A national consumer rights group on Thursday called on state insurance commissioners to investigate racial bias in claims handling after the New York Times reported on discrimination lawsuits filed against State Farm by a Chicago policyholder and a former employee assigned to the insurer’s special investigations unit in Michigan.
The Consumer Federation of America specifically urged regulators to look into whether the algorithms that insurers used to flag potential fraud produce biased results because of racism.
Doug Heller, director of insurance for the consumer group, said his organization’s research has already shown that insurance pricing models have the effect of discriminating against communities of color.
“There’s no reason to suspect that systemic bias would somehow stop at the claims handling door,” he said.
A March 18 article in the New York Times reported on a lawsuit filed by Carla Campbell-Jackson, a Black woman living in Kalamazoo, Mich., who worked for State Farm for 28 years before she was fired in 2016. The insurer says Campbell-Jackson shared confidential information outside the company, but she denies that charge.
Campbell-Jackson filed a complaint with the federal Equal Employment Opportunity Commission saying that her termination was part of a campaign by State Farm to discredit her after she raised concerns that the insurer was using fraud as a pretext to deny claims by Black policyholders. Her lawsuit alleges that State Farm managers urged investigators to regularly meet with claims adjusters and encourage them to refer more claims to the fraud unit. She says they used the term “fill the cups” as a means of increasing the number of SIU investigations as a means of denying more claims.
Last year, the EEOC agreed that State Farm had discriminated against Campbell-Jackson because of her race.
The agency recommended that State Farm pay $300,000 in punitive damages, plus back pay, according to her court filing. The EEOC was unable to reach an agreement with State Farm and issued a right-to-sue letter to Campbell-Jackson last year.
The Times report noted that one of State Farm’s policyholders, Darryl Williams of Chicago, had also filed a lawsuit in 2019 accusing State Farm of discrimination.
Williams, who is Black, is the former owner of the Connectors Realty Group in South Chicago. He says he filed a claim with State Farm after a pipe burst in a six-unit apartment building in January 2017, forcing him to foot the bill for hotel rooms for his displaced tenants. Williams filed claims seeking more than $400,000, of which State Farm paid only $56,000, the Times reported, citing court filings.
Campbell-Jackson has agreed to testify as a witness in Williams’ lawsuit. State Farm has objected to a discovery request by Williams’ attorneys that specifically requests emails and documents that use the term “fill the cup.” The insurer’s filing says Campbell-Jackson has “a personal ax to grind” and was not working for State Farm at the time Williams filed his claim, so her deposition has no bearing on the lawsuit. State Farm said the term “fill the cup”—which is no longer used—referred to a method of effectively allocating referrals among claim-handling teams.
“There is nothing nefarious about the fact that State Farm engages in efforts to identify and investigate potentially fraudulent claims and that those efforts include assigning such claims to a Special Investigations Unit and ensuring that the resources available to that unit are fully utilized,” the filing states.
State Farm’s press office did not respond to a request for comment. The Times reported that it had received a video of a presentation that State Farm managers gave to employers.
“Discrimination played no role in Campbell-Jackson’s termination,” Michael Trout, the chief human resources officer of State Farm, said in the video, according to the Times.
Campbell-Jackson has filed one other racial discrimination suit. She and her sister, Lisa Campbell, sued the Radisson Hotels & Resorts in 2005, alleging that the chain’s hotel in Bloomington, Ill., refused to provide proper accommodations to her and other Black guests when she hosted a women’s conference for the Alpha Kappa Alpha sorority in 2001. The case was settled in April 2007.