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After four years of busy litigation, several major insurance companies have paid out hundreds of millions of dollars to settle civil lawsuits and regulatory actions for allegedly charging African-Americans higher premiums than whites. Plaintiffs’ lawyers say that the suits are wrapping up, with only a handful of insurance companies to make remuneration remaining. But the tailspin has cost the insurance industry a whopping $497 million in settlements to the owners of 6.9 million policies who were unwitting targets of alleged race-based pricing, according to the National Association of Insurance Commissioners (NAIC), a group of state insurance regulators. According to plaintiffs’ lawyers, the civil litigation began a few years ago, when lawyers from five firms met in a New York conference room to discuss suing insurance companies for decades of alleged race-based pricing. Present were Andrew Friedman from Bonnett Fairbourn Friedman & Balint, in Phoenix; John Stoia from San Diego’s Lerach Coughlin Stoia Geller Rudman & Robbins (then with precursor firm Milberg Weiss Bershad Hynes & Lerach); Joe Whatley of Whatley Drake in Birmingham, Ala.; Herman Watson of Watson Jimmerson Givham Martin & Mckinney in Huntsville, Ala.; and James Hoyer of Newcomer & Smiljanich, in Tampa, Fla. Lawyers from the five firms discussed what they saw as a history of overt discrimination in pricing by the insurance industry, in some instances stretching back to burial and accident policies written in 1900. The overt discrimination lasted until the 1960s, with some insurers keeping separate rate books for African-Americans and whites, the lawyers said. From 1960 until the early 1980s, insurance companies contrived a more discreet way of discriminating, they alleged. “They went to a covert way that was tied to socioeconomics,” Stoia charged. African-Americans were charged a higher rate under the pretense that their job was more hazardous or their life span was shorter, he said. Ten major settlements The first lawsuit filed and the first company to settle charges was American General Life and Accident Insurance in 2000. McNeil v. AGLA, No. 8-991157 (M.D. Tenn.). AGLA paid $207 million to settle both civil and regulatory charges of race-based pricing. Since then, there have been about 10 major settlements with total restitution approaching a half-billion dollars, said special litigation counsel William Goodman. Goodman is with the Texas Department of Insurance, whose commissioner chaired the race-based working group in tandem with NAIC. Many of the settlements, like AGLA’s, have been combined regulatory and civil actions. In 1988, NAIC surveyed a number of insurers that admitted to having engaged in race-based pricing practices, said Goodman. Some companies went back and adjusted the inflated premiums on their own, but there was no coordinated effort by state regulators and NAIC to force them to do so. Twelve years later, regulators in Florida looking into questionable practices related to burial policies uncovered evidence of systematic race-based pricing. That event coincided with plans by plaintiffs’ lawyers for civil lawsuits and touched off the wave of litigation that began with AGLA, said Goodman. Along the way, regulators and lawyers have hit a number of complicated issues, from locating the families of deceased policyholders to the question of what to do with unclaimed settlement money. “A big issue early on in the litigation was the statute of limitations,” said Goodman. “How far do you go back for someone who received a death benefit?” The answer varies, as do insurance records on the deceased, some going back 20 years while others, like MetLife Inc., go back to 1900. Mike Pennington of Bradley Arant Rose & White in Birmingham, Ala., who has been the lead defense lawyer in a number of settlements, declined to comment, noting the pending litigation of remaining clients like Mutual Savings. New York Life Insurance Co.’s spokesman, William Werfelman, did not return calls. MetLife’s lead defense attorney, Bruce Yannett of New York’s Debevoise & Plimpton, was not available for comment. Plaintiffs’ lawyers have spent $20 million on an outreach effort to locate beneficiaries, and insurers such as New York Life have run advertising campaigns in major black magazines to notify customers of regulatory settlements. Often unclaimed settlement money has been recirculated to existing class policyholders after the window on notifying beneficiaries has closed. Both plaintiffs’ lawyers and regulators agree that the litigation is winding down, but it’s not finished, they say. Many states that have resolved regulatory actions against the major insurers are now moving on to smaller providers. All but three of the major insurers have been sued, and some insurers are still fighting charges. Earlier this month, the U.S. Supreme Court declined to hear an argument against class certification that was granted by the 5th U.S. Circuit Court of Appeals in a consolidated action pending in Louisiana. In re Monumental Life Insurance, MDL Docket No. 1371 (E.D. La.). Some of the defendants, including Monumental Life, have already settled with regulators, but not other plaintiffs. So far, no lawsuit has gone to a jury. Lawyers say that insurers, faced with the prospect of actual damages, plus interest and the possibility of punitive damages, know it’s cheaper to settle.

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