Erie Insurance has filed a lawsuit against the Maryland Insurance Administration (MIA), challenging the findings that it had engaged in discriminatory practices.
In the lawsuit, Erie claimed that state regulators hastily conducted an investigation based on brokers’ complaints and then released findings that violated confidential business information.
The insurance administration, along with the insurance commissioner, allegedly surprised Erie by issuing four public determination letters, ruling in favor of four Baltimore-area insurance brokers who had filed complaints over two years ago.
Erie’s lawsuit argued that MIA prematurely concluded the investigation, which should have been a lengthier multiyear process. Furthermore, the agency’s rulings contained “highly damaging, and unfounded determinations” based on confidential, privileged, and protected documents.
According to Erie, these documents were obtained through searches of its systems and did not originate from the company itself.
“From the outset, we have cooperated fully with the Maryland Insurance Administration and looked forward to presenting our case to the MIA,” Matthew Cummings, a spokesperson for Erie, told the Baltimore Sun. “That expected opportunity did not happen, and we believe the MIA reached its conclusions based on inaccurate and incomplete information.”
In its investigation, MIA had found that Erie unlawfully canceled or rejected business from brokers based on race or other discriminatory or arbitrary reasons. The agency also determined that the insurer had canceled or changed agreements for qualified applicants based on “adverse loss ratio.”
“The loss ratio metrics that Erie adopted were designed to target agencies writing business in urban areas with large minority populations and to reduce the volume of business being written in those areas,” MIA’s determination letters said.
According to the state’s findings, Erie’s auto insurance business in Maryland was not profitable. Instead of adjusting underwriting eligibility guidelines and rates to improve profitability, Erie allegedly maintained broad guidelines and established a secondary layer of eligibility standards that agents were expected to use to reject qualified applicants.
MIA said this practice disproportionately affected urban areas with large minority populations.
The original complaints were filed by the brokerage firms Baltimore Insurance Network LLC of Bowie, Ross Insurance Agency of Windsor Mill, Welsch Insurance Group of Baltimore, and Burley Insurance.
Both Baltimore Insurance and Welsch Insurance stated in their complaints that they felt pressured to increase profits by excluding qualified clients, allegedly receiving advice from other independent agents for Erie who suggested not selling policies to individuals with “city sounding names.”
The state investigation determined that Erie penalized brokerage firms that did not engage in discriminatory practices by reducing commissions or terminating contracts. MIA ordered Erie to calculate and pay the agencies all withheld commissions between December 1, 2019, and May of this year.
Erie previously sought a hearing with the agency to appeal the decision. The company filed its lawsuit in the US District Court in Baltimore last week and is requesting a trial by jury.
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