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U.S. Supreme Court Decision Could Have Far Reaching Effect on Insurance Industry

By: Aaron Boone, Ashley Hardesty Odell and Ronda Harvey
Insurance Defense E-alert
July 7, 2015

On Thursday, June 25, in a decision long-awaited by the banking and financial services community, the United States Supreme Court ruled that the Fair Housing Act ("FHA") may be violated without establishing that a defendant intended or was motivated to discriminate based upon race, color, religion, sex, disability, family status, or national origin.

Under the FHA, "[i]t shall be unlawful for any person or other entity whose business includes engaging in 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." Many have argued that although the FHA clearly prohibits intentional discrimination motivated by a borrower's race, religion, sex, disability, family status, or national origin, it does not prohibit policies adopted without discriminatory intent that merely have a greater impact on members of minority groups. Today's decision settles once and for all that a plaintiff may establish a FHA violation by showing that a challenged policy has a disparate-impact on minorities and is not justified by a legitimate rationale.

Although this case involves a lending institution's actions, it may be wise to consider whether this case could have implications in other arenas, such as the insurance industry. For example, would an insurer be in violation of this Act should it choose to only insure houses above $65,000 in value, especially if that choice has the effect of denying policies to minorities? Carriers should carefully consider the import of this decision.