Illinois Attorney General Kwame Raoul on Wednesday threw his support behind the U.S. Department of Housing and Urban Development in its long-running legal battle with the homeowners insurance industry over a rule designed to protect consumers from discrimination.
Raoul led a team of 15 state attorneys general across the country in filing a friend-of-the-court brief in support of HUD and its current version and enforcement of the Disparate Impact Rule, which went into effect in 2013 and was reinstated earlier this year. The rule is designed to prohibit practices deemed discriminatory under the Fair Housing Act.
When it went into effect, the rule was the subject of a legal challenge by the trade group Property Casualty Insurers of America, which won a partial victory in a 2014 ruling by the federal court for Northern Illinois.
But the case has dragged on since then, with the Property Casualty Insurers continuing to argue that the disparate impact rule shouldn’t be applied to the homeowners insurance industry.
“Accessible home insurance is critical to ending discrimination in housing,” said Raoul. “Insulating effectively discriminatory insurance policies and practices from federal liability would deal a significant blow to the efforts of states, including Illinois, to combat housing discrimination.”
The legal wrangling began when a group of property and casualty insurance companies challenged the validity of the rule as it relates to the pricing and underwriting of homeowners insurance. They argued that HUD should have granted a broad exemption to the rule because it would interfere with state insurance laws and regulations. Instead, the rule has been interpreted to allow conflicts between state and federal insurance laws involving the disparate impact rule to be considered on a case-by-case basis.
However, the trade group has argued that HUD’s rule violates the Administrative Procedure Act and that it “impairs, invalidates, or supersedes the law of any State” in violation of the McCarran-Ferguson Act when it comes to risk-based pricing and underwriting of homeowners insurance, according to court documents.
In the amicus brief, Raoul and the coalition of state attorneys general defended HUD’s approach, arguing that it reasonably opted against blanket exemptions in order to respect individual states’ policy and regulatory choices. They rejected the claim that applying the disparate impact rule to homeowners insurance interferes with state-level regulation, emphasizing that the rule complements anti-discrimination laws and policies in many states, including Illinois.
Raoul’s coalition includes attorneys general from thirteen other states and Washington, D.C.
