SAMPLE ARTICLE: Allegations of Erie Insurance’s Race Discrimination to be Heard in Maryland State Administrative Proceeding Not Federal Court
In May 2023, the Maryland Insurance Administration (MIA or Administration) issued multiple determination letters to Erie Insurance (Erie or Company) after an investigation based on allegations that Erie was unlawfully discriminating based on race by encouraging agents to reject customers from predominantly Black areas within the city of Baltimore.
MIA, while stating that a market conduct investigation remained ongoing, found that Erie had improperly penalized an agency that served some of the most impoverished areas of Baltimore. Other complaints had been received regarding discrimination by the insurer dating back to 2021, according to a June 1, 2023, article “Md. Regulator finds Erie Insurance unlawfully discriminated in Baltimore” by Madeleine O’Neill in the Maryland Daily Record. O’Neill also reported that MIA’s claims are that Erie used “pretextual metrics to justify rejecting eligible Maryland customers in urban areas with large minority populations.” She states, “The MIA’s investigation concluded that Erie Insurance maintained broad guidelines and competitive rates but ‘embarked upon a scheme to establish a secondary layer of eligibility standards that agents were supposed to develop and use to reject otherwise eligible business that Erie did not want, because Erie considered it unprofitable.’”
At that time, Erie issued a statement through spokesman Matthew Cummings, indicating that it strongly disagreed with the MIA determinations and that the company is “proud of the strong relationship we have with our independent agents in Maryland and the 13,500 Erie agents who serve customers in communities across our territory. We are confident that the business goals and service expectations we set for our agents are appropriate and reasonable and that our underwriting practices comply with applicable state insurance laws and regulations.”
On June 8, 2023, Erie Insurance Exchange et al. sued the MIA et al. and filed a motion for a temporary restraining order (TRO) and preliminary injunction “ordering the Administration to cease disseminating the illegal orders, and the underlying confidential, privileged and protected source documents – to the Hearing Officer, to complainants, and to any other third parties.“ This request was based on, among other things, the MIA violated Erie’s federal and state due process rights and have “destroyed Erie’s ability to obtain an administrative remedy on the illegal orders.” Erie ultimately sought a “mandatory, permanent injunction requiring the Administration and Commissioner to do what they should have done in the first place – withdraw the illegal orders.”
One of Erie’s key concerns in the motion is that what it asserts is confidential and privileged information and documentation was unlawfully released in the determination letters, despite having acknowledged in correspondence with the Company that under Maryland law, that same information was protected from disclosure while a market conduct exam is in progress, which was still the case. Erie also asserts several types of arbitrary and capricious actions by the MIA and violations of Erie’s rights to administrative remedies. On that basis, the Company sought the determination of the court rather than continuing to attempt resolution with the MIA. A hearing was held on June 12, 2023, on the motion and related issues and an Order of Administrative Stay was issued as the parties sought to resolve their disputes and agree on the terms of a consent order. On July 14, 2023, Erie filed a Motion to Lift the Stay after those efforts were unsuccessful. The MIA, in its Response to Plaintiff’s Motion to Lift Stay, did not object to the lifting of the Stay, although they did object to the content of the memorandum in support of the motion as being a “misrepresentation of the agreement that was discussed in court.”
The MIA further set out its position that Erie seeks to “circumvent State law and procedure. They would have this Court decide a matter where adequate state review is available, which would be contrary to the abstention doctrines held by the U.S. Supreme Court [cites omitted].” The MIA goes on to state, “From the limited back and forth that has occurred with regard to the proposed administrative consent order, it appears that Plaintiffs have decided to reopen this case to get this Court, rather than the administrative hearing officer, to determine what documents may be admitted into evidence in the administrative proceedings.”
The Stay was lifted on August 3, 2023, and on August 14, 2023, United States District Judge Julie R. Rubin issued an Order dismissing the case. The Order refers to the “reasons set forth on the record in open court” on that date for the basis of the order to close the action and provides no additional guidance on her rationale.
However, Madeleine O’Neill reported on the hearing in the Daily Record. Her reporting states that “Rubin rejected the request [for the temporary restraining order] finding that the dispute should be handled through a state administrative proceeding.” O’Neill indicates that Erie had already done so at the time of her reporting and notes that the Company can also appeal to the circuit court in Maryland if it disagrees with the outcome of the hearing.” The Judge is quoted as saying, “Judicial review of the administrative process is reserved for state circuit courts.” O’Neill notes that the “judge also declined to limit what materials could be used as evidence at the hearing” because “’It is improper for this court to decide what evidence a hearing officer can view’ in a state administrative process.”
As the case heads back to the administrative process, it appears that Erie will have its chance to offer evidence that the MIA’s conclusions as expressed in the determination letters were based on incomplete information.
Neither party issued any statements after the order.