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Wednesday, June 19, 2024 | Back issues
Courthouse News Service Courthouse News Service

9th Circuit Wants Review of Texas Insurance Laws

(CN) - The 9th Circuit wants the Texas Supreme Court to review its ruling on the reach of the state's insurance laws challenged by a black homeowner who said Farmers Insurance violated federal housing laws by using a credit-scoring system that "disparately impacts minorities."

Patrick Ojo sued Farmers and its affiliates in district court claiming the companies, "acting in concert, use a number of 'undisclosed factors' in their credit scoring system that disparately impact minorities, in violation of the federal Fair Housing Act."

Ojo did not claim that the discrimination was intentional.

The district court ruled that the Texas Insurance Code, which allows for the use of the credit scoring system, pre-empted the Fair Housing claims.

Ojo appealed, and a divided 9th Circuit panel initially reversed the district court's decision. After that ruling, the panel ordered the case to be reheard en banc.

"We have not had occasion to decide whether or not the FHA (Fair Housing Act) applies to homeowners' insurance. We now hold that the FHA prohibits racial discrimination in both the denial and pricing of homeowners insurance", the full panel ruled.

The panel also determined that the Fair Housing Act is pre-empted by state insurance law.

"The remaining dispositive question is whether application of the FHA to Ojo's case might invalidate, impair, or supersede the provisions of the Texas Insurance Code that authorize insurance companies to use credit scoring in setting insurance rates", the opinion states.

The panel explained that if Texas law permits insurance companies to use credit scores even if the factors used may have a racially disparate impact, then allowing Ojo to sue Farmers under the FHA would "impair Texas law."

On the other hand, if Texas law prohibits the use of credit-score factors that would violate the FHA on the basis of a disparate-impact theory, then FHA would complement Texas law.

The panel asked that the Supreme Court of Texas review its ruling and issue a decision.

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