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Nationwide agrees to invest $13 million to settle insurance bias claims

March 10, 1997

WASHINGTON (AP) _ 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 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 Attorney General Janet Reno, who praised the company for coming forward to resolve the complaints.

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

``Today’s agreement will make the dream of owning a home a reality for minorities, nationwide,″ Reno said.

``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’s 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 if 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 percent 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.

Nationwide agreed to:

_Inspect the condition of a home’s plumbing and wiring to decide if 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 where 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; Pittsburgh; Atlanta; Charlotte, N.C.; Columbus, Ohio; Toledo, Ohio; Dallas-Ft. Worth; Chicago; Memphis, Tenn., and Indianapolis.

The company opened sales offices in minority neighborhoods of Chicago and San Antonio, Texas, earlier, and will open similar offices in Baltimore, Cleveland and Philadelphia this year and in the other cities later.

The investment money will go to the local office of the Neighborhood Reinvestment Corp. or of the Local Initiative Support Corp.

Paul Grogin, president of the Local Initiative Support Corp., said his group in Cleveland buys and rehabilitates single-family homes for sale to first-time buyers. George Knight, president of the Neighborhood Reinvestment Corp., said $1 million would pay for financial counseling for 2,500 families,

Crabtree acknowledged that Nationwide did settle with the housing department, because Nationwide went to court with an unsuccessful argument that the Fair Housing Act did not apply to insurance.

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