Jacqueline Huskey is an Illinois Black homeowner who is suing State Farm for racial discrimination in claims decisions.
Huskey filed a class action lawsuit in federal court in Illinois on Wednesday. State Farm’s own data, she claims, shows that the company processed claims slower, paid out claims less frequently, and scrutinized claims more closely when the claimants were Black.
The lawsuit has the potential to be historic, not only because of its scope (hundreds of unnamed plaintiffs may join Huskey if the case is certified as a class action, exposing State Farm to hundreds of millions of dollars in potential liability), but also because of its reliance on the insurer’s allegedly discriminatory internal data-mining.
According to the 26-page complaint, “claims made by Black homeowners are disproportionately subjected to greater suspicion than claims made by their white counterparts.” According to the complaint, the company requests more documentation and interactions with Black claimants, resulting in slower payouts and increased inconvenience.
As a result, Black policyholders suffer a “detrimental impact to the value of their home and their quality of life as necessary repairs remain unaddressed for months on end,” which means “Black State Farm policyholders receive a less valuable product than white State Farm policyholders,” according to Huskey.
Huskey’s lawsuit is based on data that is not merely anecdotal, but is supported by the company’s automated claims-processing methods. The complaint explains that State Farm uses algorithms to screen for potentially fraudulent claims, and to distinguish more complex claims from simpler ones. According to Huskey, these algorithms “rely on biometric data that serve as proxies for race,” collect “intrusive behavioral data that serve as proxies for race, such as geolocation, social media presence, and browser search history,” and use “historical housing and claims data that are infected with racial bias.”
According to the plaintiff, State Farm’s data-collection methods and their results for Black homeowners violate the Fair Housing Act (FHA).
In Huskey’s case, hail damage to her roof occurred in June 2021. Despite the fact that Huskey promptly reported the claim (her first with her insurer), State Farm did not respond for more than a month. Huskey pursued her claim for four months but was unable to reach an adequate resolution with State Farm.
Huskey contends that modern data-mining practices are frequently inherently discriminatory, citing Amazon as an example of biased hiring practices.
“Algorithmic decision-making and data analytics are neither race nor gender neutral,” Huskey contends in her complaint. “All too often, they reinforce and even exacerbate existing and historical discrimination.”
Huskey claims that State Farm data shows that white homeowners are nearly a third more likely than black homeowners to have their claims processed quickly, that black policyholders are 39% more likely to have to submit extra paperwork to justify their claims, and that black policyholders are about 20% more likely than white policyholders to require three or more interactions with State Farm before claim resolution.
Housing discrimination on the basis of race, color, religion, sex, familial status, or national origin is prohibited under the FHA. The prohibition in the statute applies not only to the sale or rental of a home, but also to discrimination in housing transactions such as loans, repairs, maintenance, or loss recovery.
“We take this filing seriously,” a State Farm representative told Law&Crime on Wednesday. “This suit does not reflect the values that we hold at State Farm. State Farm is committed to creating a diverse and inclusive environment in which all customers and associates are treated fairly, respectfully, and with dignity. We are committed to paying our debts on time and with courtesy.”
In addition to seeking compensatory damages, the plaintiff requests that the federal court issue an injunction prohibiting State Farm from using its current automated claims processing system. Huskey also requests that the company audit its system to eliminate any discriminatory effects.
The plaintiff’s counsel did not immediately respond to Law&Crime’s request for comment.