American Property Casualty Insurance Association

  • Emerging Risk Update: APCIA Member Call re HUD Disparate Impact Ruling
  • Emerging Risk: Disparate Impact/Litigation Risk

    This is to alert you that the U.S. Department of Housing and Urban Development (HUD) has published a proposed rule in the Federal Register amending its interpretation of the Fair Housing Act's disparate impact enforcement standard. Copies of HUD's Notice of Proposed Rulemaking (NPRM) and APCIA's comment outline are attached.

    On August 19, 2019, the US Department of Housing and Urban Development (HUD) published in the Federal Register its NPRM that purports "...to amend HUD's interpretation of the Fair Housing Act's disparate impact standard to better reflect the Supreme Court's 2015 ruling in Texas Department of Housing and Community Affairs v Inclusive Communities Project, Inc." and "to provide clarification regarding the application of the standard to State laws governing the business of insurance."

    Based on our initial analysis, we believe that the proposed rule offers some important improvements over its earlier counterpart. Proposed modifications to the rule include (1) strengthening the prima facie case requirements; (2) listing specific elements that plaintiffs must plead; and (3) requiring that plaintiffs show a direct causal link among the challenged practice, the adverse impact on a protected class, and plaintiff's alleged damages. The proposed rule also revises the burden-shifting framework making it easier for defendants to defeat plaintiff's case at earlier stages in the litigation; affirms McCarran Ferguson; and acknowledges the primacy of state-based insurance regulation.

    However, HUD continues to assert that it lacks the authority to grant exemptions and, thus, the proposed rule continues to require a case-by-case adjudication of insurer practices if challenged.

    APCIA encourages member companies to submit their own comments. APCIA's legal team is available to provide guidance and work with companies on drafting their comment letters and letters from their employees. The public comment period for the NPRM is now open and the agency will accept comments through October 18, 2019.

    HUD will need time after the close of the 60-day period to digest the comments and anticipates issuing a final rule in late 2019 or early 2020.

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