurance industry

For Alexander Rose ’20, the highlight of his 2L year was participating in the Civil Rights Clinic taught by Professor of Clinical Law Deborah Archer. Over the course of the year, he worked on an employment discrimination dispute, advocated against the New York Police Department gang database, and co-drafted litigation strategies for advocates in the wake of the 2017 white supremacist rally in Charlottesville, Virginia. “Her course was the defining experience of law school and helped make me the type of advocate I am today,” Rose says.

Now, two years after his graduation, Rose and Archer are working together again, this time on a potentially groundbreaking case of racial discrimination.

Deborah Archer portrait
Deborah Archer

Filed on December 14 in federal court in Illinois, the suit, which is seeking class action status, alleges that insurance company State Farm discriminates against Black homeowners and makes it harder for them to receive pay outs for insurance claims. The case claims that State Farm utilizes fraud detection software that has a disparate impact on Black customers. Brought under the Fair Housing Act, the case is the first lawsuit of its kind to use data specific to an insurance company in making racial bias claims, according to an article on the litigation in the New York Times.

Representing the plaintiffs are NYU Law’s Center for Race, Inequality, and the Law (CRIL), where Archer is faculty co-director; and Fairmark Partners, a Washington, DC–based firm focused on civil rights and corporate accountability where Rose serves as chief of staff; and local counsel.

“This suit does not reflect the values we hold at State Farm,” Gina Morss-Fischer, a State Farm spokeswoman, told the New York Times. “State Farm is committed to a diverse and inclusive environment, where all customers and associates are treated with fairness, respect, and dignity. We are dedicated to paying what we owe, promptly and courteously.”

The case is built on a study which began when Archer, CRIL fellow David Jimenez ’23, Rose, and other members of Fairmark began discussing a 2020 story in the New York Times that reported Black homeowners often encounter difficulties when seeking payments for their property insurance claims. While these claims of bias are widespread, the Times reported, it was difficult to determine patterns of discrimination because insurance companies do not make information about claims publicly available.

“This question about wealth inequality and the links to home ownership and insurance kept coming up,” says Archer, who served as lead researcher for the study, “and CRIL has an interest in algorithmic bias, but also in thinking about community equity and the things and policies in place that make some communities less equitable and less hospitable for success,” says Archer. As many insurance companies use algorithms to handle a portion of claims, “it seemed like an important thing to explore,” she says. Archer says that CRIL and Fairmark worked with polling company YouGov to conduct a survey and analyze data from 800 State Farm claimants over several months in 2021.

The study found that, compared to White homeowners, Black customers had to submit more paperwork to have their claims approved, were likely to have more conversations with a State Farm representative before having their claims approved, and experienced longer wait times to receive payouts.

After analyzing the data, the Center and Fairmark spoke with individuals and community organizations to assess how impacted communities would like to file litigation, Archer says.

“In the past year, CRIL has become more sharply focused on challenging some of the modern tools of racial inequality, particularly with a sharper focus on economic justice issues, as well as diving deeper into exploring issues at the intersection of race and technology and algorithmic bias,” says Archer. She notes: “The practices of insurance companies and how they perpetuate racial bias and racial inequality is kind of a black box.”

Posted December 22, 2022.