Attorney General Kwame Raoul and District of Columbia Attorney General Brian Schwalb led a coalition of 19 state attorneys general in filing an amicus brief urging a federal court to reject a challenge to the Department of Housing and Urban Development’s (HUD) Discriminatory Effects Rule. The homeowners insurance industry is challenging the rule, which clarifies that insurers and other parties are liable under the Fair Housing Act for housing practices that may appear neutral but in reality are discriminatory and have a “disparate impact” on certain populations.
“Accessible homeowners insurance is critical to ending housing discrimination,” Raoul said. “Shielding what are effectively discriminatory insurance policies and practices from federal liability would deal a significant blow to efforts made by states, including Illinois, to combat housing discrimination.”
Courts have long recognized the Fair Housing Act bars housing practices that, while not overtly discriminatory, have a disparate impact on individuals based on race, national origin or another protected characteristic. However, a group of companies that sell property and casualty insurance sued to have HUD’s Discriminatory Effects Rule declared invalid as it applies to homeowners insurance pricing and underwriting. The plaintiffs argued that HUD should have granted a blanket exemption to the rule when addressing potential conflicts with state-level insurance laws and regulations instead of considering conflicts on a case-by-case basis.
A separate coalition of attorneys general, also led by Raoul, filed a brief in 2023 before the trial court in this case, arguing that HUD reasonably declined to create broad exemptions for homeowners insurance in favor of an approach that is more respectful of individual states’ policies and regulatory choices. The trial court expressly acknowledged this brief in its opinion upholding the rule, describing the brief as “significant” evidence that HUD’s approach was reasonable.
Raoul’s current brief, filed in the U.S. Court of Appeals for the 7th Circuit, advances the same arguments that the trial court credits. Specifically, the attorneys general refute the claim that applying the Discriminatory Effects Rule to the homeowners insurance industry interferes with state-level insurance regulation, which varies from state to state. Raoul and the coalition note in their brief that in many states, including Illinois, HUD’s rule complements state anti-discrimination laws and state efforts to regulate the insurance market extend to the homeowners insurance industry. The group argues that the fact that some states may impose a rule that precludes disparate-impact liability does not justify exempting the whole industry from such liability on a nationwide basis.
Joining Raoul and Schwalb in filing the brief are the attorneys general of Arizona, California, Colorado, Delaware, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island, Vermont and Washington.
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