Viens et al v. Great American Insurance Group et al
Filing
59
ORDER; Defendant's Motion 37 to Dismiss is DENIED. Signed by Judge Janet Bond Arterton on 6/23/2015. (Morril, Gregory)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
JEFFREY J. VIENS, et al.,
Plaintiffs,
v.
AMERICA EMPIRE SURPLUS LINES INS. CO.,
Defendant.
Civil No. 3:14cv952 (JBA)
June 23, 2015
RULING DENYING DEFENDANT’S MOTION TO DISMISS
Defendant American Empire Surplus Lines Insurance Company moves [Doc.
# 37] to dismiss the Second Amended Complaint [Doc. # 30] in which Plaintiffs Jeffrey
Viens, Pamela Viens, Karen Wellikoff, Finney Lane Realty Associates, LLC, and the
Connecticut Fair Housing Center allege discrimination in violation of the Fair Housing
Act, 42 U.S.C. § 3601, et seq. (“FHA”) and the Connecticut Fair Housing Act, Conn. Gen.
Stat. § 46a-63, et seq. (“CFHA”) by Defendant’s insurance underwriting criteria that
charge higher premiums or deny coverage to landlords who rent apartments to tenants
receiving Section 8 housing assistance. Plaintiffs contend that this practice has a disparate
impact on racial minorities and is impermissible discrimination under state law against
those receiving housing assistance. For the reasons that follow, Defendant’s motion is
denied.
I.
Facts Alleged
Mr. and Mrs. Viens and Ms. Wellikoff, through Finney Lane Realty Associates, are
landlords who rent apartments to tenants receiving assistance under the Section 8
Existing Housing Program administered by the United States Department of Housing
and Urban Development (“HUD”) in which participants find apartments in the private
market and pay in rent 30 to 40 percent of their gross income while HUD pays the
landlord a subsidy equaling the remainder of the rent. (2d Am. Compl. ¶¶ 4–7, 13–14.)
Mr. Viens owns three properties in Willimantic, Connecticut, each of which has a
Latino tenant who uses a Section 8 voucher. (Id. ¶¶ 28–31.) Starting in April 2013, Mr.
Viens’ properties were insured under a property policy issued by Defendant. In January
2014, however, he received a written notice of non-renewal from Defendant, stating that
the policy would be canceled effective April 2014 for the stated reason that “RISK NO
LONGER MEETS CARRIER UNDERWRITING GUIDELINES” with a handwritten note
stating, “Subsidized Housing—Section 8.” (Id. ¶¶ 33–43.) The Viens were later informed
that the non-renewal was the result of the number of tenants receiving Section 8
assistance at their properties. (Id. ¶ 45.) Because of this non-renewal, the Viens were
forced to acquire replacement insurance coverage that provided less favorable terms and
cost considerably more. (Id. ¶¶ 52–53.)
Ms. Wellikoff, through Finney Lane Realty Associates, is a partial owner and
property manager of a three-unit property located at 10 Finney Lane in Stamford,
Connecticut, which has rented to tenants receiving Section 8 assistance over the years,
each of whom was Latino or African-American. (Id. ¶¶ 54–56, 7, 59–60.) In November
2012, an inspector employed by Defendant visited the Finney Lane property and asked
Ms. Wellikoff whether any “Section 8 tenants” resided there. (Id. ¶¶ 67–68.) Shortly after
Ms. Wellikoff confirmed that she rented to Section 8 tenants, an underwriter from
American Empire told Ms. Wellikoff that Defendant had understood there to be no
Section 8 tenants at the property and because two of the three units were occupied by
such tenants, she would have to pay an additional yearly premium of $575 or face
2
cancelation of both her property and liability policies. (Id. ¶¶ 71–73.) Ms. Wellikoff
responded that the demand “constituted illegal discrimination on the basis of lawful
source of income” and refused to pay the additional premiums. (Id. ¶ 73.) After Ms.
Wellikoff refused demands for increased premiums in April, May, June, and July of 2013,
Defendant sent her a notice of cancelation of the policy, listing the reason as “non
payment of premium for endo[r]sement to agent.” (Id. ¶¶ 74–77.) As a result, Ms.
Wellikoff was forced to operate the Finney Lane property without insurance for three
months and eventually had to obtain a replacement policy that was more expensive and
provided less favorable coverage. (Id. ¶¶ 79–81.)
Plaintiff the Connecticut Fair Housing Center (“CFHC”) is a “nonprofit civil
rights organization dedicated to ensuring that all people have equal access to housing
opportunities in Connecticut,” which “focuses on the intersection of housing
discrimination and poverty.” (Id. ¶ 82.) CFHC has received a “high volume” of
complaints about discrimination based upon lawful source of income and Defendant’s
use of discriminatory underwriting criteria have “frustrated and continue to frustrate
CFHC’s mission of ensuring that all people have equal access to housing opportunities in
Connecticut” and required it to “divert its scarce resources and staff away from other
activities and direct them towards investigating and counteracting” the practice. (Id.
¶¶ 85–86.)
Plaintiffs seek certification of a class action lawsuit on behalf of “all similarly
situated landlords of residential rental units in the state of Connecticut who are
prohibited by state law from refusing to rent to tenants because of the tenants’ use of
Section 8 vouchers” and “who have been potentially subject to the defendant’s unlawful
3
underwriting criteria resulting in either termination of their insurance or increased
premiums due.” (Id. ¶ 90.)
Plaintiffs assert claims in Count One under the CFHA for (1) discrimination “in
the terms, conditions, or privileges of rental of a dwelling, or in the provision of services
or facilities in connection therewith, because of” lawful source of income, Conn Gen. Stat.
§ 46a-64c(a)(2); (2) publication of a statement or notice with respect to the rental of a
dwelling that indicates a “preference, limitation or discrimination based on lawful source
of income,” id. § 46a-64c(a)(3); (3) making a residential real-estate-related transaction
unavailable based on lawful source of income, id. § 46a-64c(a)(7); (4) discrimination in
the terms or conditions of a residential real-estate-related transaction based on lawful
source of income, id.; and (5) coercion, intimidation, threatening, or interference with the
landlords’ “exercise or enjoyment of” their right to rent to individuals without
consideration for their lawful source of income, id. § 46a-64c(a)(9); (see 2d Am. Comp.
¶¶ 103–07).
Plaintiffs also assert claims for discrimination on the basis of race and national
origin under both federal and state law (Counts Two and Three) contending that because
African-American and Latino households are 12 times more likely to participate in the
Section 8 program than white non-Hispanics, “the defendant’s use of discriminatory
insurance underwriting criteria actually or predictably results in a significantly
disproportionate impact on the basis of race and national origin” and any nondiscriminatory business purpose could be achieved by “less discriminatory underwriting
criteria.” (2d Am. Compl. ¶¶ 18–19, 112, 117, 121, 126.)
4
II.
Discussion1
A.
Source of Income Discrimination (Count One)
The CFHA protects tenants from various forms of discrimination based on their
“lawful source of income” and is “designed to provide that low income families ‘may not
be rejected or denied a full and equal opportunity for . . . public accommodation based
solely on the presence of [their lawful source of] income.’” Comm’n on Human Rights &
Opportunities v. Sullivan Assocs., 250 Conn. 763, 777 (1999) (quoting 32 H.R. Proc., Pt.
25, 1989 Sess., p. 8776) (alterations in original)). Lawful source of income includes
“income derived from . . . housing assistance,” Conn. Gen. Stat. 46a-63(3), such as Section
8 vouchers, see Sullivan Assocs., 250 Conn. at 775 (“[T]he lawful sources of income
protected from discrimination by § 46a-64c include section 8 rental subsidies as a form of
housing assistance.” (internal quotation marks omitted)).
The statute provides in relevant part:
(a) It shall be a discriminatory practice in violation of this section . . . .
(2) To discriminate against any person in the terms, conditions, or
privileges of sale or rental of a dwelling, or in the provision of services or
facilities in connection therewith, because of . . . lawful source of
income. . . .
1
“To survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570
(2007)). Detailed allegations are not required but a claim will be found facially plausible
only if “the plaintiff pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged.” Id. However, “a
plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more
than labels and conclusions, and a formulaic recitation of the elements of a cause of
action will not do. Factual allegations must be enough to raise a right to relief above the
speculative level.” Twombly, 550 U.S. at 555 (alterations in original).
5
(3) To make, print or publish, or cause to be made, printed or published
any notice, statement, or advertisement, with respect to the sale or rental
of a dwelling that indicates any preference, limitation, or discrimination
based on . . . lawful source of income . . . or an intention to make any such
preference, limitation or discrimination. . . .
(7) For any person or other entity engaging in residential real-estaterelated transactions to discriminate against any person in making available
such a transaction, or in the terms or conditions of such a transaction,
because of . . . lawful source of income. . . .
(9) To coerce, intimidate, threaten, or interfere with any person in the
exercise or enjoyment of, or on account of his having exercised or enjoyed,
or on account of his having aided or encouraged any other person in the
exercise or enjoyment of, any right granted or protected by this section.
Conn. Gen. Stat. § 46a-64c.
Defendant contends that “Plaintiffs lack a private right of action to pursue these
claims, because they are outside the protected class expressly granted such a right, and
their claimed injuries are not linked to discrimination against the protected class.” (Def.’s
Mem. Supp. [Doc. # 34] at 4.) Defendant’s argument thus appears to be twofold: (1) only
protected class members under the CFHA may bring claims to redress violations of the
Act and (2) a CFHA plaintiff’s claimed injuries must be linked to an act of discrimination
against protected class members.
B.
Who May Bring Claims to Redress Violations of the CFHA
On the first point, the Court disagrees that only those in a CFHA “protected
class”—here, tenants using Section 8 vouchers—may bring a claim to redress a violation
of the statute, because the CFHA provides that “[a]ny person claiming to be aggrieved by
a violation of section 46a-64c . . . may bring an action.” Conn. Gen. Stat. § 46a-98a
6
(emphasis added).2 This provision confers standing “as broadly as is permitted by Article
III of the Constitution,” Olsen v. Stark Homes, Inc., 759 F.3d 140, 158 (2d Cir. 2014)
(quoting Trafficante v. Metropolitan Life Insurance Co., 409 U.S. 205, 209 (1972)),3 and
“requires only that a private plaintiff allege ‘injury in fact’ within the meaning of Article
III of the Constitution, that is, that he allege ‘distinct and palpable injuries that are fairly
traceable to [defendants’] actions,’” AvalonBay Communities, Inc., 256 Conn. at 592
(quoting Havens Realty Corp. v. Coleman, 455 U.S. 363, 375–76 (1982)).
Defendant nevertheless contends that this standing provision, § 46a-98a, is
limited by the substantive anti-discrimination provision, § 46a-64c that “refers only to
buyers, renters, and prospective purchasers and tenants” and not “landlords nor the
CFHC.” (Def.’s Mem. Supp. at 5.) Defendant thus maintains that the CFHA only
“provides a private right of action to a person if that person has been discriminated
against because of his or her own lawful source of income.” (Id. at 6.)
Defendant’s position is at odds with the conclusions of courts that have
recognized that parties who have not been directly discriminated against have standing to
pursue claims under the FHA and CFHA where they sustain injuries that are causally
2
The definition of “person” includes “one or more individuals, partnerships,
associations, corporations, limited liability companies, legal representatives, trustees,
trustees in bankruptcy, receivers and the state and all political subdivisions and agencies
thereof.” Conn. Gen. Stat. § 46a-51(14).
3
The FHA likewise extends standing to any “aggrieved person,” 42 U.S.C.
§ 3613(a)(1)(A), and the Connecticut Supreme Court has generally interpreted the CFHA
in tandem with federal law, see AvalonBay Communities, Inc. v. Town of Orange, 256
Conn. 557, 591 (2001) (“[I]n addressing claims brought under both federal and state
housing laws, we are guided by the cases interpreting federal fair housing laws . . . despite
differences between the state and federal statutes.” (internal quotation marks omitted)).
7
related to discrimination against protected class members.4 For example, in Trafficante,
the Supreme Court held that existing white tenants in a housing complex had standing to
assert a claim that their landlord discriminated against nonwhite prospective tenants on
the basis of their race in rental applications, recognizing that the “exclusion of minority
persons from the apartment complex is the loss of important benefits from interracial
associations.” 409 U.S. at 209-10.
The Supreme Court later explained that a party that is “not granted substantive
rights by [the FHA] . . . may sue to enforce the [FHA] rights of others . . . . [A]s long as
the plaintiff suffers actual injury as a result of the defendant’s conduct, he is permitted to
prove that the rights of another were infringed. The central issue . . . is not who possesses
the legal rights protected by [the FHA], but whether respondents were genuinely injured
by conduct that violates someone’s [FHA] rights, and thus are entitled to seek redress of
that harm. . . .” Gladstone Realtors v. Vill. of Bellwood, 441 U.S. 91, 103 n. 9 (1979); see
also Keller v. City of Fremont, 719 F.3d 931, 947 (8th Cir. 2013) (holding that a landlord
had standing to assert a FHA claim challenging an ordinance that prohibited renting to
“illegal aliens,” because “the restrictions would likely cause [the landlord] to lose some
tenants and restrict the pool of prospective tenants, causing economic injury.”).
Plaintiffs have adequately alleged such injury. The Viens and Finney Lane Realty
Associates have alleged that after Defendant denied the Viens coverage (2d Am. Comp.
¶¶ 41–43, 48–53) and increased Finney Lane Realty Associates’ premiums (id. ¶¶ 71–72,
4
In addition, as discussed infra, the CFHA does not just protect tenants but also
protects third parties who aid or encourage protected class members in the exercise or
enjoyment of their CFHA rights. See Conn. Gen. Stat. § 46a-64c(a)(9); Frazier v.
Rominger, 27 F.3d 828, 833 (2d Cir. 1994).
8
81), they were forced to obtain less comprehensive replacement coverage at a higher price
(id. ¶¶ 52–53, 81). The CFHC has alleged harm because “[u]nderwriting criteria that
compel landlords to refuse to accept or restrict acceptance of tenants using housing
subsidies” has required it “to divert its scarce resources and staff away from other
activities and direct them towards investigating and counteracting the underwriting
criteria employed by the defendant” and frustrates its mission by creating impediments
“that make it more difficult and more expensive for landlords to accept housing
subsidies.” (Id. ¶¶ 86–87.) In Olsen, the Second Circuit held that “a not-for-profit
corporation devoted to fair-housing advocacy and counseling” had standing to assert a
FHA claim on behalf of prospective renters discriminated against on the basis of
disability, because the organization “had expended resources in investigating and
advocating on the [victims’] behalf.” 759 F.3d at 158. Therefore, Plaintiffs have adequately
alleged injury in fact from Defendant’s alleged conduct.
C.
Whether Plaintiffs’ Alleged Injuries Must be Linked to Discrimination
Against Protect Class Members
Defendant’s second argument—that Plaintiffs’ claimed injuries must be linked to
an act of discrimination against protected class members (Def.’s Mem. Supp. at 4)—
presents a closer question. At oral argument, Plaintiffs clarified that they do not claim
that they were the direct victims of discrimination as Defendant initially characterized
their argument. (See id. at 6 (“Plaintiffs claim that if a landlord is charged higher prices by
an insurer due to the presence of a tenant using § 8 vouchers, the landlord has been
discriminated against by virtue of the tenant’s lawful source of income.”) (emphasis
added).) Rather, Plaintiffs contend that the tenants have been discriminated against while
9
the harm caused by such discrimination has been borne by Plaintiffs, who have had to
pay higher insurance premiums. Defendant counters that absent any allegation that
Section 8 voucher holders have been harmed, Plaintiffs have “failed to allege the sine qua
non of a fair housing claim—an alleged act of discrimination against a member of a
protected class.” (Reply [Doc. # 36] at 3.)
As an initial matter, Defendant’s interpretation of the CFHA fails to recognize the
breadth of Plaintiffs’ five distinct claims in Count One. (See 2d Am. Comp. ¶¶ 103–07).
The scope of conduct prohibited by the CFHA is not limited to direct discrimination “in
the terms, conditions, or privileges of rental of a dwelling, or in the provision of services
or facilities in connection therewith,” Conn Gen. Stat. § 46a-64c(a)(2), but also includes
(1) coercion, intimidation, threatening, or interference “with any person in the exercise or
enjoyment of” rights under the Act, § 46a-64c(a)(9), and (2) publication of a statement
indicating a “preference, limitation or discrimination based on lawful source of income,”
id. § 46a-64c(a)(3).
1.
Interference Claim
The anti-interference provision, § 46a-64c(a)(9)5, “protects third parties, not
necessarily members of the protected class, who aid or encourage protected class
members in the exercise or enjoyment of their Fair Housing Act rights,” Frazier v.
Rominger, 27 F.3d 828, 833 (2d Cir. 1994), and thus “does not necessarily deal with a
discriminatory housing practice, or with the landlord, financer or brokerage service guilty
5
The FHA provides nearly identical protection. See 42 U.S.C. § 3617. Plaintiffs
have withdrawn their federal interference claim for “a variety of reasons” not specified
without conceding that this claim was not viable. (Pls.’ Opp’n at 23 n.11.) They maintain
that the Court should utilize FHA precedent to interpret the CFHA. (Id. at 23.)
10
of such practice. It deals with a situation where no discriminatory housing practice may
have occurred at all because the would-be tenant has been discouraged from asserting his
rights, or because the rights have actually been respected by persons who suffer
consequent retaliation,” Smith v. Stechel, 510 F.2d 1162, 1164 (9th Cir. 1975).
Plaintiffs have alleged that Defendant interfered with the landlords’ “right and
obligation to rent to individuals without consideration for their lawful source of income”
(2d Am. Compl. ¶ 107) when it charged higher premiums and canceled coverage—
essentially imposing a financial penalty on the Plaintiff-landlords for complying with
their obligations under the CFHA. In Nevels v. W. World Ins. Co., 359 F. Supp. 2d 1110,
1122 (W.D. Wash. 2004), the district court recognized a similar interference claim
brought by operators of adult family homes against a surplus lines insurer alleging that
the refusal to renew property and/or liability insurance coverage because adults with
mental illnesses resided in the properties constituted interference under the FHA. The
court reasoned “that Defendant interfered with [the plaintiff-landlords’] ability to provide
housing for mentally disabled individuals when Defendant threatened to cancel their
insurance policies” because the “FHA provides Plaintiffs and their tenants with a right to
be free from housing discrimination based on disability.” Id. Plaintiffs here have likewise
11
alleged that Defendant interfered with the landlords’ aiding of their tenants’ exercise and
enjoyment of their right to use of Section 8 vouchers.6
2.
Publication Claim
As to Plaintiffs’ claim for publication of a statement indicating an unlawful
preference or discrimination, Conn. Gen. Stat. § 46a-64c(a)(2), the Second Circuit has
held that the analogous provision of the FHA can be violated even if the statement does
not actually result in the denial of housing, see United States v. Space Hunters, Inc., 429
F.3d 416, 424 (2d Cir. 2005), and it “need not be targeted at a single, identifiable
individual at all,” Rodriguez v. Vill. Green Realty, Inc., -- F.3d --, No. 13-4792-CV, 2015
WL 3461554, at *16 (2d Cir. June 2, 2015). “What matters is whether the challenged
statements convey a prohibited preference or discrimination to the ordinary listener.” Id.
at *17. Plaintiffs have adequately alleged that Defendant made and printed statements
that conveyed a prohibited preference against Section 8 tenants.
6
Defendant also contends that Plaintiffs’ claim must “necessarily fail” because
§ 46a-64c(a)(9) is a “prohibition against retaliation” and Plaintiffs have failed to state a
valid predicate claim under the CFHA as the basis for the alleged retaliation. (Def.’s Mem.
Supp. at 20.) As discussed below, Plaintiffs have alleged underlying violations of the
CFHA, which does not simply prohibit retaliation; it also prohibits coercion,
intimidation, threatening, or interference, Conn. Gen. Stat. § 46a-64c(a)(9), and is not
dependent on an underlying violation of the CFHA, see Lachira v. Sutton, No. 3:05-CV1585 (PCD), 2007 WL 1346913, at *17 (D. Conn. May 7, 2007) (“Section 3617 may be
read as making any violation dependent on an underlying substantive violation of
§§ 3603 through 3606, however, courts within this circuit have held that § 3617 can, at
times, serve as a separate basis for an FHA claim even where there is no predicate for
liability under any of the statute’s specifically referenced enumerated substantive
provisions.”).
12
3.
Discrimination Based on Lawful Source of Income Claim
The nature of Plaintiffs’ claims for discrimination in real estate-related
transactions, Conn. Gen. Stat. § 46a-64(c)(a)(7), and “in the terms, conditions, or
privileges of rental of a dwelling, or in the provision of services or facilities in connection
therewith, because of” lawful source of income, id. § 46a-64c(a)(2), are less clear. At oral
argument, Defendant characterized its challenge to Plaintiffs’ § 46a-64c(a)(2) claim as
primarily one of failure to state a claim. However, in its memorandum of law in support
of its Motion to Dismiss, Defendant claimed only that Plaintiffs lacked standing under
the CFHA. (Def.’s Mem. Supp. at 4 (“Plaintiffs lack a private right of action to pursue
these claims . . . ”).) By recasting its argument as failure to state a claim in its reply brief
and at oral argument, Defendant deprives Plaintiffs of an adequate opportunity to
respond. See In re Dobbs, 227 F. App’x 63, 64 (2d Cir. 2007) (“[I]t was entirely proper for
the District Court to decline to consider [an] argument, raised for the first time in [a]
reply brief . . .”). The nature of Plaintiffs’ discrimination claim is nevertheless also
potentially relevant to standing if, as Defendant maintains, Plaintiffs have standing only if
13
“their claimed injuries are . . . linked to discrimination against the protected class.”7
(Def.’s Mem. Supp. 4; see also id. at 14–15 (“Landlords and the CFHC lack a private right
of action to assert claims under the CFHA . . . where there are no allegations that tenants
were discriminated against based on the tenants’ § 8 vouchers.).)
At oral argument, Plaintiffs maintained that they were not required to allege
injury to Section 8 tenants. The Court disagrees because in the absence of injury to
Section 8 tenants, Plaintiffs have not explained how Defendant has “discriminated”
against tenants in violation of Conn. Gen. Stat. §§ 46a-64c(a)(2) and 46a-64(c)(a)(7).
However, as Plaintiffs articulated at oral argument, injury to Section 8 tenants can be
plausibly inferred at this stage from Defendant’s alleged conduct because if landlords are
7
The parties do not cite any cases regarding the extent to which a FHA or CFHA
plaintiff’s injury must be linked to discrimination against protected class members. In the
context of the Rehabilitation Act (“RA”), which like the FHA confers standing to any
“person aggrieved,” the Second Circuit has recognized that non-disabled parties can bring
“associational discrimination claims,” but to do so they must “prove an independent
injury causally related to the denial of federally required services to the disabled persons
with whom the non-disabled plaintiffs are associated.” Loeffler v. Staten Island Univ.
Hosp., 582 F.3d 268, 279 (2d Cir. 2009). Thus, in Loeffler, the children of a deaf patient
could bring their own claims under the RA based on a hospital’s failure to provide a signlanguage interpreter to their father, because as a result, the children were forced to
provide such services for their father and “were consequently taken out of school and
exposed to their father’s suffering.” Id. at 280. In Rodriguez, the Second Circuit recently
held that the parents of a minor child who “a reasonable jury could conclude” was either
actually disabled under the FHA or was perceived by a broker to be disabled under the
FHA had shown “injury in fact” because the defendant caused emotional harm and
“forced them to leave their home because of their daughter’s disability.” 2015 WL
3461554, at *5, *17 n.12. Because it concluded that there was a genuine dispute as to
whether the daughter was disabled, the Second Circuit did not reach the defendant’s
argument that the “plaintiffs’ injuries do not bear a sufficient nexus to discrimination
based on disability” because the child was not actually disabled under the FHA. Id. at *17
n.12.
14
forced to pay a financial penalty for renting to Section 8 tenants, they will be less likely to
participate in the program which would result in less housing being available to Section 8
participants.8 See Havens Realty Corp, 455 U.S. at 377 (“[I]n the absence of further factual
development, we cannot say as a matter of law that no injury could be proved.”).
A number of courts considering claims similar to those pled in this case have
recognized claims under the FHA and CFHA by landlords alleging discrimination against
their tenants that primarily resulted in harm to the landlords, not the tenants. For
example, in Nevels, the operators of the adult family home did “not allege that disabled
individuals were turned away from their facilities” after the defendant canceled their
insurance. 359 F. Supp. 2d at 1119. Thus, while the cancelation “did not literally ‘make
housing unavailable’ because [the home operators] continued to care for disabled
individuals,” they still stated a discrimination claim under the FHA because the insurer’s
practice “created a powerful disincentive to provide care for disabled individuals” by
forcing them to bear the risks of operating without insurance coverage and “‘[t]his
undoubtedly could make owning and retaining real property unavailable.’” Id. (quoting
United Farm Bureau Mutual Ins. Co., Inc. v. Metropolitan Human Relations Comm’n, 24
F.3d 1008, 1014 n.8 (7th Cir. 1994)).
Likewise in Wai v. Allstate Ins. Co., 75 F. Supp. 2d 1, 6 (D.D.C. 1999), the district
court held that “the refusal to provide standard property insurance at ordinary rates to
8
Although landlords are prohibited under the CFHA from declining to rent to
prospective tenants on the basis of their lawful source of income, see Conn. Gen. Stat.
§ 46a-64c(a)(2), Defendant’s alleged conduct nevertheless creates an incentive for them to
not comply with this requirement and to the extent that landlords yield to this incentive,
less housing would be available for Section 8 tenants.
15
landlords who rent their homes to disabled persons” states a claim under the FHA for
“mak[ing] unavailable or den[ying] a dwelling” because “[i]f, in order to rent to disabled
persons, a landlord must risk losing her home through loss of mortgage financing, loss of
catastrophe insurance, and loss of liability insurance, she will be disinclined to rent to
disabled persons. Such powerful disincentives to rent to disabled persons, make housing
unavailable to them.”9
In Francia v. Mount Vernon Fire Ins. Co., No. CV084032039S, 2012 WL 1088544,
at *2 (Conn. Super. Ct. Mar. 6, 2012) (Wilson, J.), the state court recognized a claim
similar to that asserted by Plaintiffs here: that an insurer’s “practice of charging increased
premiums for buildings with subsidized tenants, and its requirements that landlords
certify that a particular building will not have more than 20% subsidized tenants using
housing vouchers during the coverage period, violate Connecticut’s prohibition against
discrimination based on lawful sources of income.” Surveying federal case law, the
Superior Court noted that in “order to fulfill its remedial purpose, courts have given an
9
Nevels and Wai both cited language in the FHA, which prohibits
“discriminat[ion] in the sale or rental, or to otherwise make unavailable or deny, a
dwelling” based on protected characteristics. 42 U.S.C. §§ 3604(a), (f)(1) (emphasis
added). Plaintiffs here do not assert claims under the provisions of the CFHA that
prohibit conduct that “otherwise make[s] unavailable” housing, Conn. Gen. Stat. § 46a64c(a)(1), but rather allege discrimination in the provision of services related to the sale
or rental of a dwelling, id. § 46a-64c(a)(2), publication of a statement indicating a
preference, limitation, or discrimination based on lawful source of income, id. § 46a64c(a)(3), interference with the landlords’ right and obligation to rent to individuals
without consideration for their lawful source of income, id. § 46a-64c(a)(9), and
discrimination in a residential real-estate-related transaction, id. § 46a-64c(a)(7). The
harm to tenants from Defendant’s alleged conduct is the same—creating a disincentive
for landlords to participate in the Section 8 program.
16
expansive reading to the protections against housing discrimination embodied within the
FHA” and “have found viable claims for discriminatory conduct that [were] not directly
connected to the rental or sale of housing, but which nonetheless had a discriminatory
impact on equal housing opportunities.” Id. at *4.10
From the facts alleged, it can be plausibly inferred that Defendant’s conduct has a
discriminatory impact on housing opportunities, that Defendant has published
statements indicating a discriminatory preference, and has interfered with Plaintiffs’ right
and obligation to rent to tenants without consideration of their lawful source of income.
Therefore, Defendant’s motion to dismiss Count One is denied.
D.
Race and National Origin Disparate Impact Claims (Counts Two and
Three)
Defendant does not dispute Plaintiffs’ standing as to Counts Two and Three,
which allege disparate impact discrimination based on national original and race, but
rather contends that: (1) the FHA and CFHA only apply to claims related to the
acquisition of housing, (2) the statutes do not apply to insurance transactions, (3) the
FHA and CFHA only prohibit intentional discrimination, not disparate impact claims,
and (4) the FHA claim is “reverse preempted” by the McCarran-Ferguson Act.
10
In Francia, the plaintiff alleged that the insurer’s conduct would harm Section 8
tenants because the landlord “would not invest in rental properties if he could not obtain
general liability insurance” and because the insurer stated that the landlord could only
have 20% of his units occupied by Section 8 recipients, this “provision would have the
effect of denying rental opportunities, because 8 of 10 of the plaintiff’s current units at its
Westland Street property would necessarily be unavailable to housing assistance
recipients for no other reason than their lawful source of income.” 2012 WL 1088544, at
*8. As discussed supra, a similar harm can be inferred at this stage from the circumstances
alleged in this complaint, the existence of which can be tested on a fully developed record.
17
1.
Previously Acquired Dwelling
Defendant contends that both the FHA and CFHA “are limited to the initial
acquisition of housing, and do not apply where, as here, the alleged wrongdoing occurs
after the dwelling has already been sold.” (Def.’s Mem. Supp. at 15–16.)
The FHA provides that it is unlawful:
To discriminate against any person in the terms, conditions, or privileges
of sale or rental of a dwelling, or in the provision of services[11] or facilities
in connection therewith, because of race, color, religion, sex, familial
status, or national origin.
42 U.S.C. § 3604(b). The CFHA provision is nearly identical although it also prohibits
discrimination based on lawful source of income. See Conn. Gen. Stat. § 46a-64c(a)(2).
The unlawful publication provision of the CFHA likewise refers to “the sale or rental of a
dwelling.” Conn. Gen. Stat. § 46a-64c(a)(3).
There is a circuit split as to the extent to which the FHA reaches post-acquisition
discrimination claims. In The Comm. Concerning Cmty. Improvement v. City of Modesto,
583 F.3d 690, 713 (9th Cir. 2009), the Ninth Circuit concluded that post-acquisition
11
Plaintiffs maintain that insurance, as a “service” connected to buying and
maintaining a dwelling, is covered by the statute. HUD regulations provide:
It shall be unlawful, because of race, color, religion, sex, handicap, familial
status, or national origin, to engage in any conduct relating to the
provision of housing or of services and facilities in connection therewith
that otherwise makes unavailable or denies dwellings to persons.
24 C.F.R. § 100.70(b). The regulation explains that it prohibits activities including
“[r]efusing to provide municipal services or property or hazard insurance for dwellings or
providing such services or insurance differently because of race, color, religion, sex,
handicap, familial status, or national origin.” 24 C.F.R. § 100.70(d)(4). The Supreme
Court has recognized that as the agency charged with enforcement of the FHA, HUD’s
construction of the statute “is entitled to great weight.” Trafficante, 409 U.S. at 210.
18
claims were covered in a case alleging discrimination in the provision of municipal
services, reasoning that the inclusion of the word “privileges” in 42 U.S.C. § 3604(b)
“implicates continuing rights, such as the privilege of quiet enjoyment of the dwelling,”
and the “natural reading” of the statute “encompasses claims regarding services or
facilities perceived to be wanting after the owner or tenant has acquired possession of the
dwelling.” The court noted that “there are few ‘services or facilities’ provided at the
moment of sale, but there are many ‘services or facilities’ provided to the dwelling
associated with the occupancy of the dwelling.” Id. The Ninth Circuit also noted that
“limiting the FHA to claims brought at the point of acquisition would limit the [A]ct
from reaching a whole host of situations that, while perhaps not amounting to
constructive eviction, would constitute discrimination in the enjoyment of residence in a
dwelling or in the provision of services associated with that dwelling.” Id. at 714.
The Seventh Circuit has read the statute more narrowly, concluding that the text
of the FHA “indicates concern with activities, such as redlining, that prevent people from
acquiring property” and “contains no hint either in its language or its legislative history of
a concern with anything but access to housing.” Halprin v. Prairie Single Family Homes of
Dearborn Park Ass’n, 388 F.3d 327, 329 (7th Cir. 2004). Halprin held that § 3604 did not
apply to allegations of anti-Semitic harassment and vandalism against Jewish property
owners in a suburban housing subdivision because the plaintiffs were “complaining not
about being prevented from acquiring property but about being harassed by other
property owners.” Id. The Seventh Circuit suggested, however, that the FHA “might be
stretched far enough to reach” post-acquisition discrimination that results in
“constructive eviction” because 42 U.S.C. § 3604(a) prohibits refusing to sell or rent “or
19
otherwise mak[ing] unavailable or deny[ing]” housing on the basis of protected
characteristics, and if, for example, “you burn down someone’s house you make it
‘unavailable’ to him, and ‘privileges of sale or rental’ might conceivably be thought to
include the privilege of inhabiting the premises.” Id.; see also Bloch v. Frischholz, 587 F.3d
771, 776 (7th Cir. 2009) (reaffirming Halprin).
District courts in this Circuit that have addressed the issue have concluded that
the FHA applies to post-acquisition claims.12 For example, in Davis v. City of New York,
902 F. Supp. 2d 405, 436 (S.D.N.Y. 2012), a class action lawsuit against New York City
and its Housing Authority alleging an unconstitutional policy of stops and frisks in public
housing buildings, the district court concluded that the FHA reached a post-acquisition
claim for discrimination in the provision of police services. Discussing the split of
authority, the court agreed with the Ninth Circuit’s analysis that the inclusion of the
words “privileges” and “services or facilities” both implied that the FHA reached
“continuing rights” beyond the acquisition of housing. Id. (quoting City of Modesto, 583
F.3d at 713).
Davis further reasoned that this construction was warranted because construing
the statute to allow intentional discrimination or sexual harassment against existing
tenants would “make[] little sense” where the FHA is to “‘be given broad and liberal
construction.’” Id. (quoting Cabrera v. Jakabovitz, 24 F.3d 372, 388 (2d Cir. 1994)).
Finally, the district court reasoned that HUD regulations recognizing post-acquisition
12
Defendant has not cited any Second Circuit or within circuit district court cases
that have declined to recognize post-acquisition claims.
20
claims, on which Plaintiffs also rely, 24 C.F.R. § 100.65, were entitled to “great weight.”13
Davis, 902 F. Supp. 2d at 436 (quoting Bloch, 587 F.3d at 781). The Court finds this
analysis persuasive and concurs with the conclusion in Davis and City of Modesto that
post-acquisition claims are cognizable under the FHA.
Defendant asserts that the Connecticut Supreme Court’s conclusion in Webster
Bank v. Oakley, 265 Conn. 539, 558 (2003) that the CFHA does not apply to postacquisition claims is fatal to Plaintiffs’ theory. However, Webster Bank addressed only
whether the FHA and CFHA “require a bank, which is foreclosing on a mortgage loan
that it has serviced, to accommodate a disabled mortgagor’s inability to make her loan
payments.”14 265 Conn. at 542.
The primary issue in Webster Bank was which of two provisions of the FHA
applied to the mortgagor’s claim: 42 U.S.C. § 3604(f)(1), which makes it unlawful to
discriminate “in the sale or rental, or to otherwise make unavailable or deny, a dwelling to
13
Other courts in this Circuit have recognized post-acquisition claims under the
FHA, albeit without attention to the split of authority on whether they are actionable. See,
e.g., Rhodes v. Advanced Prop. Mgmt. Inc., No. 3:10-CV-826 (JCH), 2011 WL 2076497, at
*4 (D. Conn. May 26, 2011) (“The FHA also permits suits based on discrimination in the
provision of repairs or maintenance” by existing tenants); Khalil v. Farash Corp., 260 F.
Supp. 2d 582, 589 (W.D.N.Y. 2003) (“[E]ven if plaintiffs were not forced to leave, they
could still state a claim based on discrimination that they endured during their tenancy at
the complex.”); Green v. Konover Residential Corp., No. 3:95CV1984 (GLG), 1997 WL
736528, at *11 (D. Conn. Nov. 24, 1997) (recognizing claim that tenants were
“discriminated against on the basis of their race with respect to the condition of the
premises”).
14
This claim was analyzed under both federal and state law without distinction.
Webster Bank, 265 Conn. at 568 (“Inasmuch as the relevant provisions of the state and
federal fair housing statutes in the present case are virtually identical, we apply the
analysis that we utilized in evaluating the defendant’s FHA[] claims.”).
21
any buyer or renter because of a handicap,” or 42 U.S.C. § 3605, which prohibits
discrimination “in residential real estate-related transactions.” The Connecticut Supreme
Court concluded that a claim for discrimination in the enforcement of a mortgage loan
agreement “unambiguously [fell] within the ambit of 42 U.S.C. § 3605,” Webster Bank,
265 Conn. at 588, because § 3605 defined a “residential real estate-related transactions” as
including the “making or purchasing of loans” to purchase a home, 42 U.S.C.
§ 3605(b)(1), and therefore “the specific applicability of § 3605 to the context of
enforcement of mortgage loan agreements precludes the application of § 3604 in that
same arena,” Webster Bank, 265 Conn. at 558.
Defendant’s reading of Webster Bank as standing for the proposition that
§ 3604(b) and its state counterpart do not apply to “services provided in connection with
a ‘dwelling previously acquired’” (Def.’s Reply at 4), sweeps too broadly from a holding
confined to mortgage transactions which are excluded from § 3604 only because they,
unlike insurance transactions, are explicitly included in § 3605.15
To summarize, this Court concludes that the FHA and CFHA apply to postacquisition claims, because (1) the words “privileges” and “services or facilities” in the
statutes connote continuing rights beyond the acquisition of housing; (2) HUD
regulations, which the Supreme Court has recognized as holding “great weight,”
15
In fact, Eva v. Midwest National Mortgage Bank, Inc., 143 F. Supp. 2d 862, 883
(N.D. Ohio 2001), which the Connecticut Supreme Court adopted, acknowledged the
viability of claims under § 3604 similar to those asserted by Plaintiffs here when the
district court cited Nationwide Mut. Ins. Co. v. Cisneros, 52 F.3d 1351, 1354 (6th Cir.
1995) where the Sixth Circuit recognized a claim that an insurer “had refused, because of
[the plaintiff’s] sex, race, and the racial make-up of the area, to reinstate [the plaintiff’s]
insurance policy on a residential building that was located in a predominantly black area.”
22
Trafficante, 409 U.S. at 210, recognize such claims, and (3) such claims are consistent
with the “broad and liberal construction” given to the FHA and CFHA, see Cabrera, 24
F.3d at 388.
2.
Residential Real-Estate Related Transaction
Defendant next contends that Plaintiffs’ claims under § 3605 of the FHA and its
state counterpart are not viable because insurance is not a “residential real estate-related
transaction” covered by these provisions. Section 3605 provides:
It shall be unlawful for any person or other entity whose business includes
engaging in residential real estate-related transactions to discriminate
against any person in making available such a transaction, or in the terms
or conditions of such a transaction, because of race, color, religion, sex,
handicap, familial status, or national origin.
42 U.S.C. § 3605(a). The term “residential real estate-related transaction” is defined as the
“making or purchasing of loans or providing other financial assistance—(A) for
purchasing, constructing, improving, repairing, or maintaining a dwelling; or (B) secured
by residential real estate.” Id. § 3605(b); see also Conn. Gen. Stat. § 46a-64c(a)(7).
Defendant relies primarily upon N.A.A.C.P. v. Am. Family Mut. Ins. Co., 978 F.2d
287, 297 (7th Cir. 1992) which held that property insurance is not a “residential real
estate-related transactions” covered by § 3605, reasoning:
It would strain language past the breaking point to treat property or
casualty insurance as “financial assistance”—let alone as assistance “for
purchasing . . . a dwelling.” Insurers do not subsidize their customers or
act as channels through which public agencies extend subsidies. They do
not “assist” customers even in the colloquial sense that loans are
“assistance” (a lender advances cash, with repayment deferred). Payment
runs from the customer to the insurer. Insurance is no more “financial
assistance” than a loaf of bread purchased at retail price in a supermarket
23
is “food assistance” or a bottle of aspirin bought from a druggist is
“medical assistance.”
Id.
Plaintiffs maintain that property insurance falls within the ambit of § 3605,
“because it ‘provides the financial assistance necessary’ to maintain, repair, or construct a
residential dwelling.” (Pls.’ Opp’n [Doc. # 35] at 21.) Several courts have accepted
Plaintiffs’ position. For example, the United States District Court for the District of
Columbia rejected N.A.A.C.P., reasoning that “by defining a real estate-related
transaction as one involving a loan or ‘other financial assistance,’ section 3605 indicates
that ‘financial assistance’ includes loans, and thus should be construed more broadly than
the traditional notion of a subsidy.” Nat’l Fair Hous. Alliance, Inc. v. Prudential Ins. Co. of
Am., 208 F. Supp. 2d 46, 58 (D.D.C. 2002) (emphasis in original).
The court concluded that homeowners’ insurance fell within the ambit of § 3605
because “individuals are often unable to purchase or to maintain financing for homes
without homeowners insurance” and therefore “insurance provides the financial
assistance necessary to maintain a dwelling.” Id.; see also Nevels, 359 F. Supp. 2d at 1122
(“Giving the terms of the FHA a broad and generous construction, it is reasonable to
conclude that the liability insurance at issue here is ‘financial assistance’ for the purposes
24
of § 3605 because such insurance is essentially necessary for the safe maintenance of
Plaintiffs’ adult group homes.”).16
This Court is persuaded that the property and commercial general liability
insurance policies at issue in this case could fit within the definition of a “residential real
estate-related transaction.” 42 U.S.C. § 3605(a). In reaching a contrary conclusion in
N.A.A.C.P., the Seventh Circuit rejected the notion that property insurance could
constitute a form of “financial assistance” because insurers “do not subsidize their
customers or . . . ‘assist’ customers even in the colloquial sense that loans are ‘assistance.’”
978 F.2d at 297. This Court respectfully disagrees. Section 3605 does not contemplate that
loans for the purchase of a home are the only form of “financial assistance” that fall
within its ambit, because it refers to “loans or . . . other financial assistance,” 42 U.S.C.
§ 3605(b)(1) (emphasis added), for not only purchasing a dwelling but also for
“constructing, improving, repairing, or maintaining a dwelling,” id. § 3605(b)(1)(A).
By identifying loans as a form of financial assistance, § 3605 is not limited to the
notion of traditional subsidies. Insurance bears an analytical similarity to a loan in that
both provide financing when needed for a predetermined fixed price—interest in the case
of a mortgage and premiums in the case of insurance. See 1 Couch on Ins. § 1:6
16
Citing a 1996 letter from HUD to the Illinois Department of Insurance,
Plaintiffs contend that HUD has interpreted § 3605 in this manner as well. (Pls.’ Opp’n at
21 & Ex. A (“Property insurance is also required to maintain a dwelling, and, thus enjoy
the benefits and privileges of homeownership. Therefore, discrimination in the provision
of property insurance constitutes discrimination in residential real estate-related
transactions in violation of Section 3605.”).) The Court recognizes that “an interpretation
contained in an opinion letter, not one arrived at after, for example, a formal adjudication
or notice-and-comment rulemaking . . . . [does] not warrant Chevron-style deference.”
Christensen v. Harris Cnty., 529 U.S. 576, 587 (2000).
25
(“Essentially, insurance is a contract by which one party (the insurer), for a consideration
that usually is paid in money . . . promises to make a certain payment, usually of money,
upon the destruction or injury of ‘something’ in which the other party (the insured) has
an interest.”). Payment of a claim is not gratuitous financial assistance or a subsidy but
rather ensures that upon the occurrence of a covered event, insurance provides the
necessary financial assistance to “repair[]” or “maintain[] a dwelling.” 42 U.S.C.
§ 3605(b)(1)(A). Given the “broad and liberal construction” of the FHA, Cabrera, 24 F.3d
at 388, property insurance is not excluded from the definition of a residential real estaterelated transaction under § 3605 and Conn. Gen. Stat. § 46a-64c(a)(7).
3.
Disparate Impact Claims
Defendant American Empire acknowledges that the Second Circuit recognized
disparate impact claims under the FHA in Huntington Branch, N.A.A.C.P. v. Town of
Huntington, 844 F.2d 926, 934 (2d Cir.), aff’d in part sub nom. Town of Huntington, N.Y.
v. Huntington Branch, N.A.A.C.P., 488 U.S. 15 (1988), but contends that the “decision is
no longer valid . . . in light of subsequent Supreme Court authority.” (Def.’s Mem. Supp.
at 29.) In Smith v. City of Jackson, Miss., 544 U.S. 228, 241 (2005), a Supreme Court
plurality recognized disparate-impact claims under the Age Discrimination in
Employment Act, but on the basis that there were “key textual differences” in the statute
between the provision recognizing claims of intentional discrimination and the provision
recognizing disparate impact, the text of which “focuses on the effects of the action on the
employee rather than the motivation for the action of the employer.” Id. at 236 & n.6
(emphasis in original); see also Watson v. Fort Worth Bank & Trust, 487 U.S. 977, 993
(1988) (recognizing disparate impact claims under Title VII).
26
The Supreme Court is currently considering the viability of disparate impact
claims under the FHA, see Texas Dep’t of Hous. & Cmty. Affairs v. Inclusive Communities
Project, Inc., 135 S. Ct. 46 (2014), but in the absence of a contrary ruling from the Court
of Appeals or the Supreme Court, this Court is bound by Second Circuit precedent. See,
e.g., City of Los Angeles v. JPMorgan Chase & Co., No. 2:14-CV-04168 (ODW), 2014 WL
6453808, at *9 (C.D. Cal. Nov. 14, 2014) (“The Supreme Court’s decision to take up the
disparate-impact question in Texas Department of Housing also holds no sway over the
FHA claim here, unless and until it holds that disparate-impact is not an available theory
under the FHA.”); Folger v. City of Minneapolis, No. CIV. 13-3489 (SRN) (JJK), 2014 WL
4187504, at *15 n.15 (D. Minn. Aug. 22, 2014) (“In short, until the Supreme Court
squarely addresses the issue or the Eighth Circuit overrules its existing decisions, this
Court is not the proper tribunal to find that the FHA is confined to disparate-treatment
liability.”).
Next, Defendant contends that even if disparate impact claims are generally
cognizable under the FHA, claims that the “refusal to accept a § 8 tenant” has resulted in
a disparate racial impact are exempted. (Def.’s Mem. Supp. at 22.) The Second Circuit has
held that a prospective tenant cannot state a claim against a landlord who refused to
accept Section 8 tenants, “agree[ing] with the Seventh Circuit’s observation that because
the Section 8 program is voluntary and non-participating owners routinely reject Section
8 tenants, the owners’ ‘non-participation constitutes a legitimate reason for their refusal
to accept section 8 tenants and . . . we therefore cannot hold them liable for . . .
discrimination under the disparate impact theory.’” Salute v. Stratford Greens Garden
27
Apartments, 136 F.3d 293, 302 (2d Cir. 1998) (quoting Knapp v. Eagle Prop. Mgmt. Corp.,
54 F.3d 1272, 1280 (7th Cir. 1995) (alterations in original)).
However, as Plaintiffs note, “Knapp and Salute are premised on the notion that
participation in the Section 8 program by landlords is voluntary” (Pls.’ Opp’n at 38), and
that logic does not necessarily extend to a landlord’s insurers. Even if landlords have the
prerogative under federal law to reject Section 8 tenants, there is no sound reason why
insurers should be immunized from claims of discrimination when such landlords have
decided to accept Section 8 tenants, and thus Salute does not bar Plaintiffs’ claims.17
4.
McCarran-Ferguson Act
Finally, Defendant contends that recognizing disparate impact claims under the
FHA would conflict with the McCarran-Ferguson Act, which provides:
No Act of Congress shall be construed to invalidate, impair, or supersede
any law enacted by any State for the purpose of regulating the business of
insurance . . . unless such Act specifically relates to the business of
insurance . . . .
15 U.S.C. § 1012(b). The Second Circuit has found “based on the historical context, the
legislative history, and judicial interpretations of that history, that Congress, in enacting a
statute primarily intended to deal with the conflict between state regulation of insurers
and the federal antitrust laws, had no intention of declaring that subsequently enacted
civil rights legislation would be inapplicable to any and all of the activities of an insurance
17
Because Connecticut law provides protection for lawful source of income, the
reasoning of Salute applying the FHA has no application to Plaintiffs’ distinct claims
under Connecticut law. While Defendant contends that the Connecticut Supreme Court
has “recognized the authority of Salute” (Reply at 9), it did so for an unrelated
proposition, i.e., the reach of the FHA’s requirement of reasonable accommodations for
persons with disabilities. See Webster Bank, 265 Conn. at 561 n.20.
28
company that can be classified as ‘the business of insurance.’” Spirt v. Teachers Ins. &
Annuity Ass’n, 691 F.2d 1054, 1065 (2d Cir. 1982).18
The Connecticut law that Defendant contends a disparate-impact FHA claim
would “invalidate, impair, or supersede” is Conn. Gen. Stat. § 38a-665(a), which provides
the standards that an insurer “shall apply to the making and use of rates pertaining to
commercial risk insurance” and states that “[r]ates shall not be excessive or inadequate, as
herein defined, nor shall they be unfairly discriminatory,”19 Conn. Gen. Stat. § 38a-665(a),
and that “[c]onsideration shall be given, to the extent possible, to past and prospective
loss experience within and outside this state” and other risk factors, Conn. Gen. Stat.
§ 38a-665(b). Defendant maintains that under Connecticut law “insurers are required to
make rating and underwriting decisions on the basis of risk factors” and if “the FHA were
construed as Plaintiffs seek, American Empire would affirmatively be prohibited from
taking factors such as loss experience or a margin for underwriting profit into account if
consideration of those factors had a disparate impact on protected groups,
18
Defendant views this reasoning as undermined by Arizona Governing Comm.
for Tax Deferred Annuity & Deferred Comp. Plans v. Norris, 463 U.S. 1073, 1099 (1983) in
which a Supreme Court plurality ruled that McCarran-Ferguson Act applies to Title VII.
However, after the Supreme Court vacated and remanded Spirt for the Second Circuit to
consider Norris, the Second Circuit adhered to its prior decision, see Spirt v. Teachers Ins.
& Annuity Ass’n, 735 F.2d 23, 29 (2d Cir. 1984).
19
“Discriminatory” is not defined in the statute, but has been interpreted “in a
broad manner to mean disparate treatment” where “no reasonable distinction can be
found between those favored and those not favored,” Connecticut Podiatric Med. Ass’n v.
Health Net of Connecticut, Inc., 302 Conn. 464, 476–77 (2011) (internal quotation marks
omitted), as opposed to being limited to disparate treatment on the basis of impermissible
characteristics such as race.
29
notwithstanding the fact that Connecticut law requires consideration of such factors” and
it would thereby be in “an impossible position.” (Def.’s Mem. Supp. at 34.)
Although two courts outside this Circuit have held that the McCarran-Ferguson
Act reverse preempts FHA claims, see Am. Ins. Ass’n v. United States Dep’t of Hous. &
Urban Dev., No. CV 13-00966 (RJL), 2014 WL 5802283, at *11 (D.D.C. Nov. 7, 2014);
Saunders v. Farmers Ins. Exch., 537 F.3d 961, 967–68 (8th Cir. 2008), the majority of the
federal courts of appeals have held that enforcement of federal civil rights laws does not
interfere with and frustrate the abilities of states to regulate insurance rate making, see
Dehoyos v. Allstate Corp., 345 F.3d 290, 298 & n.4 (5th Cir. 2003) (“[T]he Eleventh,
Seventh, Fourth, Sixth, and Ninth Circuits all have determined that the [McCarranFerguson Act] does not prevent the application of federal anti-discrimination laws to the
insurance industry.” (collecting cases)). The majority position is consistent with the
Second Circuit’s ruling in Spirt and thus will be adopted by this Court.20 Therefore, the
McCarran-Ferguson Act does not reverse preempt Plaintiffs’ FHA disparate impact
claim.
20
Additionally, the CFHA provides similar (albeit broader) protection against
housing discrimination as the FHA, which is strong indication that application of the
federal antidiscrimination law will not impair Connecticut’s regulation of the insurance
industry, but rather is complementary with Connecticut’s overall regulatory scheme. See
Nevels, 359 F. Supp. 2d at 1123. (“[T]he application of the FHA will advance Washington
State’s interest, rather than impairing it.”).
30
III.
Conclusion
For the reasons set forth above, Defendant’s Motion [Doc. # 37] to dismiss the
Second Amended Complaint is DENIED.
IT IS SO ORDERED.
/s/
Janet Bond Arterton, U.S.D.J.
Dated at New Haven, Connecticut this 23rd day of June, 2015.
31
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