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National Fair Housing Alliance v. Travelers Indemnity Co.

United States District Court, District of Columbia

August 21, 2017



          JOHN D. BATES United States District Judge

         This case raises an oft-litigated Fair Housing Act claim: whether an insurer's facially-neutral policy has a disparate impact on the availability of housing for members of a protected class. The twist, however, is that it follows shortly after the Supreme Court's decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., 135 S.Ct. 2507 (2015) (Inclusive Communities), and thus requires this Court to consider how that case changed the pleading standards for disparate-impact claims under the Fair Housing Act (FHA). The Court determines that plaintiff National Fair Housing Alliance (NFHA) has standing, and that under Inclusive Communities' more stringent pleading standard for disparate-impact claims, NFHA has stated a claim under the FHA. The Court therefore also determines that NFHA has stated a claim under the D.C. Human Rights Act (DCHRA). Defendants' motion to dismiss will be denied.


         Except where noted, the following facts are according to the amended complaint, which the Court accepts as true at this stage. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). NFHA is a non-profit “dedicated to ending discrimination in housing.” See Am. Compl. [ECF No. 12] ¶ 1. The defendants are two insurers, Travelers Indemnity Corporation and Travelers Casualty Insurance Company of America (collectively, “Travelers”). Travelers “is one of the largest underwriters of property insurance policies” in the D.C. metropolitan area. Id. ¶ 18.

         NFHA alleges that Travelers has a policy of refusing to provide habitational insurance policies for landlords that rent to tenants who receive Housing Choice Vouchers, commonly known as Section 8 vouchers. Id. ¶ 21. As explained below, Housing Choice Vouchers is a federal program that provides financial assistance to low-income persons to obtain housing. NFHA's allegations are based on the experiences of five “testers, ” who each “posed as a prospective purchaser of a four unit apartment complex” in the Anacostia neighborhood in southeast D.C. and attempted to obtain insurance. Id. ¶¶ 22-23, 25. The testers spoke with “insurance agencies doing business in the District of Columbia that market Travelers insurance policies” between July 2015 and February 2016. Id. ¶ 23 (listing the insurance agencies). NFHA employed “experienced tester[s], ” id. ¶ 25, “provided a common set of instructions to the individual testers, ” and recorded the interactions that took place over the telephone, id. ¶ 24. The testers “advised each broker that the complex was currently occupied by tenants participating in the Housing Choice Voucher program.” Id. ¶ 25. In each instance, the broker explained to the tester that “Travelers would not underwrite the policy because of the presence of voucher recipients in the building.” Id.; see also id. ¶¶ 26-32 (detailing individual interactions with each of the five brokers).

         For example, one broker stated that she would not send the tester's application to Travelers because Travelers “won't write subsidized housing policies.” Id. ¶ 27. Another broker, who was not initially told that the property was occupied by voucher recipients, first stated that he had spoken with a Travelers' representative and quoted a policy between $3, 000 and $3, 500. Id. ¶ 29. But when the tester then informed the broker that the building was occupied by tenants receiving vouchers, he responded: “Wait a minute. Stop right there. Subsidized housing is a problem.” Id.

         The broker further expressed his doubt that Travelers would underwrite that policy, but he offered to confirm with Travelers directly. Id. The following day, the broker called the tester and conveyed that he spoke with a Travelers representative who stated that Travelers would not underwrite a policy for that building and that “any Section 8 would be a problem.” Id. ¶ 30. The broker then explained that the tester would likely need to obtain a policy from the secondary market, which would have a premium of approximately $4, 500 and would provide “not as good a policy.” Id. In other words, the broker explained, the tester would be “paying more for less.” Id.

         The Housing Choice Voucher program, established by Congress, is “the federal government's major program for assisting very low-income families, the elderly, and individuals with disabilities in affording decent, safe, and sanitary housing in the private rental market.” Id. ¶¶ 9-10 (citing 42 U.S.C. § 1437f(o)). In the District of Columbia, households that participate in the voucher program are disproportionately headed by African-American women. According to the complaint, the D.C. population is currently 48.7% non-Hispanic African American or Black and 35.4% non-Hispanic White. Id. ¶ 14. Households in D.C. are approximately 45.2% non-Hispanic African American or Black and 41% non-Hispanic White. Id. Approximately 47.1% of all households in D.C. are headed by women. Id. Within the population of households that receive vouchers, however, African-American households and women-headed households are overrepresented: 92% of participating households are non-Hispanic African American or Black (compared to 45.2% in the whole D.C. population), and only 1% of participating households are non-Hispanic White (compared to 41% in the whole D.C. population). Id. ¶ 16. Similarly, 81.5% of households receiving vouchers are headed by women (compared to 47.1% in the whole D.C. population). Id. Additionally, “residents who participate in the Housing Choice Voucher program are largely concentrated” in particular neighborhoods: “the four Census tracts in the District with the highest concentration of Housing Choice Voucher program participants are all east of the Anacostia River, as are eight of the top ten Census tracts.” Id. ¶ 17. These tracts have a far higher concentration of African-American residents than the District as whole: they are 84.7% African-American or Black, as compared to the District-wide average of 51.1%. Id. NFHA therefore believes that Travelers' policy of denying insurance to landlords whose tenants receive vouchers discourages landlords from renting to voucher recipients, which has a disproportionate effect on tenants who are African-American or in women-headed households.

         Once NFHA became aware of Travelers' allegedly discriminatory policy, it took several steps to investigate the scope of the problem and educate D.C. tenants, landlords, and policy makers about this issue. It “devoted considerable staff time and resources to efforts to identify the nature and scope of Traveler's [sic] discriminatory conduct.” Id. ¶ 35. It then “added educational information to its website, along with links” to the relevant federal and state laws “specifically designed to educate the general public . . . about fair housing laws and habitational insurance discrimination based on Housing Choice Voucher program participation.” Id. ¶ 37(a). It also engaged in targeted outreach specifically designed to inform the people who were likely to be harmed by Travelers' policy. It “placed a public service announcement in the Washington, DC print edition of the Afro-American, a local weekly newspaper, for two weeks” from February 6 through February 19, 2016, and paid for an email blast to the newspaper's readers during that same time. Id. ¶ 37(b). NFHA also created and mailed “educational letter[s] and flyers” to a total of approximately 105 “predominately African American churches in the Washington DC area” in February and March 2016. Id. ¶ 37(c).

         In addition to alerting residents who might be affected, plaintiff “has also taken steps to educate” the D.C. Housing Authority and D.C. landlords “about insurance discrimination based on Housing Choice Voucher program participation.” Id. ¶ 37(d). NFHA's President and Chief Executive Officer addressed the D.C. Housing Authority's monthly board meeting, and other staff members communicated with Housing Authority officials about discrimination in habitational insurance. Id. ¶ 37(d)-(e). The NFHA also designed and implemented additional training to prepare its staff “for the possibility of landlords and tenants calling NFHA for additional information about insurance discrimination” and prepared intake tools to handle an increased volume of calls. Id. ¶ 37(f).

         Collectively, according to NFHA, these efforts “diverted scarce time and resources away from routine tasks and activities.” Id. ¶ 38. This required NFHA to “delay, suspend, or even forego other existing programs or projects, ” including suspending planned initiatives to investigate a different “potentially discriminatory loan policy maintained by a specific national lender, ” to analyze “the conduct of two banks in Kentucky that appeared to be underserving African-American consumers, and the unlawful redlining practices of two Tennessee banks.” Id. ¶ 42.

         In May 2016, NFHA filed suit, and in August 2016, NFHA filed the operative Amended Complaint. In the Amended Complaint, NFHA alleges that Travelers' discriminatory policy has a disparate impact on African-Americans and women and serves no legitimate business interest, in violation of the Fair Housing Act, 42 U.S.C. § 3601 et seq. NFHA also asserts that Travelers' policy violates the D.C. Human Rights Act's prohibition on housing discrimination on the basis of race, sex, and source of income. See D.C. Code § 2-1402.21 (2011). NFHA seeks declaratory and injunctive relief as well as damages and attorney's fees. In response, Travelers filed a motion to dismiss. See Def.'s Mot. to Dismiss [ECF No. 14-1]. Travelers contends that NFHA does not have standing because its only injuries are self-inflicted and because Travelers has ceased using this policy. Travelers also argues that NFHA has failed to plead sufficient facts to show a causal connection between its policy and any disparate impact under the heightened pleading standards for a prima facie disparate-impact claim following Inclusive Communities. Travelers contends that the DCHRA is not applicable to insurance and that, even if it were, NFHA has failed to state a claim for discrimination based on race, sex, or source of income under state law for the same reasons that it has failed to do so under federal law.

         The Court concludes that NFHA has standing to bring these claims, and that NFHA has sufficiently pleaded a causal connection between Travelers' policy and a disparate impact based on race and sex to make out a prima facie claim under the FHA. The Court also concludes that the DCHRA does apply to habitational insurance and that NFHA has stated a claim under that act as well. The Court will therefore deny Travelers' motion to dismiss.


         Federal Rule of Civil Procedure 12(b)(6) requires dismissal of a complaint that “fail[s] to state a claim upon which relief can be granted.” Fed.R.Civ.P. 12(b)(6). At the motion to dismiss stage, all of a plaintiff's factual allegations are taken as true. Bell Atl. Corp., 550 U.S. at 555. In order to survive a Rule 12(b)(6) motion to dismiss, a complaint's “[f]actual allegations must be enough to raise a right to relief above the speculative level on the assumption that all the allegations in the complaint are true.” Id. (internal citation omitted). The complaint “must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks omitted). On a Rule 12(b)(6) motion, the Court generally may not consider documents or materials outside of the pleadings without converting the motion into one for summary judgment. See Kim v. United States, 632 F.3d 713, 719 (D.C. Cir. 2011).

         When considering a motion to dismiss for lack of standing under Rule 12(b)(1), the Court likewise accepts the plaintiff's allegations as true and draws all reasonable inferences in its favor. See Settles v. U.S. Parole Comm'n, 429 F.3d 1098, 1107 (D.C. Cir. 2005). However, because the Court has an “affirmative obligation to ensure that it is acting within the scope” of its authority, “‘plaintiff's factual allegations . . . will bear closer scrutiny in resolving a 12(b)(1) motion' than in resolving a 12(b)(6) motion for failure to state a claim.” Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F.Supp.2d 9, 13-14 (D.D.C. 2001) (quoting 5A Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure ยง 1350 (2d ed. ...

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