Insurance 301 Sullivan Way, West Trenton, NJ 08628 NJM Group 609-883-1300, Ext. 5828 / [email protected]

KATE 110, ESQ. Assistant Vice President & General Counsel

August 20, 2018

Paul Compton General Counsel Department of Housing and Urban Development 451 Seventh Street SW, Room 10276 Washington, DC 20410-0001

Re: Reconsideration of HUD's Implementation of the Fair Housing Act's Disparate Impact Standard, 24 CFR Part 100 [Docket No. FR-6111—A-01] RIN 2529—ZA01

Dear General Counsel Compton:

New Jersey Manufacturers Insurance Company ("NJM") appreciates the opportunity to comment on the Department of Housing and Urban Development's ("HUD") advance notice of proposed rulemaking referenced above. The rule in question extends disparate-impact liability to the provision and pricing of homeowner's insurance and creates a burden-shifting framework for assigning liability in private lawsuits and government enforcement actions premised on the existence of a disparate impact.

NJM is a property and casualty insurance provider headquartered in West Trenton, . Founded in 1913, NJM currently offers homeowners, umbrella, personal auto and commercial auto insurance to policyholders in New Jersey and and workers compensation insurance in New Jersey, , Pennsylvania, , and . HUD has requested comments to determine what changes, if any, are appropriate following the decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., 135 S. Ct. 2507 (2015) which details certain standards and constitutional limitations on disparate impact claims.

Initially, NJM maintains that application of the disparate impact rule to homeowners insurance is inconsistent with the state-based regulation of insurance, and with general principles of actuarially-based ratemaking. Nevertheless, assuming that the Department intends to proceed with its proposed rulemaking, NJM maintains that the disparate impact standard set forth in HUD's 2013 final rule and supplement is clearly not in compliance with the limitations on disparate-impact liability that the Supreme Court articulated in Inclusive Communities, and should be reconsidered and revised.

New Jersey Manufacturers Insurance Company • New Jersey Re-Insurance Company • New Jersey Casualty Insurance Company New Jersey Indemnity Insurance Company NEW JERSEY MANUFACTURERS INSURANCE GROUP

Paul Cornpton General Counsel Page Two August 20, 2018

The Supreme Court was clear in Inclusive Communities that specific limitations are necessary in order to protect defendants from improper and abusive disparate impact claims, and held that disparate impact liability must be limited so as to prohibit a finding of liability solely based on a demonstration of statistical disparity. Specifically, the Court held that a disparate impact claim relying on a statistical disparity cannot be successful where a plaintiff does not identify a specific policy or policies causing the disparity. In so doing, it noted that a "robust causality" requirement ensures that racial disparity alone does not give rise to a disparate impact claim and, as a result, protects defendants from liability for disparities they did not create.

The 2013 disparate impact rule does not comport with these standards. First, the Rule allows a plaintiff to bring an action based on statistical disparity alone, thereby impermissibly allowing defendants to be held liable for disparities they did not create. Second, the Rule allows an action to be filed without requiring plaintiff to identify the particular policy that caused the alleged disparity. Clearly, these Rule deficiencies do not comport with the "robust causality" requirement set forth in Inclusive Communities.

Moreover, the Rule permits a plaintiff to prove that a challenged practice causes or "predictably will cause" a discriminatory effect. To permit liability based on a prediction or possibility of a disparate impact further violates the "robust causality" requirement.

Finally, the Rule also allows a plaintiff to displace a defendant's valid policy choice without demonstrating that the proffered alternative is at least as effective, while Inclusive Communities requires an action to be based upon "artificial, arbitrary, and unnecessary barriers" - - clearly a more taxing standard..

Overall, the disparate impact approach to civil-rights enforcement is misguided as a matter of policy and inherently inconsistent with the constitutional presumption against race-based decision making. Furthermore, the limitations discussed in detail by the Supreme Court in Inclusive Communities are absent frorn the proposed HUD Disparate Impact Rule and, as such, the proposed Rule is in conflict with the Court's ruling.

In the event that HUD determines that the Rule should not be vacated completely, it is certainly necessary that every standard and limitation set out by the Supreme Court's decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project should be explicitly acknowledged and adopted in a revised Rule.

Very truly yours,

(cite New Jersey Manufacturers Insurance Company