Supreme Court Turns Away Allstate Lawsuit
 
Associated Press, Apr. 26, 2004

WASHINGTON - The Supreme Court Monday turned away Allstate Corp.'s attempt to stop a discrimination lawsuit over the company's use of credit scoring to set insurance rates.
 
In recent years, many insurance companies have used consumer credit scores as a factor in setting individual policy rates. Allstate, of Northbrook, Ill., was sued over the practice in a civil rights lawsuit brought by Hispanics and blacks. The suit, which cites the Fair Housing Act, alleges the use of credit scores results in higher rates for minorities.
 
The challenge includes claims by two Texas homeowners who have sued over insurance policies they sought from Allstate. Four other individuals from Texas and Florida have sued over automobile policy rates. The case raises both charges of intentional discrimination and a "disparate impact" claim, which alleges the use of credit scoring to set rates discriminates against a group of people.
 
Allstate's appeal to the Supreme Court is a challenge to the disparate impact claim. Such claims have long been allowed under some civil rights laws, but in recent years courts have dealt with whether disparate impact theory can be claimed under employment and other civil rights laws.
 
Allstate argued the insurance industry is primarily regulated by the states rather than the federal government, making it hard to "reconcile" a Federal Housing Act claim with the McCarran-Ferguson Act, which restricts federal involvement in insurance regulation.
 
"Extending the disparate impact theory of discrimination to insurance, however, would be a momentous step," said Washington attorney Seth Waxman, who is representing the company. He said that classification of customers is "fundamental" to the insurance industry, and that the process inevitably hurts some groups.
 
A federal trial judge allowed the lawsuit to go forward in 2002. Last year, a divided panel of the 5th U.S. Circuit Court of Appeals, New Orleans, also ruled the discrimination lawsuit was allowed by federal law.
 
"Beginning in the early 1990s, Allstate used racially slanted credit formulas to place its non-Caucasian policyholders in higher risk rate classifications for auto and homeowners insurance, based on credit rather than risk," said Sanford Svetcov, a San Francisco attorney who is representing the minorities.
 
Svetcov challenged the company's contention the lawsuit's federal claims interfered with state insurance regulation, saying state insurance regulators have not stepped in to help stop the suit. The lawsuit seeks class action status and could ultimately go to trial.
 
The case is Allstate Corp. v. DeHoyos, 03-1214.