LOUISVILLE — State officials are waiting on a suspension order from South Carolina before deciding what action to take against an insurer that allegedly based its rates, in part, on race.

        Liberty Life Insurance Corp., is based in Greenville, S.C. It has offices in Lexington and Corbin, Ky..

        The department that regulates insurance companies doing business in South Carolina accused Liberty last week of illegally differentiating rates based on race and continuing to collect premiums based on the race of the insured.

        As many as 120,000 black policyholders, mainly in South Carolina, Louisiana and Kentucky, are believed to be affected.

        Specific numbers for Kentucky were not available, said Bill Free, a spokesman for Liberty, which was acquired last year by RBC Financial Group of Canada. But he said Kentucky represents less than 5 percent of the company's business, which extends across 49 states.

        According to records at the Kentucky Department of Insurance, Liberty reported $10 million in premiums on insurance written in the state in 1999, the most recent figures available.

        Roger Snell, a spokesman for the Kentucky department, said it is awaiting a copy of South Carolina's suspension order. “Typically, when a lead state orders a suspension, other states follow suit,” Mr. Snell said.

        An attorney representing Liberty said the company did not break the law when it used race to price policies issued in the 1940s through 1960s.

        Attorney Frank Ellerbe said Liberty has requested a hearing before an administrative law judge to address the new allegations.

        While Liberty is “not comfortable with the way the policies were issued — the way they were underwritten ... we believe Liberty's issuance of the policies was lawful at the time,” he said.

        Liberty is defending itself in a class-action lawsuit about the same issue, Mr. Ellerbe said.

        Ernst Csiszar, director of the South Carolina Insurance Department, said it never has been legal to use race as a determinant of life expectancy for pricing an insurance policy. He said some companies claimed they were using lifestyle issues, but it was clear they charged different prices based solely on race.

        In his order, Mr. Csiszar said Liberty has to pay $2 million within 30 days of the order. The company also was ordered to make restitution on those policies paying race-based premiums and to set aside $1 million for future claims. Mr. Csiszar also ordered Liberty be suspended from doing business in South Carolina for one year.

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