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FOR IMMEDIATE RELEASE THURSDAY, MARCH 30, 1995

CR (202) 616-2765 TDD (202) 514-1888

JUSTICE DEPARTMENT OBTAINS $16 MILLION SETTLEMENT AGAINST AMERICAN FAMILY MUTUAL INSURANCE FOR ALLEGEDLY REFUSING TO INSURE AFRICAN AMERICAN HOMES FIRST SUIT UNDER THE FAIR HOUSING ACT AGAINST INSURANCE COMPANY WASHINGTON, D.C. -- In the first Justice Department action against an insurance company under the federal Fair Housing Act, American Family Mutual Insurance Company has agreed to pay over $16 million for allegedly providing blacks with inferior policies than those offered to whites and in some cases for simply refusing to insure homes of African Americans. "When property is not insured, homes cannot be rebuilt, neighborhoods deteriorate, and communities suffer," said Attorney General Janet Reno. "All of Milwaukee benefits from today's actions by American Family." Under the agreement between the Justice Department, American Family and a group of private plaintiffs, the company has agreed not to discriminate based on race and to pay over $14 million in damages to compensate the victims of the company's discriminatory policies and an additional amount in attorneys fees. It also has agreed to advertise in media that targets African Americans and inspect homes in African American neighborhoods on an equal basis as in white neighborhoods. "Today's agreement ensures that African Americans will be part of the American Family," stated Reno. "We commend the company for recognizing the need to service the entire community, taking steps to compensate victims of its past actions, and ensuring that all citizens of Milwaukee have a chance to receive quality insurance for their homes." In a complaint filed together with the agreement, the Justice Department charged the company with engaging in a pattern of discrimination by using race as a factor in determining whether to grant homeowner insurance policies in the Milwaukee metropolitan area. "Risk discrimination is permitted, race discrimination is not," added Reno. The complaint, filed with the agreement today in U.S. District Court in Milwaukee alleged that employees of American Family at one time: ​ gave explicit instructions to agents and underwriters to consider race in deciding whether, and on what terms, to offer homeowners insurance; ​ required agents and underwriters to consider race as a factor in deciding whether to inspect a home -- the results

of which were used to deny coverage in some cases; ​ overlooked deficiencies in conditions of homes in white neighborhoods that were used to deny coverage in black neighborhoods; ​ ​ made disparaging and stereotypical references about African Americans as being poor insurance risks; and, criticized agents, including African American agents, who sought to do business in the African American community, and discouraged them from doing such business. "We are persuaded by the evidence that American Family discriminated in the past," said Assistant Attorney General for Civil Rights Deval L. Patrick. "By entering this agreement, American Family has turned a new page." The Justice Department first started to investigate the company in 1988 after receiving numerous complaints about American Family's discriminatory behavior. The investigation in part revealed that African American homeowners disproportionately received inferior, more costly "repair cost" policies while white homeowners with similar risk assessments were provided the more favorable "replacement cost" policies. The investigation also showed that blacks were forced to submit to inspections more often than whites and that agents failed to return calls from black customers and refused to keep appointments. As a result of the alleged discriminatory practices, the company insured a significantly lower percentage of homes in the predominantly black neighborhoods than in comparable white neighborhoods. Even after accounting for various socioeconomic factors, the Justice Department's investigation revealed that the differences could not be explained by non-racial factors or any actuarial data. The agreement also provides that the company will issue a non-discrimination statement, continue to recruit qualified prospective customers from the state's insurance plan, conduct random testing, no longer exclude homes solely on the basis of the age or sales price of the home, and provide a new custom value policy that will make replacement cost-type coverage more widely available. "Today's agreement will benefit the private plaintiffs whose civil rights have been vindicated and the people of Milwaukee who will have greater opportunities for decent and affordable housing without regard to race." said U.S. Attorney Thomas Schneider of Milwaukee. "American Family has taken the lead by recognizing past problems, finding ways to provide greater protection for all homeowners, and taking steps to expand its own business opportunities." # # # 95-175