HUD says insurer biased

HUD says insurer biased

Syracuse homes red-lined, say investigators

Friday, October 27, 2006

By Tim Knauss, Staff writer

Federal officials Thursday accused five Syracuse-area insurance agencies and a Pennsylvania-based insurance company of discriminating against blacks.

The U.S. Department of Housing and Urban Development said they offered worse insurance coverage to homeowners in racially mixed neighborhoods of Syracuse than they offered in white neighborhoods in the Liverpool area.

The agencies and Erie Insurance Group are accused of violating the federal Fair Housing Act, which makes it illegal to refuse to provide insurance based on race or to provide insurance differently based on race.

"This really is about African-Americans being denied an equal opportunity to protect the biggest investment of their lives," said Kim Kendrick, assistant secretary for fair housing and equal opportunity.

The insurance agencies named in HUD's complaint are R.K. Johnson & Associates Insurance Agency, of Camillus; Salanger & Hayward Agency, of Syracuse; The Vacco Agency, of Fayetteville; the Grimsley Agency, of North Syracuse; and CNY Insurance Associates, of Liverpool.

HUD's civil complaint stems from an investigation in 2000 and 2001 conducted by the Fair Housing Council of Central New York, a Syracuse nonprofit group that fights housing discrimination.

Undercover investigators from the council called each of the local insurance agencies, which are licensed to sell Erie Insurance, pretending to be first-time home buyers and seeking hazard insurance.

In eight out of 12 cases, the callers from Syracuse neighborhoods with large black populations either were not offered insurance or were offered less coverage than callers from predominantly white neighborhoods in the Liverpool area.

Those results prompted the Fair Housing Council to contact HUD, said Merrilee Witherell, the council's executive director.

Robert Hayward of Salanger & Hayward and Don Grimsley of Grimsley Agency declined comment Thursday. Other agency owners could not be reached.

Mark Dombrowski, speaking for Erie Insurance, of Erie, Pa., said he did not have enough information about HUD's complaint to comment Thursday night.

After receiving the Fair Housing Council's allegations, HUD conducted its own investigation to assess Erie's sales activity in different neighborhoods, said Bryan Greene, deputy assistant secretary for enforcement and programs.

According to HUD's analysis, in 600 New York ZIP codes where blacks represent less than 1 percent of the population, Erie Insurance has 49 agents, or 2.7 agents per 100,000 people. In 27 ZIP codes in which blacks are more than 30 percent of the population, Erie has two agents, or 0.55 agents per 100,000 people.

As a result, the more blacks in a community, the less likely Erie is to sell insurance there, HUD officials said.

Kendrick, the HUD assistant secretary, said Erie and the agencies have disputed the allegations against them.

The complaint will be heard by a HUD administrative law judge, unless Erie and the agencies elect to have their cases heard in federal district court. The hearing is tentatively scheduled for Jan. 23.

HUD can impose a maximum fine of $11,000 for each incident. In addition, the Fair Housing Council will seek compensation for its costs to investigate and pursue the case, Witherell said.

The Fair Housing Council launched its investigation after hearing allegations about Erie Insurance from fair-housing advocates in other communities, Witherell said.

For the investigation, the council matched houses in Syracuse and the Liverpool area by age, condition, size, purchase price and other factors. In each test, callers ask for an insurance quote for a Syracuse house and for the Liverpool-area house that matched its characteristics.

The Syracuse houses were on Cheney Street in ZIP code 13207, and on Fillmore Avenue, Pleasant Avenue and Cannon Street in ZIP code 13205. The percentage of homes owned by a black or a person of mixed race in those census tracts ranges from 37 percent to 61 percent, HUD said.

The Liverpool-area houses were from Fourth Street, Sixth Street, Plaxdale Road (Salina) and Melvin Avenue, all in ZIP code 13088. The percentage of homes owned by a black or a person of mixed race in those census tracts ranges from 0.4 percent to 1.3 percent, HUD said.

In four tests, the Syracuse callers received no insurance quote despite specifically asking for one. Their Liverpool-area counterparts received quotes.

In four other tests, Syracuse callers received quotes for Extra´cover, Erie's second-broadest policy. Their Liverpool-area counterparts received quotes for Ultracover, Erie's best policy, which offers more extensive coverage for $1 more.

Tim Knauss can be reached at tknauss@syracuse.com or 470-3023.