State Farm Allegedly Discriminated against Black Customers in Claim Payout

State Farm, the nation's largest homeowner insurance provider, used an AI-powered fraud detection system developed by FRISS (a Netherlands-based AI firm) through Duck Creek Technologies to process insurance claims. The system assigned 'risk scores' to policyholders using demographic data about neighborhoods including 'degree of urbanization,' crime statistics, and social media data. A study conducted over nine months in 2021 by NYU School of Law and Fairmark Partners surveyed over 800 State Farm customers across six Midwestern states. The study found that Black homeowners were 20% more likely to need at least three interactions with State Farm representatives before claim approval, 39% more likely to be asked for additional paperwork, and significantly less likely to have claims paid within one month compared to white customers. Only 30% of Black customers had claims paid within one month versus 39% of white customers. The lawsuit, filed in December 2022 and seeking class-action status, represents potentially 10,000 Black customers and seeks hundreds of millions in damages. Plaintiff Jacqueline Huskey experienced this discrimination firsthand when her June 2021 hail damage claim took four months for partial approval, requiring 20-30 interactions with State Farm, and she ultimately paid $7,000 out of pocket while receiving only $4,687 from the insurer.