UNITED STATES OF AMERICA,
     Plaintiff,

v.

CIVIL ACTION No. C2-97-291

NATIONWIDE MUTUAL INSURANCE
COMPANY; AND NATIONWIDE MUTUAL
FIRE INSURANCE COMPANY,
     Defendants.

___________________________________

The United States of America alleges as follows:

1. The United States brings this action pursuant to the Fair Housing Act, Title VIII of the Civil Rights Act of 1968, as amended by the Fair Housing Act of 1988, 42 U.S.C. 3601, et seg.

2. This Court has jurisdiction of this action under the provisions of 28 U.S.C. 1345 and U.S.C. 3614(a).

3. The defendants (hereafter referred to jointly as "Nationwide") are affiliated domestic corporations which operate as one company under the Nationwide Mutual Insurance umbrella. Nationwide Mutual Insurance Company and Nationwide Mutual Fire Insurance Company are incorporated under the laws of the State of Ohio with their principal places of business in Columbus, Ohio, in the Southern District of Ohio. Nationwide Mutual Insurance Company, through its subsidiaries, operates insurance companies throughout the United States. Nationwide Mutual Fire Insurance Company is the entity which actually writes homeowners insurance.

4. Nationwide writes insurance, including homeowners insurance, in all fifty states in the country. Nationwide ranks fifth in the country in market share for homeowners insurance, with a total of 3,050,635 policies for all fire lines -- homeowners, inland marine, and property fire -- in effect as of. December, 1996. Nationwide's country-wide market share for homeowners insurance is 3.1% as of 1995.

5. The majority of Nationwide's business is in states east of the Mississippi River. Nationwide has the greatest number of its homeowners insurance policies in the states of Ohio, Pennsylvania, and North Carolina. Nationwide ranks second in the homeowners insurance markets in the states of Ohio and North Carolina, with 358,997 policies comprising 10.3% market share in Ohio, and 344,491 policies comprising 16.1% market share in North Carolina. In Pennsylvania, Nationwide ranks third in the homeowners insurance market, with 289,300 policies in effect, and a market share of 9.7%.

6. The residential housing patterns in many of the cities where Nationwide does business are racially segregated. Readily identifiable neighborhoods exist in these cities which are predominantly minority in population. Nationwide has been aware of the racial and ethnic compositlon of these neighborhoods at all times relevant to this complaint.

7. As described below in paragraphs 9 through 11, Nationwide has established, implemented and maintained eligibility criteria for its homeowners insurance policies that discriminate against homeowners in minority neighborhoods in areas in which Nationwide does business and are not justified by legitimate business considerations.

8. Nationwide traditionally has offered two basic forms of homeowners insurance: repair cost coverage policies and replacement cost coverage policies. Replacement cost coverage policies are superior, for several reasons. In the case of damage constituting a total loss of a home, repair cost coverage provides the homeowner with compensation only up to the current market value of the home, even if the cost of replacing the home exceeds that market value. Replacement cost policies provide the full cost of replacement, even if the cost of replacing the home exceeds the market value. Additionally, replacement cost policies generally provide significantly better coverage at a lower premium cost per dollar of insurance coverage than do repair cost policies.

9. Nationwide has established, implemented and maintained minimum home market value criteria for the availability of homeowners insurance coverage and the availability of replacement cost coverage. Such minimum value criteria discriminate against homeowners in minority neighborhoods in areas in which Nationwide does business, as often properties in such neighborhoods sell for an amount that is less than these minimum values. For example, in Philadelphia, Nationwide does not offer replacement cost policies on homes with a value under $50,000, and does not offer even repair cost homeowners insurance on homes valued under $45,000. 1990 Census data shows that in Philadelphia County, 70.5% of houses in majority minority census tracts have values under $40,000, and 80.9% have values under $50,000. This compares with only 23.2% of houses valued under $40,000 and 33.5% under $50,000 in majority white census tracts in Philadelphia County. As a result of Nationwide's minimum home value criteria, many properties in minority neighborhoods in areas in which Nationwide does business may not be eligible for insurance coverage at all, or may only qualify for inferior repair cost coverage.

10. Nationwide has established, implemented and maintained eligibility criteria for its homeowners insurance policies which set maximum home ages for the availability of replacement cost coverage. Homes thirty years of age and older are ineligible for the Golden Blanket Policy, Nationwide's most comprehensive policy. Nationwide discourages writing any replacement cost policy on homes over thirty years old. This maximum age criteria discriminates against homeowners in minority communities in areas in which Nationwide does business.

11. Nationwide has established, implemented and maintained eligibility criteria for its homeowners insurance policies which require that the market value of a home be from 70% to 805 of the replacement cost in order to obtain replacement cost coverage. In many cities in this country in which Nationwide does business, residential properties in minority neighborhoods sell for an amount that is significantly less than the cost necessary to rebuild the dwellings. Accordingly, these criteria of Nationwide result in less access to homeowners insurance for homeowners in minority neighborhoods in areas in which Nationwide does business.

12. The eligibility criteria described in paragraphs 9 through 11 are not necessitated by considerations of risk, profit, or any other legitimate race-neutral business consideration. Alternative method's are available which would accomplish the business objectives forming the ostensible rationale for these practices without the substantial and disproportionate burden on residents of minority neighborhoods.

13. In large part because of the discriminatory policies described above and other policies, Nationwide has taken other actions described immediately below to limit the opportunities of minorities to obtain homeowners insurance.

14. Nationwide has imposed geographic restrictions on writing homeowners insurance in areas where minority persons are in the majority. In particular, Nationwide employees, including underwriters, district managers, and other management employees, have instructed sales agents that Nationwide did not desire homeowners insurance business from neighborhoods with substantial minority populations. Nationwide conveyed this information through the use of maps as well as oral and written instructions.

15. In order to avoid doing business with homeowners in minority neighborhoods, members of Nationwide's management have criticized agents for doing business in minority areas, have explicitly based decisions regarding the processing of insurance claims on the basis of race, and have pressured agents in minority areas to move their offices out of urban areas and into surrounding suburbs which are predominantly white.

16. Nationwide's marketing strategy identifies particular geographic areas as growth areas which managers and agents are directed to target in selling Nationwide insurance. In the 1990s, one of the principal forms for this marketing analysis has been Local Area Marketing Plans or LAMP reports. The areas targeted pursuant to these marketing plans have been predominantly white in population.

17. The actions of Nationwide described in paragraphs 14 through 16 were intentional, willful, and taken with reckless disregard for the rights of persons aggrieved by such actions.

18. Nationwide's actions as alleged herein constitute:
    1. A pattern or practice of resistance to the full enjoyment of rights secured by the Fair Housing Act, as amended, 42 U.S.C. 3601, et seg.; and

    2. A denial of rights granted by the Fair Housing Act, as amended, 42 U.S.C. 3601, et seg., to a group of persons that raises an issue of general public importance.

19. The totality of Nationwide's standards, practices, and procedures, as described above, constitutes:
    1. Making unavailable or denying dwellings to persons, because of race, color, and national origin, in violation of Section 804(a) of the Fair Housing Act, 42 U.S.C. 3604(a);

    2. Discriminating on the basis of race, color, and national origin, in the terms, conditions, or privileges of the provision of services or facilities in connection with the sale or rental of dwellings, in violation of Section 804(b) of the Fair Housing Act, 42 U.S.C. 3604(b); and

    3. Making, printing, or publishing of a statement that indicates a preference, limitation, or diszrimination based on race, color, and naticnal origin, with respect to the sale or rental of a dwelling, in violation of Section 804(c) of the Fair Housing Act, 42 U.S.C. 3604(c).

20. Persons who have been victims of Nationwide's discriminatory policies and practices as described above, are aggrieved persons within the meaning of 42 U.S.C. 3602(i). These aggrieved persons have suffered damages as the result of Nationwide's conduct.

WHEREFORE, the United. States prays that the Court enter a judgment:

1. Declaring that the actions of Nationwide described above constitute a violation of the Fair Housing Act, as amended, 42 U.S.C. 3601, et seg.;

2. Enjoining Nationwide, its agents, employees, successors, and all other persons in active concert or participation with it, from discriminating in any aspect of its homeowners insurance activities because of the predominant race, color, or national origin of an individual insured or prospective insured, or of the neighborhood in which a home may be located;

3. Requiring Nationwide to develop, and present for this Court's review, a detailed plan to ensure that Nationwide's homeowners insurance is available to all persons in cities in which it does business regardless of the racial and ethnic characteristics of the neighborhood in which their home is located, and to repair the harm done because of its discriminatory activity;

4. Requiring Nationwide to review applications for insurance coverage on homes located in predominantly minority areas under the same standards, and according to the same nondiscriminatory underwriting criteria, as applied to homes in majority white areas;

5. Requiring Nationwide to provide such monetary relief as necessary to remedy the harms caused by Nationwide's discriminatory practices;

6. Requiring Nationwide to pay punitive damages; and

7. Assessing a civil penalty against the defendants to vindicate the public interest.

The United States further prays for such additional relief as the interests of justice may require together with the costs and disbursements of this action.

JANET RENO
Attorney General

ISABELLE KATZ PINZLER
Acting Assistant Attorney General
Civil Rights Division

PAUL F. HANCOCK
Chief, Housing and Civil Enforcement Section
Civil Rights Division

BRIAN F. HEFFERNAN
SHARON BRADFORD FRANKLIN
STEVEN J. MULROY
Attorneys, Housing and Civil Enforcement Section
Civil Rights Division
U.S. Department of Justice
P.O. Box 65998
Washington DC 20035
(202) 514-4736

DALE ANN GOLDBERG (0005054)
United States Attorney
Southern District of Ohio

JAMES E. RATTAN (0018632)
Assistant U.S. Attorney
280 North High Street, 4^th Fl.
Columbus, OH 43215
(614) 469-5715