Nationwide Will Settle Racial-Bias Claims

WASHINGTON — Nationwide, the fifth-largest U.S. home insurer, agreed Monday to invest $13.2 million in minority neighborhoods and alter its underwriting and marketing policies to settle complaints that it was biased against minorities.

The agreement, the most comprehensive ever negotiated by the Justice Department under the federal Fair Housing Act, was announced by Atty. Gen. Janet Reno, who praised the firm for coming forward to resolve the complaints.

The changes in underwriting rules are similar to those agreed to earlier by State Farm and Allstate during conciliation by the Department of Housing and Urban Development, said Paul Hancock, chief of Justice’s housing enforcement section.

“These markets represent attractive sources of business for us,” said Richard D. Crabtree, president of Nationwide’s property and casualty insurance companies, who joined Reno at a news conference.

“The agreement formalizes a marketing plan that Nationwide had been working on,” Crabtree said. “We don’t believe we committed any illegal acts.”

Hancock noted that the government filed a lawsuit simultaneously with the agreement to settle it. The government alleged that Nationwide had rules against insuring homes over a certain age or below a certain value that were not supported by valid economic considerations, particularly in minority neighborhoods where homes are typically older and undervalued partly as a result of racial bias.

Asked whether there was intentional discrimination, Hancock said, “Intent and effect get intertwined in these cases.”

For instance, Hancock said, Nationwide did not insure homes valued under $50,000 or over 30 years of age. He noted that 80% of the houses in minority neighborhoods in Philadelphia were valued below $50,000.

“That leads to decisions that certain neighborhoods are not good business opportunities, and in many urban areas in the eastern United States, that translates into neighborhoods substantially populated by minority residents,” he said.

Columbus, Ohio-based Nationwide agreed to:

* inspect the condition of a home’s plumbing and wiring to decide whether it should be covered rather than refusing coverage of houses over a certain age or below a certain dollar worth.

* stop requiring a home’s market value to be a minimum percentage of the total cost of replacement. Every customer whose home passes inspection will have the opportunity to buy replacement cost coverage.

* not place geographic restrictions that bar homeowners insurance in minority neighborhoods.

* target advertising to minority communities.

* provide $2.2 million in each of the next six years in up to 10 cities that Nationwide conducts business to assist home buyers in minority neighborhoods with down payments, closing costs, below-market mortgage loans, second mortgages and home ownership counseling.

Nationwide will choose the 10 cities from among the following: Philadelphia; Cleveland; Baltimore; Louisville, Ky.; Richmond, Va.; Cincinnati, Columbus or Toledo, Ohio; Pittsburgh; Atlanta; Charlotte, N.C.; Dallas-Fort Worth; Chicago; Memphis, Tenn., and Indianapolis.