The opinion of the court was delivered by: Sullivan, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiffs are non-profit organizations that promote fair housing
policies and practices and three individuals from Toledo, Ohio. Plaintiffs
are suing Prudential Insurance Company and Prudential Property &
Casualty Company (collectively, "Prudential") under the Fair Housing Act
("FHA"), 42 U.S.C. § 3601 et seq., and 42 U.S.C. § 1981, alleging
that Prudential engages in policies and practices that discriminate
against minority applicants for homeowners insurance. Specifically, the
plaintiffs challenge the use of certain "redlining" procedures, which
Prudential utilizes to deny homeowners insurance in certain areas,
including the entire District of Columbia, and the use of factors such as
credit history to determine eligibility for homeowners insurance.
Pending before the Court is defendants' motion to dismiss the complaint
pursuant to Fed.R.Civ.P. 12(b)(6). Defendants' motion to dismiss asserts
four primary arguments: (1) that plaintiffs lack standing to bring this
case; (2) that the FHA doesn't apply to provision of homeowners
insurance; (3) that disparate impact claims are not available under the
FHA, and even if they are, that plaintiffs have failed to state a
disparate impact claim, and such claims should be barred by the equitable
doctrine of laches; and (4) that plaintiffs have failed to state a claim
pursuant to section 1981, and that the statute of limitations bars any
section 1981 claims.
The Court finds that, because sections 3604 and 3605 of the FHA may be
reasonably construed to apply to the provision of homeowners insurance,
plaintiffs have stated legally cognizable claims under sections 3604 and
3605 of the FHA. Furthermore, because defendants' challenge to
plaintiffs' standing and defendants' laches defense are based on facts
outside the complaint, resolution of such issues is inappropriate at this
stage of the proceedings. Accordingly, after careful consideration of
defendants' motion to dismiss, the response and reply thereto, the
argument of counsel, and the applicable statutory and
case law, the Court denies defendants' motion to dismiss.
Plaintiffs in this matter are National Fair Housing Alliance, Inc.
("NFHA"),*fn1 Housing Opportunities Made Equal of Richmond, Inc.
("HOME"), Fair Housing Council of Suburban Philadelphia ("FHCSP"), Toledo
Fair Housing Center ("TFHC"). Metropolitan Milwaukee Fair Housing
Council, Inc ("MMFHC") (together, "Fair Housing Group plaintiffs"), and
Dr. Monica Holiday-Goodman. Justina Alsup, and Robert Scales (together.
"Individual Plaintiffs"). The Fair Housing Group plaintiffs are all
non-profit organizations that work to promote fair housing in their
respective geographic areas across the United States.
In September 1997, the Fair Housing Group plaintiffs, with the
exception of FHCSP, filed a Housing Discrimination Complaint against
Prudential with the U.S. Department of Housing and Urban Development
("HUD") alleging that Prudential discriminates against African-American
and Hispanic homeowners and prospective homeowners through several
underwriting practices and policies, many of which are challenged in this
lawsuit. FHCSP filed a similar HUD action against Prudential in October
2001. The HUD complaints allege that Prudential's discriminatory acts
constitute a continuing violation of the FHA. Efforts to mediate the HUD
complaint filed by the Fair Housing Group plaintiffs have not been
On October 23, 2001, plaintiffs filed this lawsuit against Prudential.
On December 20, 2001, defendants filed a motion to dismiss.
In reviewing a motion to dismiss under Fed.R.Civ.P. 12(b). the Court
must assume the factual allegations pled by the plaintiffs to be true.
See Sparrow v. United Air Lines Inc., 216 F.3d 1111 (D.C.Cir. 2000).
Therefore, the Court briefly reviews the facts alleged in plaintiffs'
Plaintiffs detail allegedly discriminatory polices and practices of
Prudential, claiming that Prudential had discriminated, and continues to
discriminate, on the basis of race and color, in the provision, terms and
conditions of its homeowners insurance products.
In the areas of the country served by the Fair Housing Group
plaintiffs, homeowners are typically required to have homeowners insurance
coverage in order to qualify for a mortgage or home equity loan, and must
maintain insurance for the life of the loan. Compl. ¶ 32. Thus,
plaintiffs allege. adequate and cost-effective homeowners insurance is
necessary to home ownership. Id.
Plaintiffs claim that Prudential, for several years, has engaged in and
continues to engage in discriminatory "redlining" with respect to
homeowners insurance throughout the country. Specifically, plaintiffs
allege that certain minimum underwriting requirements for certain types
of coverages, such as a "replacement cost" policy, have a discriminatory
impact on past, present and prospective African-American and Hispanic
homeowners in predominantly African-American and Hispanic neighborhoods.
Id. ¶¶ 3, 44. According to plaintiffs, Prudential's requirements are
not justified or supported by business necessity or actuarial data and
there are less restrictive, non-discriminatory alternatives available to
meet any legitimate business objectives. Id. ¶ 55.
Plaintiffs have "tested" Prudential to identify practices and policies
that are implemented and maintained by the company, and which have a
discriminatory impact on minority homeowners, or which represent
disparate treatment on the basis of race or intentional discrimination.
Id. ¶¶ 62-63. Plaintiffs contend that Prudential maintains
underwriting policies that disparately affect minority homeowners and
minority neighborhoods. Id. ¶¶ 44-56. They identify the following
(1) Prudential's minimum underwriting requirements for
obtaining replacement cost coverage include the
age of the home, the market value of the home and
the difference between the replacement cost and
the market value;
(2) Since 1994, Prudential does not have a policy of
selling homeowners insurance policies in the
District of Columbia; to the extent that
Prudential has re-entered the District, it has
done so for select clients and without notice to
the D.C. Insurance Commissioner or the public;
(3) Prudential rates territories by segregating
neighborhoods into zones that reflect their racial
(4) Prudential uses credit scores or credit ratings of
applicants to determine eligibility for homeowners
Plaintiffs claim that Prudential has long known that its underwriting
guidelines and policies have a disparate impact on the basis of race, but
has deliberately chosen not to remedy the discriminatory conduct. Id.
¶ 57. As such, plaintiffs claim that Prudential has engaged in
intentional discrimination on the basis of race by continuing to utilize
these guidelines and policies. Id.
Plaintiffs also contend that Prudential's practices demonstrate
disparate treatment of minority homeowners. In particular, Prudential
points to the following alleged practices as evidence of intentional
discrimination and disparate treatment on the basis of race:
(1) Prudential does not apply underwriting rules
consistently to existing and potential homeowners
in African-American and Hispanic neighborhoods;
(2) Prudential has chosen to place no or relatively
few agent offices in predominantly
African-American and Hispanic neighborhoods, as
compared with other neighborhoods;
(4) Prudential has deliberately failed to train agents
in anti-discrimination and equal opportunity
laws, or in the benefits of assisting
African-American and Hispanic customers in
predominantly African-American and Hispanic
The individual plaintiffs, Dr. Monica Holiday-Goodman, Justina Alsup
and Robert Scales, own houses in Toledo, Ohio. Id. ¶¶ 78-80. All of
the individual plaintiffs are African-American, and own homes in
neighborhoods that are, or were, predominantly African-American. Id. Both
Dr. Holiday-Goodman and Ms. Alsup applied to Prudential for homeowners
insurance in April 1997. Id. ¶¶ 78, 79. Prudential initially told Dr.
Holiday-Goodman that no agent was assigned to her address. Id. ¶ 78.
Later, when Dr. Holiday-Goodman was able to speak with a representative,
she was told that, if the market value of her home was less than 50% of
its replacement cost, she could not purchase either a market value policy
or a replacement value policy. Id. She was directed to the Ohio Fair
Plan. Dr. Holiday-Goodman asked that Prudential mail her a quote for a
market value policy, but never received such a quote. Id. On February 6,
1998, she filed a complaint against Prudential with HUD, which is still
Mr. Scales had a similar experience. A Prudential agent told Mr. Scales
that the company could not insure his house because of the differential
between the market value and the cost of replacing the house if it were
to burn down. Id. ¶ 80. The market value of his house was $41,500;
when he called the toll-free number for Prudential, to which he was
referred, he was told that there was a $50,000 minimum value for market
value coverage. Id. On July 29, 1997, Mr. Scales filed a HUD complaint
against Prudential, which is still pending. Id.
Ms. Alsup was told by Prudential that she would have to pursue the Ohio
Fair Plan because she had no insurance history, and that Prudential
required two or three years of insurance history. Id. ¶ 79. On
December 8, 1997, Ms. Alsup filed a HUD complaint against Prudential,
which is still pending. Id. ¶ 79. The complaint states that Ms. Alsup
still owns a house in Toledo, but now resides in Las Vegas, Nevada. Id.
¶ 26. The complaint does not indicate when Ms. Alsup moved to Nevada.
Defendants' motion to dismiss raises four primary arguments. First,
defendants argue that plaintiffs lack standing to bring the instant
lawsuit. Second, Prudential contends that the FHA does not apply to the
provision of homeowners insurance. Third, Prudential argues that disparate
impact claims are not cognizable under the FHA, and that plaintiffs fail
to sufficiently state a claim of discrimination based on disparate