State Farm Algorithm Bias Lawsuit

Jacqueline Huskey, et al. v. State Farm Fire & Casualty

Case type: Discrimination & Harassment

Filed in: U.S. District Court for the Northern District of Illinois

Docket: Case No.: 1:22-cv-07014 

Case Summary

Sanford Heisler Sharp is co-lead counsel in a proposed class action lawsuit filed against State Farm Fire & Casualty (“State Farm”) alleging that State Farm handled the claims of Black homeowner insurance policyholders with greater scrutiny because of their race, in violation of the Fair Housing Act (“FHA”).  The Complaint alleges that State Farm’s use of algorithms in its claims-processing methods disproportionately impacts Black policyholders by flagging their claims for greater scrutiny than those of white policyholders, causing delays in urgent repairs and in the payment of benefits, impacting quality of life, and devaluing damaged homes.

The class action Complaint was filed in the U.S. District Court for the Northern District of Illinois on behalf of a class of Black homeowners in the Midwest. Sanford Heisler Sharp is serving as co-lead counsel with Fairmark Partners, LLP and the Center on Race, Inequality, and the Law at the NYU School of Law.

Among other allegations, the Complaint cites a 2021 survey conducted by the polling firm YouGov of 648 white and 151 Black homeowners with State Farm policies in Illinois, Indiana, Michigan, Missouri, Ohio, and Wisconsin. According to the survey, among other disparities, white homeowners were almost a third more likely than Black homeowners to have their claim processed expeditiously (in less than a month), while Black policyholders were 39% more likely to have to submit extra paperwork to justify their claims, causing months of delay in receiving coverage for urgent repairs.

The case is being closely watched as a bellwether federal civil rights lawsuit alleging racial bias through the reliance on data-mining and machine-learning algorithms in such sectors as home lending and insurance.  

The named Plaintiffs are Illinois homeowners Jacqueline Huskey and Riian Wynn, who were both first-time claimants when their homes were damaged in storms.

Ms. Huskey suffered substantial delay in receiving insurance benefits. It took two months before State Farm provided her any benefits, by which time there was water damage in her kitchen and two bathrooms.

Ms. Wynn owns a townhome in Evanston that is attached to three other townhomes. In March 2022, a severe storm blew the roof membrane off all four townhomes, including Ms. Wynn’s. She and her neighbor, who is white, both filed claims with State Farm on March 6 for the same property damage issues. According to the Complaint, Ms. Wynn’s claim received significantly more scrutiny, including demands for additional documentation, estimates and inspections. In the end, Ms. Wynn’s claim for similar interior damage and water mitigation from the same storm in a connected townhouse took approximately three months longer to process than her white neighbor’s claim did, and resulted in Ms. Wynn being forced to move out of her home, the Complaint alleges.

In addition to monetary relief, the Complaint seeks a court order compelling State Farm to monitor and/or audit its algorithmic decision-making tools to ensure the cessation of discriminatory effects in claims processing.

On September 11, 2023, the Court granted in part, and denied in part, State Farm’s motion to dismiss the case. The matter remains in active litigation.