The American Insurance Association and the National Association of Mutual Insurance Companies have asked a federal judge in Washington to block a new federal rule the industry says will make it impossible to set rates that accurately reflect risk.The lawsuit filed by AIA and NAMIC against U.S. Housing and Urban Affairs Director Shaun Donovan stems from HUD's February decision to expand the Fair Housing Act's disparate impact standard to allow claims to be brought against insurers whose policies negatively affect protected classes of people --- regardless of whether there is evidence of an intent to discriminate. HUD has said the rule merely clarifies the existing interpretation of the act.
However, the two trade organizations argue that the rule goes beyond the scope of the FHA and will open up insurers to a wave of civil litigation. The industry has argued that allowing it to stand will make it difficult to set prices without fear of running afoul of the rule.
"Ultimately, the Disparate-Impact Rule harms the public, as consumers of insurance, because increased costs to the insurance industry will result in increased costs to insurance policyholders; because consideration of potential disparate impacts will make rating less efficient, causing some policyholders to overpay; and because the rule, for the first time, makes the policyholder's protected personal characteristics such as race relevant to the insurance decision," AIA and NAMIC wrote in the complaint.
AIA and NAMIC referred calls for comment to their lawyers at the Washington firm Williams & Connolly. Efforts to reach them were not immediately successful.
The industry is watching the Supreme Court to see how the justices decide Mount Holly v. Mt. Holly Gardens Citizens in Action Inc., which questions whether the disparate impact standard is appropriate for identifying discrimination under the FHA. The Supreme Court agreed to hear the case in June. If the Supreme Court were to strike down the disparate-impact standard, it would essentially nullify the industry-opposed expansion of the disparate-impact standard.