By Christine Dugas, USA TODAY
March, 1997
Nationwide Insurance wanted John Askin on its team.
In 1990, the company recruited the former Notre Dame football tackle, who played briefly with the New England Patriots and Cleveland Browns. Askin joined the Louisville sales force and soon was winning awards for his performance.
By 1993, Askin had opened his own agency and proposed opening a satellite office with some former football teammates in Louisville's predominantly black West End. But Askin says Nationwide turned down the request, saying the area was not its target market. He says his manager, Pam Nunnley, told him not to sell insurance in the West End. He says he was given a map with an "X" through the neighborhood - and the words "waste of time."
Nunnley says she can't comment on the allegations, which are part of a lawsuit Askin filed this month in Jefferson County (Ky.) Circuit Court against Nationwide, the nation's sixth-largest property and casualty insurer, with 43,000 agents and 10.4 million policies in force. He is asking for $4.9 million in lost future earnings and benefits, and $100 million in punitive damages.
There are at least a dozen lawsuits and complaints pending against Nationwide across the USA. Among other things, they allege the Columbus, Ohio-based insurance giant has engaged in a pattern of geographic discrimination, called redlining.
"One of the worst crimes is discrimination based on geographic location - which is often a code word for race and ethnicity," says Sen. Russ Feingold (D-Wis.). He is considering reintroducing legislation that would require insurance companies to provide sales records by ZIP code or census tract to help detect violations of the Fair Housing Act.
The act is a federal law that prohibits discrimination in real estate-related transactions, including home insurance.
Many Nationwide agents blame a 2-year-old quota system for pressuring them to focus their efforts on higher-income suburban areas. Those who complained, the agents say, have been subject to harassment and termination.
Askin says that after he complained, he was assigned hundreds of unprofitable policies written by other agents, and he was put on probation. He also says that after he threatened to sue, documents in his file were destroyed. Askin, who has a wife and three children, is technically still working for Nationwide, but he will be lucky to earn a few hundred dollars this month, according to J. Daniel Farrell, one of his lawyers.
Nationwide says it can't comment on specific litigation, but adamantly denies that it discriminates. "I would ask people to reserve judgment until we've had our day in court," says Nationwide spokesman John Millen.
That day is coming soon:
In March, Florida Insurance Commissioner Bill Nelson will hold public hearings on Nationwide's sales practices in that state. He has accused Nationwide of engaging in a marketing scheme that pressures agents to sell consumers unnecessary policies and excludes some consumers based on where they live. In May, a case involving former Nationwide agent Terry Novak is scheduled to come to trial in Wayne County (Mich.) Circuit Court. Novak claims the company told him not to write business in the city of Detroit. After he was terminated for allegedly violating a rule against selling another company's insurance, he says Nationwide made a concerted effort to cancel his Detroit policies. A suit filed with the Lucas County (Ohio) Court of Common Pleas by the Toledo Fair Housing Center is set for trial in June. It claims Nationwide discouraged homeowners in minority neighborhoods from buying insurance. It also claims homeowners in white neighborhoods received lower premiums and better coverage than homeowners in black neighborhoods with similar homes.The Housing Center is asking the court to prohibit Nationwide from discriminating and award the 10 plaintiffs - and anyone else who can prove discrimination - more than $3 million each in compensatory and punitive damages.
Court documents in that case include a map Nationwide used to divide Toledo area ZIP codes into three categories: "best of the best," "middle of the best," and "lowest of the best." Predominantly black and Hispanic neighborhoods fell into the lowest category.
Similar suits have been filed in state courts by fair housing groups in Lexington, Ky., and Richmond, Va.
Last year, the National Fair Housing Alliance, based in Washington, asked the Department of Justice to investigate Nationwide. Although the Justice Department won't comment, a number of former Nationwide agents say they have been interviewed by federal investigators.
'Good-faith discussions'
Nationwide says it has been meeting with the Justice Department for several months. "We have been having good-faith discussions and hope to resolve these issues," Millen says.Nationwide also says it isn't the only insurance company to come under fire. "The fact is, insurance companies get sued," Millen says. "All companies get sued. And lots of charges are thrown around in suits. We take these charges seriously and we investigate them because we have a very clear corporate policy of non-discrimination."
Fair-housing groups also have lodged complaints against Allstate, State Farm and American Family Insurance. Although the companies denied any discrimination, they eventually adopted more flexible underwriting standards in low-income and minority areas. For example, Allstate scrapped restrictions that generally prohibited policies on homes valued at less than $40,000 or older than 40 years.
American Family settled with the Justice Department in 1995, including a commitment to invest $14.5 million in programs to help home buyers in Milwaukee's low-income neighborhoods. Nearly a year later, the company opened an office in downtown Milwaukee and has hired a number of black agents.
In a class of its own
But Nationwide is in a class of its own, says Shanna Smith, executive director of the National Fair Housing Alliance. "No other company has as many fair housing allegations against them," she says. "I haven't seen them do anything positive to deal with all these allegations."Nationwide counters that it launched an Urban Markets Development Program last year. "Our goal is to increase our sales and service in urban markets and to become a key player in addressing urban issues," says Lorraine Brock, head of the program. As part of that effort, the company says it is reviewing its underwriting guidelines for homeowners insurance. The following Nationwide guidelines have come under attack from housing advocates:
Limiting coverage on properties more than 30 years old. Denying coverage on homes valued at less than $45,000. Denying replacement-cost coverage on homes valued at less than $60,000. Replacement-cost policies pay to rebuild a home if it is destroyed, while market-value policies reimburse the policyholder only for a home's current market value. In low-income neighborhoods, market value can be substantially below the cost of replacement.
Housing groups say these policies virtually eliminate the opportunity for people in older homes in minority neighborhoods to get high-quality insurance coverage. Some of the lawsuits also allege that Nationwide does not enforce the guidelines for white homeowners.
Steve and Jennifer Beavers, a young, professional black couple, say they were victims. In 1990, when they bought Jennifer's 100-year-old family home in a black neighborhood of Dayton, Ohio, they went to Nationwide for home insurance.
Several weeks after they paid the premium, they received a cancellation notice. They say the only reason cited was the property's poor physical condition. They were astonished because they say the home inspection report found no problems. When the couple pressed their agent for an explanation, they say he told them the underwriter may have been intimidated by their neighborhood. The couple filed a complaint with the Dayton Human Relations Council, which has a federal contract to investigate alleged Fair Housing Act violations.
Nationwide went to a federal appeals court to quash the investigation, arguing that insurance companies are regulated by state, not federal, law. The court ruled against the company. And last year, the U.S. Supreme Court declined to consider Nationwide's appeal, leaving the lower court ruling intact. Now, after six years, the Beaverses complaint is moving forward again. The couple got insurance elsewhere and still live in the house.
In addition to consumers who claim they have been unfairly denied insurance coverage, a number of Nationwide's agents have grievances against the company.
Agents say their problems began after Nationwide acquired Wausau Insurance in 1985. According to a company history, On Your Side, Nationwide underestimated by $1 billion what it would have to put up as a cushion against losses at Wausau. Richard McFerson, who became CEO in 1992, also was concerned about Nationwide's stagnant market share in its traditionally strong property and casualty lines.
Pushing for profits
So the company began making changes aimed at increasing market share and profitability. Some agents claim that included shifting business away from high-risk urban areas.One of the exhibits in a federal suit filed by five former agents in the Eastern District of Pennsylvania is what they claim is a 1986 Nationwide sales memo. It says agents should not take new customers in Philadelphia County, which has a large low-income and minority population.
Nationwide says it is not excluding urban areas. In fact, it says it now is targeting those areas for growth. "We started from our farm roots and followed the population growth from rural over to suburban," Millen says. "We see great marketing opportunities in cities. We're focused there. We're a work in progress, so don't judge us today."
So far, Nationwide has aggressively defended itself against the onslaught of lawsuits. Says Smith of the National Fair Housing Alliance: "I hope the company isn't so dug in that it can't see the value of examining the basis of the lawsuits and trying to change its behavior."