California Attorney General Rob Bonta, along with a coalition of 18 attorneys general, has filed an amicus brief supporting the U.S. Department of Housing and Urban Development’s (HUD) Discriminatory Effects Rule. This rule was adopted by HUD to enforce the federal Fair Housing Act (FHA), which seeks to eliminate racial and other forms of prohibited discrimination in housing and related services. The insurance industry is currently challenging the Discriminatory Effects Rule, which holds insurers and other parties accountable for housing practices that may seem neutral but are discriminatory in practice, resulting in a “disparate impact” on certain populations.
“Housing discrimination is no longer what it once was: explicit and obvious for all to see. Instead, housing discrimination remains alive and well in mostly implicit ways. The U.S. Department of Housing and Urban Development’s rule recognizes that unfortunate reality and empowers individuals to do something about it,” said Attorney General Bonta. “I fully support the Biden Administration as it defends the rule in court. At the California Department of Justice, we are committed to eliminating racial, ethnic, and other unlawful disparities in housing and every other aspect of society.”
In the amicus brief, Attorney General Bonta and other members of the coalition argue that despite the enactment of the FHA, vestiges of residential segregation persist in American social life. They assert that the discriminatory effects doctrine, including disparate-impact liability, is essential for combating ongoing housing discrimination—whether intentional or unintentional.
The brief highlights various forms of discrimination in homeowner’s insurance, such as offering policies with inferior coverage or imposing different terms based on neighborhood demographics. It notes that disparate-impact claims have been instrumental in addressing such discrimination within the homeowner’s insurance market.
For example, Black plaintiffs recently brought a class action lawsuit against State Farm for using algorithms that allegedly resulted in significant racial disparities in claim processing times. According to the plaintiffs, Black claimants had to wait longer for payouts compared to white claimants. The court ruled in favor of the plaintiffs, determining they had successfully stated a disparate-impact claim under the FHA.
The brief also argues that state law does not categorically shield homeowner’s insurers from federal disparate-impact liability and emphasizes that both federal and state laws work together to prohibit intentional and disparate-impact discrimination.
The availability of a disparate-impact claim under the FHA was reinforced by the U.S. Supreme Court’s 2015 decision in Texas Department of Housing & Community Affairs v. Inclusive Communities Project, Inc.
After being challenged by the insurance industry, HUD's rule received summary judgment from the U.S. District Court for the District of Columbia favoring HUD. The decision has since been appealed to the U.S. Court of Appeals for the District of Columbia.
Attorney General Bonta is joined by attorneys general from Arizona, Colorado, Delaware, Illinois, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New Mexico, New York, North Carolina, Oregon, Pennsylvania, Rhode Island Washington., Washington D.C.,
A copy of the amicus brief can be found here.