Discrimination in Property Insurance Under the Fair Housing Act; Advance Notice of Proposed Rulemaking Notice of Extension of Public Comment Deadline

DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT

Office of the Assistant Secretary for Fair Housing and Equal

Opportunity

24 CFR Chapter I

[Docket No. R-94-1743; FR-3755-N-03]

Discrimination in Property Insurance Under the Fair Housing Act;

Advance Notice of Proposed Rulemaking Notice of Extension of Public

Comment Deadline

AGENCY: Office of the Assistant Secretary for Fair Housing and Equal

Opportunity, HUD.

ACTION: Advance Notice of Proposed Rulemaking; Notice of extension of

public comment deadline.

-----------------------------------------------------------------------

SUMMARY: On August 16, 1994, HUD published an advance notice of

proposed rulemaking. The notice announced HUD's intention to publish

regulations concerning nondiscrimination in property insurance

practices under the Fair Housing Act, and to solicit public comment on

this subject prior to publication of a proposed rule. The purpose of

this document is to extend the public comment period to November 18,

1994, and to repeat the issues for which HUD specifically requests

comment from the public.

DATES: Comment Due Date: November 18, 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. August 16, 1994 Advance Notice of Proposed Rulemaking

On August 16, 1994 (59 FR 41995), HUD published an advance notice

of proposed rulemaking. The notice announced 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.

The purpose of this notice, published in today's Federal Register,

is to extend the public comment period to November 18, 1994. For the

convenience of this public, this notice also republishes the background

information related to the advance notice of proposed rulemaking, and

the issues on which HUD specifically requests comment from the public.

II. 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 C.F.R. 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.

III. 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: October 7, 1994.

Roberta Achtenberg,

Assistant Secretary for Fair Housing and Equal Opportunity.

[FR Doc. 94-25428 Filed 10-13-94; 8:45 am]

BILLING CODE 4210-28-M