A federal court in New Orleans will soon hear the case of a group of Allstate and State Farm policyholders who claim they were unfairly discriminated against by the insurers' use of their credit history to rate them.
Earlier this month, the seven-member Louisiana Insurance Rating Commission, which rules on carriers' rate requests, said it had found no evidence that State Farm and Allstate's use of credit-based insurance scores had unfairly discriminated against auto and homeowner policyholders.
Policyholders had argued that the two insurers' use of credit information to compile insurance scores resulted in discrimination against minorities and low-income customers and resulted in policy cancellations, nonrenewals or higher rates.
The LIRC said that it had conducted proper investigations before approving the two companies' rate filings and was not required to look into the policyholders' contention they are based on discriminatory credit scores.
New Orleans-based attorney Tom Thornhill, who represents the policyholders, called the IRC hearing a "kangaroo court" and said he plans on filing suit in state court next week charging the LIRC with failing to perform its duties properly.
The case began as a state action more than a year ago and had the LIRC as a party to the suit. State Farm and Allstate secured its removal to federal court.
"You should not place too much stock in the merits of the decision of the LIRC to find that it had no duty to investigate the discriminatory effects of credit scoring in fixing rates or the premiums charged," Mr. Thornhill said. "We did not expect the LIRC to admit it had failed to do its job."
Mr. Thornhill said the federal case now includes claims under U.S. law. "That makes this a potential national class action," he said.
Commission Chairman Chad Brown said that states that banned use of credit-based insurance scores found themselves embroiled in a federal lawsuit. Louisiana has addressed the issue through state law and has a number of safeguards that protect consumers, he said.
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