Disparate Impact Discrimination Remains in the Spotlight: Insurance Industry Trade Groups Challenge HUD’s Disparate Impact Rule

August 12, 2013

Two insurance industry trade groups, the American Insurance Association and the National Association of Mutual Insurance Companies, recently filed suit against the U.S. Department of Housing and Urban Development (HUD) challenging HUD’s new rule which codifies disparate impact liability (i.e., no-fault discrimination) under the Fair Housing Act (FHA).

The plaintiffs allege that liability for discrimination in providing homeowner’s insurance under the FHA should be limited to intentional discrimination. They argue that HUD’s rule would require insurers to provide and price insurance in a manner that is inconsistent with actuarial practice and applicable state insurance law. They also allege HUD’s disparate impact rule is inconsistent with the McCarran-Ferguson Act.

As discussed in our previous OnPoint,2 HUD’s rule makes facially neutral lending policies susceptible to discrimination liability claims under the FHA even when there is no evidence of discriminatory intent in the application of such policies.

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