Friday, 30 June 2006 10:00

Allstate reaches settlement in Texas insurance scoring lawsuit

Written by Autobody News staff
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Allstate Insurance Co. and plaintiffs in the case of Jose DeHoyos, et. al. vs. Allstate Insurance Co., et. al. have reached a settlement agreement, which has been preliminarily approved by United States District Judge Fred Biery. 

The case, filed in 2001 in U.S. District Court, Western District of Texas San Antonio division, was brought by seven individual Allstate customers seeking to represent a nationwide class of African-American and Hispanic individuals who were issued automobile and/or homeowners insurance policies by Allstate-affiliated companies.

The plaintiffs claim that they were discriminated against in violation of federal civil rights laws, including the Fair Housing Act, by allegedly being charged higher premiums based on Allstate's use of information from their credit reports. The court has made no rulings on the merits of any of plaintiff's claims, and Allstate denies that it in any way discriminates against minorities in the pricing of insurance policies.

"We are very pleased with this settlement," said Michael Trevino, a spokesperson for Allstate Insurance Company. "During the discovery phase of this case, the parties undertook court ordered settlement negotiations. Although confident in our position, Allstate was presented with an opportunity to resolve this case on terms that we consider to be fair and appropriate. By achieving this settlement Allstate is able to avoid the burden and expense of continued litigation and is therefore able to continue to focus its efforts on providing insurance policies to consumers -- including minority consumers -- at competitive prices. This is good for Allstate and its customers.

"Ultimately, the court must give final approval to the settlement, including the benefits being conferred to individual class members, which we believe will be viewed as fair and reasonable given their breadth and value."

Allstate will take the following actions under the terms of the settlement:

• Allstate will roll-out a new insurance scoring algorithm.

• In states where Allstate uses information from credit reports to rate policies, Allstate will provide its customers with the opportunity to have an insurance policy priced using its new insurance scoring algorithm.

• Allstate will make its new insurance scoring algorithm publicly available.

• Allstate will deliver a comprehensive credit education program to class members, which provides valuable information, including the many different types of business transactions where information from credit reports is used today and how class members can improve their credit position.

• Allstate will adopt an appeals program under which all customers who experience extraordinary events that negatively impact their credit history information can potentially obtain premium reductions.

• Allstate will increase the substantial percentage of its national media spend devoted to targeted multi-cultural marketing in its continued efforts to make the widest range of consumers aware of its insurance products. Class members will be entitled to apply for a one-time monetary payment. Eligibility for this payment will be determined based on a comparison of the insurance scoring group assigned to his or her Allstate policy and the insurance scoring group assigned under the insurance scoring algorithm that will be implemented pursuant to this Settlement.