FOILing Redlining

It's happened before. And it's happening again, and this time, the answer is yes.

"Redlining", as the term is used in the insurance industry, is an insurer's refusal to issue or renew, or its cancellation of, a policy premised exclusively on the geographic location of the risk.

Concerned that auto insurers were engaging in that practice in Brooklyn, in 2002, Brooklyn Borough President Marty Markowitz filed two Freedom of Information Law (FOIL) requests with the State Insurance Department seeking information "for each Kings County zip code, including, by carrier, the number of voluntary [automobile] policies issued, renewed, cancelled (other than for non-payment of premium) or nonrenewed." Markowitz claimed that such zip code reports (commonly referred to as Regulation 90 reports) were available pursuant to 11 NYCRR 218.7 (d), an insurance regulation which states that such reports "shall be public record."

The Insurance Department said no to Markowitz, asserting the FOIL exemption precluding disclosure or release of trade secrets or records that, if disclosed, "would cause substantial injury to the competitive position" of insurers (Public Officers Law § 87 [2] [d]). The Department told Markowitz they would send him the requested reports, but only after six years.

Ironically, that's how long it took it took Markowitz to prevail on his FOIL request. After exhausting his administrative remedies, he commenced a CPLR Article 75 special proceeding against the Insurance Department in 2004 to get the Regulation 90 reports he sought. Supreme Court granted his petition, but the Appellate Division, First Department, reversed.

The Court of Appeals granted leave to appeal and, on June 26, 2008, reversed the First Department's decision and granted the petition, ordering the Insurance Department to disclose the reports. Matter of Markowitz v. Serio, 11 NY3d 43 (2008):

Because the overall purpose of FOIL is to ensure that the public is afforded greater access to governmental records, FOIL exemptions are interpreted narrowly (see Matter of Washington Post Co. v New York State Ins. Dept., 61 NY2d 557, 564 [1984]). To meet its burden, the party seeking exemption must present specific, persuasive evidence that disclosure will cause it to suffer a competitive injury; it cannot merely rest on a speculative conclusion that disclosure might potentially cause harm.

Here, the Department and insurers have failed to meet this burden. The evidence suggesting they will suffer a competitive disadvantage is theoretical at best. The insurers' key argument is that if they are forced to reveal zip codes of areas where relatively few policies are issued, competitors could use this information to exploit an insurer's geographic weak spot. It has not been shown that zip code data, without more, would necessarily put the insurer at a competitive disadvantage. Because neither the Department nor insurers have met their burden of justifying the exemption of the reports under Public Officers Law § 87 (2) (d) (see Matter of Washington Post Co., 61 NY2d at 567), the order of the Appellate Division should be reversed, with costs, and the order and judgment of Supreme Court reinstated.

As the Washington Post Co. case citation in the Court of Appeals' decision suggests, newspapers love to FOIL and watch the courts for signs, suggestions and new ideas for utilizing FOIL requests to dig up information for stories. And that's probably what happened recently right here in Buffalo, with the Buffalo News filing FOIL requests for the auto and homeowner policy Regulation 90 reports of State Farm, Nationwide, Fireman’s Fund, USAA, Farmers, Hartford, and Chubb. This time, "constrained" by the Court of Appeals' recent decision in Matter of Markowitz, the Department said yes and ruled earlier this week that the records may be disclosed under FOIL.

The Buffalo News is reporting that several of the insurers may go to federal court to block the disclosure, and at least one insurer is expected to appeal the Department's decision to disclose the records. In the absence of an appeal or further court challenge, the Department must be provided to the Buffalo News by Thursday, September 11th.