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$14.5 Million Settlement Reached in Insurance Suit

March 30, 1995 GMT

MILWAUKEE (AP) _ A Wisconsin insurance company accused of racial discrimination in the sale of homeowner’s policies has agreed to a settlement including $14.5 million to be invested in Milwaukee’s inner city.

Attorney General Janet Reno was scheduled to be in Milwaukee Thursday to announce the settlement of the lawsuit against American Family Insurance Group of Madison, company spokesman Rick Fetherston said Wednesday night.

Redlining refers to a practice of discriminating against customers by refusing to insure properties in certain neighborhoods, especially those that are predominantly black.


Eight black Milwaukee homeowners sued in 1990 claiming American Family discriminated against them. The lawsuit was filed as a class action on behalf of all black homeowners in Milwaukee.

Alderman Marvin E. Pratt, one of the plaintiffs, said initial reports of the settlement made it sound good.

``The idea of a settlement has been a long time coming,″ he said.

Included in the $14.5 million is $5 million for potential damage awards to black residents who meet criteria to be set by the Justice Department and the plaintiffs, Fetherston said. Any unused part of the $5 million is to be invested elsewhere in the black community.

American Family, in agreeing to a consent decree, said it didn’t admit or deny the charges of racial discrimination but committed itself to increased sales of homeowner’s policies in the black community, hiring of four agents to maintain inner-city offices and providing training to agents in urban marketing.

In addition to the $5 million for potential damages, the company said its financial commitment includes:

_$4 million for below-the-market home mortgage loans to help residents of the inner city.

_$500,000 for city agencies to help provide counseling to low-and moderate-income first-time buyers of inner city homes.

_$1.5 million to help people seeking to obtain loans, including down payments or closing costs.

_$2 million for a pilot program creating an emergency home repair program to help pay unexpected repair or replacement costs and avoid default on home loans.

Jim Eldridge, executive vice president of American Family, said in a statement that ``American Family does not discriminate in the sale of homeowners insurance.


``We have strong, longstanding corporate policies that forbid any form of unlawful discrimination,″ he said.

He said the company settled to avoid years of expensive litigation. ``We prefer to invest millions of dollars to improve life in the inner city,″ he said.

The case had been scheduled for trial next month in U.S. District Court in Milwaukee.