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Big ‘I’ Submits Comments on Biden Administration Reinstating HUD Disparate Impact Rule

The Big “I" pointed out that the rule directly conflicts with state laws that require rates to be based upon actuarially sound factors predicated on risk.
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big ‘i’ submits comments on biden administration reinstating hud disparate impact rule

Earlier this year, the U.S. Department of Housing and Urban Development issued a Notice of Proposed Rulemaking (NPRM) titled “Reinstatement of Discriminatory Effects Standard." This action would rescind a 2020 HUD rule issued by the Trump administration and reinstate the agency's 2013 disparate impact rule implementing the Fair Housing Act's disparate impact standard.

As a result of the NPRM, HUD specifically requested comments on their proposal to recodify their 2013 rule.

Disparate impact refers to practices in employment, housing, and other areas that adversely affect one group of people of a protected characteristic more than another, even though rules applied by employers or landlords are formally neutral. The rule in question extends disparate impact liability to the sale and servicing of homeowners insurance and creates a burden-shifting framework for assigning liability in private lawsuits and government enforcement actions premised on the existence of a disparate impact.

The Big “I" submitted comments on the proposal earlier this week, contending that the 2013 rule should not be reinstated. In the comments, the Big “I" argued that the disparate impact standard set forth in HUD's 2013 final rule is not in compliance with the limitations on disparate impact liability following the Supreme Court decision, Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., 135 S. Ct. 2507 (2015), in which they ruled that disparate impact claims were subject to certain standards and constitutional limitations.

Additionally, the Big “I" argued that the rule, as applied to homeowners insurance, violates the McCarran-Ferguson Act, which leaves regulation of the “business of insurance" to the states, unless preempted by a federal law that “specifically relates to the business of insurance."

The rule directly conflicts with state laws that require rates to be based upon actuarially sound factors that are predicated on risk. As such, the Big “I" asserted that the regulation interferes with the ability of insurers to provide homeowners insurance at a fair price by requiring that insurance placement and underwriting decisions be based on factors that are not risk-predictive.

Wyatt Stewart is Big “I" assistant vice president of federal government affairs.

Wednesday, October 13, 2021
On the Hill