Redlining Premium Lawsuits Barred by McCarran-Ferguson Act

high for the insurance coverage provided and a reasonable degree of -6- only to judicial review for arbitrary and capricious agency action. even if the same good faith and with probable cause. § 379.348. plaintiffs filed no administrative state law.5 discrimination claims would "impair" the missouri laws that regulate the business of v. * rights under law that the mccarran-ferguson act does not apply to subsequently violation and the insured's financial injury. by mandating an exclusively deem it advisable," but at least once every four years. § 379.343. if the director finds rates based on a homeowner's race. their factually explicit allegations are that the united states court of appeals to the decision in united states v. south-eastern underwriters ass'n, 322 u.s. 533 rights," compensatory and punitive damages, and attorneys' fees and costs. rather, the issue is whether the theory of liability asserted and the relief ___________ mccarran-ferguson act after humana. 440 f.3d at 946. therefore, plaintiffs did not regulation by providing, in pertinent part, that no federal statute "shall be construed supreme court in humana inc. v. forsyth, 525 u.s. 299 (1999). enacted in response insurers used rating zones based on facially neutral risk factors that have a disparate these statutes to "invalidate, impair, or supersede" state insurance laws. like the committee for civil rights * reinvestment coalition, * which unfairly discriminate between risks having essentially the same marva jean saunders, et al., * impact theory.3 regulating the business of insurance . . . unless such act specifically relates to the raised in this case, and we need not decide it. lawsuit in state court challenging an unlawful rate. only the director, in his to continue to insure because of race. mo. rev. stat. §§ 375.007, 375.936(11)(g). but may suspend or revoke an insurer's license for a willful violation. § 379.361.1. some alleged wrongdoing." taffet v. southern co., 967 f.2d 1483, 1491 (11th cir.) 6 a hud regulation interprets § 3604(b) as applying to the business of consistent with)" unlawful conduct. bell atl. corp. v. twombly, 127 s. ct. 1955, coverage are actuarially sound and consistent with state law." doe v. mut. of omaha homeowners insurance. see 24 c.f.r. § 100.70(d)(4); american family, 978 f.2d as the seventh circuit observed in american family, 978 f.2d at 290, direct conflicts with state law but did not intend "to cede the field of insurance rate is "unfairly discriminatory" in terms specific to the business of insurance -- "risks 7 fire and allied lines. including "an order of restitution or disgorgement" in favor of "identifiable * relief from the director of insurance, who has the exclusive authority to conduct an reviews whether the agency action was in excess of its authority; unsupported by agreement or from private misconduct . . . . not new rights created solely by the and plaintiffs' categorical argument that no fair housing act claims are barred by the * not supplanted, by "a rate-payer's cause of action to recover damages measured by the u.s.c. §§ 3601 et seq., and 42 u.s.c. §§ 1981 and 1982, by "charg[ing] higher claims under the "filed rate doctrine," and we remanded those claims. word "impair" to mean, in addition to a "direct conflict" with state law, any iii. applying the mccarran-ferguson act and humana. premium rates charged by property and casualty insurers are governed by chapter 379 * the missouri insurance laws require insurers to establish rates based upon ii. missouri's regulatory regime. (1944), the mccarran-ferguson act preserves the traditional role of state insurance farmers insurance exchange, et al., * the federal civil rights statutes on which plaintiffs rely do not "specifically within a reasonable period of time thereafter, the further use of such rate . . . shall be transferring their administration from state agency to federal court "obviously would statute." 991 s.w.2d at 668. the state law right not to pay "unfairly discriminatory" in july 2006 amendments, the legislature authorized the director to file a civil conceive." dehoyos, 345 f.3d at 302 (jones, j., dissenting). based in whole or in part on the racial composition of kansas city zip code areas" relate" to the business of insurance, so the mccarran-ferguson act bars applying * may group risks by classifications that "measure any differences among risks that can however, the insurers have not raised the issue and therefore we assume, without united states of america; lawyers' * and, if the request is denied, may "file a written complaint and request for hearing be defined to include, but shall not be limited to, the use of rates . . . by the mccarran-ferguson act, 15 u.s.c. §§ 1011-1015, as construed by the to enforce that right, and by granting the director of insurance exclusive authority to comparable risks located in white communities. relevant factors, including trend factors." § 379.318(1). in establishing rates, insurers in missouri, the director of insurance has been delegated the essentially legislative economic factors such as loss experience that are essential to insurer solvency, and * 2 an abuse of discretion. § 536.140. they did not argue this distinction in the district court, which is reason enough to * v. * would have been, and then prescribe the future rate in an injunctive decree, "[a] more contiguous black community in kansas city." plaintiffs allege, inter alia, that action under missouri law to enforce the mandate in § 379.318(4) that rates not be they fail to cite a case in which a state or federal court has applied the mhra, which whether [the insurers] used separate rating territories to charge higher were to allow private actions challenging unfairly discriminatory rates. prohibited." § 379.346.3. the director may also order the insurer to cease and desist -2- with state insurance regulation, while a suit challenging the racially disparate impact not argued that the federal laws invoked by plaintiffs would invalidate or supersede * 3 granted defendants' motions, concluding that the price 03 (8th cir. 2005). applying department of housing and urban development 991 s.w.2d 662, 667 (mo. banc 1999). in dierkes, the court dismissed claims "based of mo. v. angoff, 909 s.w.2d 348 (mo. banc 1995). under that statute, the court discrimination plus injunctive relief to prevent further violations of federal law. but ignore it on appeal. moreover, after twelve years of litigation, plaintiffs provide no hazard and having substantially the same degree of protection against loken, chief judge. administrative remedy, missouri law preserves the agency's primary authority to the rico claims at issue complemented rather than impaired nevada's administrative contract claims against an insurer for misrepresenting that its policies met all "state do not exclude remedies available under other state laws. but dierkes held only that that are fair in form, but discriminatory in operation." griggs v. duke power co., 401 cir. 1992). but at least with respect to insurers, the question is not free from doubt. with the "intentional and/or unintentional unlawful effect of extracting higher pleading requirement of rule 8(a)(2) -- "allegations plausibly suggesting (not merely -10- discrimination "in the terms, conditions, or privileges of sale or rental of a dwelling, under the missouri human rights act (mhra), mo. rev. stat. §§ 213.010 et seq. plaintiffs - appellants, * to pay a civil penalty and the reasonable costs of investigation. § 374.046.1. the a person "aggrieved by any rate charged" may ask the insurer to review the rate that "any rate" filed by an insurer may not comply with the provisions of chapter 379, seeking to deflect the significance of their disparate impact theory on the merrill lynch & co., 524 f.3d 866, 870 (8th cir. 2008) (standard of review). plaintiffs failed to raise this issue, even though in saunders we specifically stated that at 297-301. however, "hud has never applied a disparate impact analysis to discretion, may do so. plaintiffs also concede there is no implied private right of expenses." mo. rev. stat. § 379.318.1-2.6 clarified that congress in using the word "impair" intended to encompass more than the judgment of the district court is affirmed. litigation, we affirmed the dismissal of other claims that minority residents of the administrative hearing procedures found in mo. code. regs. ann. tit. 20 § 800-1.100 cert. denied, 516 u.s. 1140 (1996). award damages based upon the lower rates they would have paid absent no rate shall be held to be excessive unless such rate is unreasonably ins. co., 179 f.3d 557, 564 (7th cir. 1999), cert. denied, 528 u.s. 1106 (2000). plaintiffs allege that the insurers violated 42 u.s.c. § 3604(b), which bars race 1966 (2007). viewing the complaints in their entirety, the lengthy litigation history, enforces their laws." doe, 179 f.3d at 564. the mccarran/ferguson act. in this case, "[t]he allegations of intentional race plaintiffs seek to displace the state law definition of unfair discrimination with a application of federal law that would "frustrate any declared state policy or interfere before loken, chief judge, hansen and murphy, circuit judges. discrimination, prohibiting an insurer from canceling or refusing to insure or refusing dehoyos, 345 f.3d at 297-98 n.5, "the federal regulatory goal of disallowing racially competition does not exist in the area . . . . unfair discrimination shall difference between the filed rate and the rate that would have been charged absent u.s. 424, 431 (1971). in a number of prior cases, we have recognized a disparate deciding whether disparate treatment claims against missouri insurers are barred by "insurance works best when the risks in the pool have similar characteristics. . . . to racially discriminatory insurance pricing." see mo. rev. stat. § 379.318(4), defining plaintiffs note that two provisions in chapter 375 specifically address the issue of race plaintiffs - appellants, * mccarran-ferguson act did not bar the civil rico fraud claim at issue because mccarran/ferguson act, we conclude their conclusory allegations of discriminatory marva jean saunders, et al., * comprehensive administrative regime. loss experience within and outside this state," "catastrophe hazards," "past and public hearings are conducted in accordance with detailed, recently amended asserted and relief sought by plaintiffs on the exclusively administrative insurance -8- -4- civil rights statutes, an injunction against "any further conduct violating plaintiffs' seventh circuit, we reject the contention by amicus lawyers' committee for civil hold a hearing in response to a § 379.348 complaint could be judicially reviewed statutory and common law private actions to remedy such misconduct and allowed the discrimination . . . do not appear to be preempted, but they are a diversion." dehoyos on the prior appeal was not adequate to decide that issue.1 premium rates from homeowners" in the predominantly black community. their f.3d 1209, 1222-23(11th cir. 2001), cert. denied, 535 u.s. 1018 (2002). "it is one complaints in these cases. we assume -- though it appears the supreme court of or $50,000 per year for multiple violations. §§ 374.049.2(2), 379.361. the director the mccarran-ferguson act bars the application of federal statutes to with a state's administrative regime." 525 u.s. at 310. we concluded that the record * rates is a level two violation for which the maximum penalty is $1,000 per violation standards, we have recognized a disparate impact fair housing act claim against after a hearing that the rate does not comply, he "shall issue an order . . . stating when, raciallydisparatetreatment,orintentionaldiscrimination,aswellasdisparateimpact." establishes that the mccarran-ferguson act bars plaintiffs' price discrimination snider v. united states, 468 f.3d 500, 512 (8th cir. 2006); von kerssenbrock- law creates an administrative regime that would be frustrated and interfered with, if § 374.010. the director of insurance may examine an insurer "at any time he may or pricing of insurance. more significantly, after the insurers moved to dismiss -5- v. farmers insurance exchange, 440 f.3d 940 (8th cir. 2006), after years of related "supersede" state law, as that term was defined in humana. but the issue was not unavailable and civil penalties are limited to $1,000 per violation. § 374.049.3(2). `supersede' ordinarily means to displace (and thus render ineffective) while providing insurers." nationwide mut. ins. co. v. cisneros, 52 f.3d 1351, 1362 (6th cir. 1995), with the director," who must hold a hearing if he finds that the complaint is made in task of rate-making by reviewing insurer risk classifications and pricing differentials. coverage denial was the product of overt racial animus would doubtless be in harmony the honorable fernando j. gaitan, jr., chief judge of the united criteria. but we reversed the district court's dismissal of the price discrimination state's administrative regime. compare moore v. liberty nat'l life ins. co., 267 or in the provision of services or facilities in connection therewith," as well as § 1981 appeals from the united states insurance within the meaning of 15 u.s.c. § 1012(b) as construed in humana. a disparate impact theory of fair housing act liability, that is, challenges to "practices in remanding, we noted that the discriminatory pricing claims might be barred rate-setting regime under missouri law. the mccarran-ferguson act's application action." id. at 1965. the point is important. our opinion should not be read as accord murff v. prof'l med. ins. co., 97 f.3d 289, 292 n.4 (8th cir. 1996), cert. mccarran/ferguson act analysis, plaintiffs on appeal note that they "complain of carefully defined in § 379.318(4): (en banc), cert. denied, 506 u.s. 1021 (1992); see labarre v. credit acceptance statute." id. at 667-68. recovery of damages exceeding the treble damages available under rico. therefore, and § 1982. their prayers for relief seek a declaration that the insurers violated these see, e.g., darst-webbe tenant ass'n bd. v. st. louis hous. auth., 417 f.3d 898, 902- cases, plaintiffs ask a federal court to determine that the insurers' filed rates are thing to say that an insurance company may not refuse to deal with . . . persons . . . . saunders v. farmers ins. exch., 515 f. supp. 2d 1009 (w.d. mo. 2007). plaintiffs allow rate classifications based on factors such as loss experience and define when a of the missouri statutes. insurers must file their rates and policy forms and, in the 1 under law; national community * for the first time on appeal, plaintiffs -- joined by the united states as amicus -- sought by plaintiffs would impair state law by interfering with missouri's company, * regulation to the states." 525 u.s. at 308. the court went on to conclude that the enacted federal civil rights legislation such as the fair housing act. see naacp v. * -7- -3- there appears to be no direct conflict because, as the court observed in interfere with the administration of the state law. the states are not indifferent to who the insurance laws do not preclude common law claims "arising under a private plaintiffs - appellants, * -11- defendants - appellees. * be demonstrated to have a probable effect upon losses or expenses." § 379.318(2). discrimination. however, the supreme court observed in humana that "the term consumers" who have suffered "financial loss" from a violation of the insurance laws. praschma v. saunders, 121 f.3d 373, 375-76 (8th cir. 1997). v. allstate corp., 345 f.3d 290, 300 (5th cir. 2003) (jones, j., dissenting). might well be different if other disparate impact claims were asserted or if missouri private actors in another context. see united states v. badgett, 976 f.2d 1176 (8th focus must be on the precise federal claims asserted. federal civil rights statutes are * curtail adverse selection, insurers seek to differentiate risk classes with many plaintiffs' price discrimination claim as barred by the mccarran-ferguson act, if a federal court may assess damages based upon what a non-discriminatory rate for unfairly discriminatory insurance rates. rather, aggrieved insureds must seek action in state court seeking various remedies against a non-complying insurer, arguingthatanalysisofplaintiffs'lengthycomplaintsandthemissouriinsurancelaws violating the insurance laws, to take affirmative steps to comply with those laws, and * on remand, the insurers renewed their rule 12(b)(6) motions to dismiss, coleman mcclain, et al., * * amici on behalf of appellants. * unlawful using a different federal standard -- disparate racial impact -- and then to ___________ authorized amount of civil penalties is specified. charging unfairly discriminatory excessive or unfairly discriminatory. cf. dierkes v. blue cross & blue shield of mo., moreover, unlike nevada law at issue in humana, 525 u.s. at 312, neither the no. 07-1903 ______________________________ congress' could not be more comprehensive"), cert. denied, 508 u.s. 907 (1993). federal rule that is based on a single factor -- disparate racial impact -- and looks ___________ western district of missouri community were denied coverage due to the insurers' discriminatory underwriting submitted: january 17, 2008 seek the limited remedies for violations ofchapter379prescribedbystatute,missouri no provision of the missouri insurance statutes allows an aggrieved insured to file a factual basis for their conclusory allegations that the insurers intentionally charged case of homeowners insurance, may only charge the filed rates. see mo. rev. stat. premium rates for risks located in the community . . . than for defendant insurance companies ("the insurers") violated the fair housing act, 42 in humana, the supreme court resolved a conflict in the circuits when it -9- "invalidate, impair, or supersede" state laws regulating insurance. in this case, it is legal standards apply under federal and state law (which would not be the case), -12- § 374.048.2(d). this remedy applies to violations of the rate-regulating provisions of ways, but not in others. for example, a federal claim alleging that an insurer's pricing is governed exclusively by § 379.318(4). ___________ ___________ defendants - appellees. * * administrative hearing, or to commence an action in state court to remedy an insurer claims. without objecting to deciding the issue on rule 12 motions, plaintiffs argued ___________ he "shall hold a public hearing in connection therewith." § 379.346.2.4 ___________ disparate impact claim of racially discriminatory pricing. thus, discrimination in ------------------------------------------------ * intent are mere "labels . . . and a formulaic recitation of the elements of a cause of in applying humana's fact-intensive interpretation of the word "impair," our -13- chapter 379. § 379.361.2. as with the administrative remedies, punitive damages are whether [the insurers] can provide any loss histories, or other actuarial (effective may, 30, 2008). see also mo. rev. stat. § 374.046. determinewhetherratesareexcessiveorunfairlydiscriminatory,§379.318(4),subject impact cause of action under the fair housing act against governmental authorities. appeal. reviewing de novo the grant of motions to dismiss, we affirm. benton v. business of insurance." 15 u.s.c. § 1012(b). in humana, the court construed the deciding, that private insurers may be liable under the fair housing act on a disparate premium rates for the same type of homeowner's coverage to homeowners in the for the eighth circuit prospectiveexpensesbothcountrywideandthosespecificallyapplicabletothisstate," company, et al., * the district court2 the missouri department of insurance is "charged with the execution of all suspiciously like a "substitute rule." arguably, therefore, these pricing claims would having essentially the same hazard." § 379.318(4). in this disparate impact case, "a reasonable margin of underwriting profit and contingencies," and "all other these state statutes prescribing what rates solely on the statutory violation" but allowed common law fraud and breach-of- a substitute rule." 525 u.s. at 307 (quotation omitted). the missouri insurance laws drafted broadly, so a statute might "impair" state insurance laws when applied in some laws . . . in relation to insurance and insurance companies doing business in this state." i. plaintiffs' price discrimination claims. plaintiffs' allegations of unintentional unlawful discrimination seek relief on 4 see naacp v. am. family mut. ins. co., 978 f.3d 287, 290-91 (7th cir. 1992). substantial evidence; procedurally unlawful; arbitrary, capricious or unreasonable; or or statistical data, to support [their] use of such segregated and discriminatory insurance pricing is in harmony with the state's goal of disallowing missouri prohibits rates that are "excessive . . . or unfairly discriminatory," terms ___________ the availability of state remedies was crucial to the issue of preclusion under the variables. risk discrimination is not race discrimination." to invalidate, impair, or supersede any law enacted by any state for the purpose of plaintiffs' complaints allege that the insurers "used a multi-tiered rate structure missouri insurance laws nor missouri common law provide a private right of action shelter general insurance * states district court for the western district of missouri. among risks that can be demonstrated to have a probable effect upon losses or v. * under the contested case provisions of the missouri administrative procedure act. insurance rates is solely a creature of the insurance statutes. by barring private actions that the mccarran-ferguson act does not preclude their federal civil rights claims. §§ 379.321, 379.356. in setting rates, insurers must consider "past and prospective argue that missouri allows private actions against insurers for rate discrimination regime. id. at 311-13. we reiterate that our decision is limited to the impact of the specific claims and federal requirements" because those claims existed "independent of the foregoing does not specifically mention insurance, to unlawful discrimination in the provision am. family mut. ins. co., 978 f.2d 287, 294 (7th cir. 1992) (the term "`no act of racial impact. it is these disparate impact allegations that satisfied the threshold preserve the issue for appeal. we decline to consider it, or its significance. see american family mutual insurance * insurance. see sec v. nat'l sec., inc., 393 u.s. 453, 458-59, 463 (1969). in these unfair discrimination "to include, but . . . not be limited to" risk and hazard denied, 520 u.s. 1273 (1997). 5 ___________ community . . . than [they] charged homeowners in white communities." in saunders if he finds see mo. rev. stat. §§ 536.063(1), 536.100; cf. farm bureau town & country ins. co. complete overlap with the state [agency's] pricing decisions is impossible to permit insurers to classify risks based upon standards that "measure any differences in response, plaintiffs rely on dierkes to argue that the missouri insurance laws filed: august 12, 2008 no. 07-1897 district court for the defendant - appellee. * no. 07-1894 missouri has never considered the question -- that a decision by the director not to corp., 175 f.3d 640, 643 (8th cir. 1999).7 it is another thing to require federal courts to determine whether limitations on these are purported class actions on behalf of persons living in a "single, may be charged are essential to the core of missouri's regulation of the business of like most states, missouri thoroughly regulates the business of insurance. the they cite no authority extending those statutes beyond their plain meaning to cover a allegations of issues common to the class include: nevada's insurance laws also prohibited insurance fraud, and those laws permitted of industry-wide rate classifications may usurp core rate-making functions of the discriminatory rating territories.