AGs urge court to reject HUD suit

Nineteen (19) attorneys general have filed a joint brief urging the US Court of Appeals for the Seventh Circuit to reject a lawsuit over the disparate-impact rule by the Department of Housing and Urban Development (HUD).

The rule targets both intentional and unintentional discrimination in housing market practices. Illinois Attorney General Kwame Raoul and Washington, D.C. Attorney General Brian Schwalb led the multi-state coalition in defense of HUD’s position that insurance companies bear liability under the Fair Housing Act for seemingly neutral practices but that are allegedly discriminatory on certain sectors.

The litigation dates back to 2013 when the American Property Casualty Insurers Association first challenged the rule. Industry groups claimed that HUD regulation overstepped state authority in its regulatory capacity and misapplied the Fair Housing Act to insurance operations.

The attorneys general maintain that the rule strengthens existing state antidiscrimination laws and insurance regulations. “Accessible homeowners’ insurance plays a vital role in ending housing discrimination,” Raoul stated according to an AM Best report. “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.”

The agency reinstated the rule this year, resulting in another lawsuit from the insurance industry. Fifteen (15) attorneys general filed a similar brief in support of HUD’s rule last October 2023.

In addition, a group of 14 insurance commissioners voiced concerns over the rule’s impact on insurer solvency, arguing it could lead to inadequate rates, increased legal complexity, and regulatory uncertainty from the need to defend actuarial decisions on a case-by-case basis.

As of this writing, APCIA is yet to comment on the issue.

To monitor developments in this case, check the Seventh Circuit Court website. For more information about the disparate-impact rule, visit the HUD Fair Housing portal at www.hud.gov/fairhousing.

How do you think this recent ruling affects the enforcement of the Fair Housing Act in the insurance industry? Share with us your thoughts below.