[Federal Register Volume 59, Number 157 (Tuesday, August 16, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20048]


[[Page Unknown]]

[Federal Register: August 16, 1994]


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DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Fair Housing and Equal 
Opportunity

24 CFR Ch. I

[Docket No. R-94-1743; FR-3755-N-02]
(RIN 2529-AA73)

 

Discrimination in Property Insurance Under the Fair Housing Act; 
Advance Notice of Proposed Rulemaking

AGENCY: Office of the Assistant Secretary for Fair Housing and Equal 
Opportunity, HUD.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: HUD is charged with the administration and enforcement of the 
Fair Housing Act (the Act), including the promulgation of regulations 
under the Act. This notice announces HUD's intention (1) to publish 
regulations concerning nondiscrimination in property insurance 
practices under the Fair Housing Act, and (2) to solicit public comment 
on this subject prior to publication of a proposed rule. Issues for 
which HUD specifically requests comment from the public are set forth 
in the Supplementary Information section of this notice.

DATES: Comment Due Date: October 17, 1994.

FOR FURTHER INFORMATION CONTACT: Peter Kaplan, Director, Office of 
Regulatory Initiatives and Federal Coordination, Office of Fair Housing 
and Equal Opportunity, HUD, Room 5240, 451 Seventh Street SW., 
Washington DC 20410-0500, telephone (202) 708-2904 (not a toll free 
number). The toll free TDD number is 1-800-877-8339.

ADDRESSES: Interested persons are invited to submit comments in 
response to this notice to the Rules Docket Clerk, Office of the 
General Counsel, Room 10276, Department of Housing and Urban 
Development, 451 Seventh Street, SW, Washington, DC 20410-0500. 
Comments should refer to the above docket number and title. A copy of 
each comment submitted will be available for public inspection during 
regular business hours at the above address. Facsimile (FAX) comments 
are not acceptable.

SUPPLEMENTARY INFORMATION:

I. Background

    The Department of Housing and Urban Development (HUD) is committed 
to initiatives that will provide access to capital and economic 
empowerment for all Americans. HUD has launched several programs to 
stem disinvestment in cities and disadvantaged communities throughout 
the country, increase the flow of capital into these communities, and 
create communities of opportunity throughout the nation.
    Among HUD's priorities are: (1) Empowerment of local communities by 
supporting local economic development efforts; (2) expansion of housing 
opportunities through partnerships with state and local government and 
private developers and financial institutions; and (3) opening housing 
markets through vigorous enforcement of the Fair Housing Act (42 U.S.C. 
3601-3619). A critical component of these initiatives is assuring 
access to capital for homeownership and business development. Assuring 
fair access to property or hazard insurance is essential to achieve 
each of these objectives. Insurance is necessary for access to capital.
    HUD is charged with the administration and enforcement of the Act, 
including the promulgation of regulations under the Act. HUD is also 
responsible for receiving and investigating complaints alleging 
discriminatory practices under the Act and bringing enforcement actions 
where the Department determines that reasonable cause exists to believe 
that a violation has occurred or is about to occur. As part of these 
initiatives, and in furtherance of its responsibilities under the Act, 
HUD announces its intent to issue regulations concerning property 
insurance practices that are discriminatory under the Act.
    As indicated in HUD's current regulations, discriminatory housing 
practices include ``refusing to provide * * * property or hazard 
insurance * * * or providing such * * * insurance differently because 
of race, color, religion, sex, handicap, familial status, or national 
origin.'' 24 CFR 100.70(d)(4). Case precedents such as Dunn v. 
Midwestern Indemnity Mid-American Fire & Casualty Co., 472 F. Supp. 
1106 (S.D. Ohio 1979) and McDiarmid v. Economy Fire & Casualty Co., 604 
F. Supp. 105 (S.D. Ohio 1984) established the applicability of the Act 
to discriminatory insurance practices. But see Mackey v. Nationwide 
Insurance Co., 724 F. 2d 419 (4th Cir. 1984). More recent precedents, 
N.A.A.C.P. v. American Family Mutual Insurance Co., 978 F.2d 287 (7th 
Cir. 1992), cert. denied, 113 S. Ct. 2335 (1993) and Nationwide Mutual 
Insurance Co. v. Cisneros, No. C3-92-52 (S.D. Ohio Feb. 24, 1994), 
reaffirmed this principle, according deference, under standards 
established in Chevron U.S.A., Inc. v. Natural Resources Defense 
Council, 467 U.S. 837 (1984), to HUD's substantive regulation 
promulgated in 1989.

II. Solicitation of Public Comments

    HUD is requesting public comment in several areas to be addressed 
by the regulation. There are several complex issues to be addressed by 
this regulation. In developing this regulation, HUD will work closely 
with insurance companies, trade associations, State regulators, civil 
rights groups and community organizations to ensure that HUD has heard 
as many viewpoints as possible on the subject of property insurance 
practices. HUD already has begun informal discussions with 
representatives of these entities, organizations and individuals to 
learn more about their views on current property insurance practices 
and about issues that HUD should address in the regulation. These 
contacts will continue in the form of group meetings and informal 
discussions with insurance companies, advocacy groups and trade 
associations.
    In addition, HUD will hold several public meetings around the 
country for industry groups, advocacy groups and private citizens to 
submit comments and discuss what the regulation should address.
    Based on the comments that HUD receives in response to this notice 
and comments presented at the public meetings, as well as any written 
guidance received from additional communications with industry groups 
and others, HUD will publish a proposed rule. Following careful 
consideration of the comments received on the proposed rule, HUD will 
issue a final regulation.
    HUD is considering the issues and areas that the regulation should 
address in order for the regulation: (1) to be effective as guidance to 
HUD investigators, state and local civil rights agencies and private 
fair housing groups; (2) to serve as a guidepost for preventive acts by 
the industry; and (3) to be a clear description of the rights afforded 
protected classes. To do so, the regulation will address specific 
practices that are prohibited under the Act, describe the standards to 
be utilized in determining whether violations of the Act have occurred, 
and discuss investigative techniques that will be utilized, remedies 
that will be sought where violations are found, and voluntary 
affirmative efforts that are appropriate to eliminate discrimination.
    The standards for determining discrimination in this area are those 
utilized in all other areas covered by the Act. Specific practices that 
violate the Act will be identified and the factual circumstances for 
identifying violations will be defined. The rule will describe the 
investigative techniques HUD will utilize, including those HUD employs 
in current fair housing complaint investigations. The rule will 
identify remedies to be considered that are appropriate to insurance 
cases.
    The areas for which HUD specifically requests comment from the 
public are the following:
    1. Underwriting practices that may discriminate due to either 
disparate treatment or disparate impact.
    2. Sales and marketing practices that may discriminate due to 
either disparate treatment or disparate impact.
    3. Explanations or justifications for those industry practices that 
could be challenged as violations of the Act because of disparate 
treatment or disparate impact. In cases of disparate impact, 
explanations should address the business necessity for the practice and 
why no less discriminatory alternative exists.
    4. Barriers to the availability of insurance, or barriers to equal 
terms and conditions of insurance, for particular protected classes.
    5. Entities and individuals who should be covered by the 
prohibition against discriminatory insurance practices, such as mutual 
and stock companies, independent agents, direct writers, exclusive 
agents, and rating services.
    6. Techniques HUD should use in complaint investigations.
    7. Remedies HUD should consider to discourage discriminatory 
practices, including equitable, injunctive, and affirmative relief, 
monetary damages, and civil penalties.
    8. Voluntary actions insurers can take to assure nondiscrimination 
and to increase availability of insurance to allow access to capital.
    9. Other issues that are relevant to the issue of insurance 
discrimination.
    In addition to comments, HUD is also requesting any reports, 
documents, or other evidence that will assist the Department in 
evaluating issues to be addressed in the regulation.
    HUD requests that, in submitting comments on any of the foregoing 
issues, the commenter please cite the item number of the issue 
addressed by the comment. HUD also welcomes comments on issues related 
to insurance practices that are not specifically included in the items 
listed.

    Dated: August 10, 1994.
Roberta Achtenberg,
Assistant Secretary for Fair Housing and Equal Opportunity.
[FR Doc. 94-20048 Filed 8-15-94; 8:45 am]
BILLING CODE 4210-28-P