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home / insurance / in the media

Associated Press
Dec 04, 1999

State Farm Sues Over Release of Documents Suggesting Alleged Redlining

SAN FRANCISCO--State Farm is suing the state and a former Texas insurance commissioner, demanding he return proprietary information the company says was inadvertently released by California insurance regulators.

The insurance giant charges that officials gave David Birnbaum trade secrets, such as statistical data, information on State Farm's premiums, exposures and nonrenewals for various insurance options. Consumer advocates say the information suggests redlining by the company - or unfairly discriminating against people because they live in high-risk areas.

"If State Farm's competitors had access to this information, they would be able to capitalize on State Farm's trade secrets developed over many years at great effort and expense and threaten the position State Farm has earned through its own hard work and investment," the Bloomington, Ill.-based company charged in documents filed Thursday in San Francisco Superior Court.

State Farm will ask a judge Tuesday to order Birnbaum, now a private consultant, to return the data and prohibit him from discussing it while the case is decided. It also wants the names of anyone else who obtained the information.

Also named in the suit are state Insurance Commissioner Chuck Quackenbush and the California Department of Insurance, which declined comment.

Birnbaum and activists argue that the data is in the public record. "Their competitors already know their strategy," Birnbaum said. "In Texas, we found that State Farm was denying policies to poor and minority communities," he said. "And they're afraid we're going to find the same thing here in California."

State Farm attorney Vanessa Wells disputed the allegations. "State Farm is (selling policies) in poor and underserved communities," she said.

A survey released earlier this year by the Department of Insurance - the first to examine automobile, homeowners and commercial coverage in "underserved communities" - showed that roughly 16 percent of the state's population lives in those neighborhoods. However, those areas accounted for only 6 percent of the private passenger auto insurance, about 6.6 percent of homeowners coverage and less than 10 percent of all commercial policies.

Moreover, only about 5 percent of the companies' agents served the mostly inner-city areas.

Consumer advocate Doug Heller said that under Proposition 103, the state is required to release the information State Farm wants back.

Proposition 103, passed by voters in 1988, required insurance companies to base rates on driving records, miles driven and years of experience behind the wheel.


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