Claims and Bad Faith Law Blog

TRICK OR TREAT! ATTORNEY'S FEES FOR THE REST OF US.

The Uniform Mortgage Instruments written and distributed by Fannie Mae and Freddie Mac for almost all homes with a mortgage in the United States have provisions for attorney's fees for the mortgage lenders. These provisions are written for two purposes or at least with two results in mind. The first is to protect banks and mortgage companies from incurring attorney's fees in actions on the mortgage loans they make. The second is to make homeowners pay in actions on the mortgage loans they take.

Some States have tried to reach a better balance. Some State efforts apply generally to contracts which authorize attorney's fees for a large corporate party. They authorize attorney's fees for the other contracting parties as well whenever one party has written its contract to authorize it to collect attorney's fees when someone sues on that contract.

Parenthetically, in many or most such cases, it is the large corporate party that wrote the contract.

For example, Florida Statute Section 57.105(7) on its face applies to "contracts" which authorize attorney's fees for only one party to the contract:

(7) If a contract contains a provision allowing attorney’s fees to a party when he or she is required to take any action to enforce the contract, the court may also allow reasonable attorney’s fees to the other party when that party prevails in any action, whether as plaintiff or defendant, with respect to the contract. This subsection applies to any contract entered into on or after October 1, 1988.

Fla. Stat. § 57.105(7), brought forward without change to 2019.

In the case of Madl v. Wells Fargo Bank, N.A., 244 So. 3d 1134 (Fla. 5th DCA 2017) & on rehearing (Fla. 5th DCA 2018) (Edwards, J.), there was a mortgage contract. That was not disputed. There was a dispute, of course, but it was about standing to bring the suit to enforce that contract.

In a unanimous opinion in this case written by Judge James Edwards, Florida's Fifth District Court of Appeal applied the language of Section 57.105(7). "Section 57.105(7) transforms a unilateral right into a reciprocal right so that all parties to the contract are entitled to recover attorney’s fees upon prevailing." Madl, 244 So. 3d at 1138. The appellate panel awarded appellate attorney's fees to the homeowners who prevailed in this action to enforce the mortgage contract against them.

As the Fifth District itself pointed out, Madl, 244 So. 3d at 1139, there is authority from the Fourth District which appears to stand to the contrary.
It is not necessarily free from doubt whether the Fourth District in a proper case would deny outright the availability of Section 57.105(7) in mortgage cases. However, it can be said that the Fourth District cases seem to involve disputes about whether the parties before the court were all parties to the contract, or even whether the contracts at issue were proven to exist in the first place. In Madl, there was no dispute but that the appellants and the appellees were parties to the mortgage contract that existed in that case.

So, on this Halloween day, trick or treat! Thanks to Florida law (with the possible exception of the Fourth District), attorney's fees for the rest of us and not just for the ones who write the contracts.

On the attorney's fees provision in the Uniform Mortgage Instruments of Fannie Mae and Freddie Mac, and particularly on its lack of reciprocity absent another Statute, see DENNIS J. WALL, LENDER FORCE-PLACED INSURANCE PRACTICES § 4.4, Attorneys and Lender Force-Placed Insurance Practices (2015 American Bar Association Publishing). 

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PREMATURE FLORIDA STATUTORY BAD FAITH CLAIM? THIS TIME DISMISS, NOT ABATE.

The general rule in the Middle District of Florida, with some exceptions, has been that if a Florida statutory bad faith claim under Fla. Stat. § 624.155 is premature, the defendant's remedy is to have it abated rather than dismissed.

In Pranger v. Garrison Prop. & Cas. Ins. Co., No: 6:19-cv-1099-Orl-40EJK, 2019 WL 5448284 (M.D. Fla. Aug. 6, 2019), the Court addressed what it labeled a premature statutory bad faith claim in an Underinsured Motorist Case.  The District Judge in this Middle District of Florida case dismissed it and expressly declined to abate it.

Ruling as though this were the inevitable result and ignoring the clear Middle District of Florida precedent, the District Judge cited a pair of cases that ruled in favor of the exception of dismissal rather than abatement of a premature Florida statutory bad faith claim, and declined in the Court's "discretion" to abate it in this case:

    Defendant argues that Count II, which alleges a claim for bad faith pursuant to § 624.155 of the Florida Statutes, should be dismissed as premature. Plaintiff agrees that the claim is premature but argues that abatement, rather than dismissal, is proper. “[I]t is this Court’s position that until a bad-faith claim has a factual basis to support it—i.e., the plaintiff’s claim for [underinsured motorist] benefits has been resolved in the plaintiff’s favor—such claim is prematurely brought.”

Pranger, 2019 WL 5448284, at *1.  Sometimes exceptions swallow the rules, if we let them.

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RECOVERING POLICY LIMITS WITHOUT COVERAGE.

There are many things to say about the rulings in the Szafarowicz case.  Commerce Ins. Co. v. Szafarowicz, 131 N.E.3d 782 (Mass. October 1, 2019).  A special feature of the case was discussed in an article posted here on October 22, 2019, and the background of the case has been discussed with unique insight into Insurance Coverage Law in Massachusetts by Nina Kallen, Esquire in her blog of that name, most recently on October 23, 2019.

I have struggled with ways to organize my own remaining thoughts about the reported decision in this case.   Here is how I settled, for now, on organizing some of them.

1.  Recovery under a stipulated settlement or "Consent Judgment" in this case was limited to policy limits because that's what the insureds and the claimant agreed.

The insureds and the deceased claimant's estate stipulated to settlement of the estate's Wrongful Death Action against the insureds.  Although it appears not to be relevant to the stipulation, the fact that the settlement happened at all has everything to do with a couple of further facts by way of background here.  The insureds were being defended by Commerce at the time under a reservation of rights to deny all coverage.  Commerce also separately pursued a Declaratory Judgment Action before the underlying settlement was stipulated.  (Commerce objected to the settlement.)

As a part of their stipulated settlement, the insureds and the estate in the Wrongful Death Action stipulated that the estate's recovery if any would be limited to the insureds' Commerce policy limits and that they, the defendants-insureds, would not face any other risk of damages other than the Commerce policy limits.  Szafarowicz, 131 N.E.3d at 789.  Not only did the estate stipulate to limiting recovery to policy limits.  "The estate agreed that it would not seek to collect or enforce any judgment against the [insureds] beyond the amount payable under their insurance policy[.]" Szafarowicz, 131 N.E.3d at 789.  

That is why the estate's potential recovery against Commerce was limited to the policy limits by the Supreme Judicial Court of Massachusetts:  Anything else they could say would be dicta in the face of these facts.  The facts of this case determined the outcome.

2.    Recovery of policy limits was possible in this case even though there is no insurance coverage.

The Massachusetts Supreme Judicial Court allowed injured claimants, broadly speaking, to recover from defendants' liability insurance carriers so long as certain conditions were met.  Those conditions are discussed below.

However, in the Szafarowicz case, by the time the Supreme Judicial Court ruled there had already been a judicial determination that Commerce had no coverage under the "optional" bodily injury liability coverage under its policy. Szafarowicz, 131 N.E.3d at 790-91.

To recover policy limits, which the Szafarowicz Court said it would allow theoretically, means that the injured claimant would recover under the policy.  Yet in this case, there was already a determination that there was no coverage under the policy.  Still the Massachusetts HIgh Court remanded for a determination in the lower courts under its theoretical framework for recovery of Consent Judgments, as discussed below.

That framework simply does not include proving insurance coverage for the loss.  If it did, the Szafarowicz Court would not have remanded for a determination of anything in this case, where to say again there was already a judicial determination of no insurance coverage for the loss.

3.    "How many angels can dance on the head of a pin?"  Theoretically.  The elements of recovery under a Consent Judgment in Massachusetts today.

Well, there was still the matter of whether Commerce would be liable for post-judgment interest on any part of the underlying Consent Judgment.  So, the Massachusetts Supreme Judicial Court said that it was fashioning a rule to address that situation.  But that is not what they actually did.

In Szafarowicz, the Court fashioned a rule for recovery under Consent Judgments generally:

    Balancing these risks and benefits, we conclude that an insurer who defends a claim under a reservation of rights is bound by the amount of a judgment arising from a prejudgment settlement/assignment agreement where (1) the insurer is given notice of the settlement/assignment agreement and an opportunity to be heard by the court before judgment enters; (2) the insurer contests the judgment; and (3) the insured, after hearing, meets his or her burden of showing that the settlement is reasonable in amount.

Szafarowicz, 131 N.E.3d at 797.

The Court said, theoretically, that "the probability of a finding that the plaintiff's injuries were caused by an accident rather than intentional conduct ... may also be considered in determining the amount of a reasonable settlement." Szafarowicz, 131 N.E.3d at 798.

They said this despite the fact that, in this case, they previously said that on remand Commerce will not be bound here "to pay the damages determined at the assessment hearing, because it obtained a declaratory judgment that it was not obligated to pay these damages." Szafarowicz, 131 N.E.3d at 796.

In the final analysis, the Szafarowicz Court was against exposing carriers to recovery beyond policy limits even when Consent Judgments are successfully enforced against the carriers, at least in a case like this where the insureds and the injured claimant stipulated to that result.  Except that liability carriers can be exposed to paying Consent Judgments even when they have no coverage under their policies for the loss at issue unless they previously obtained a judicial declaration of no coverage for the loss at issue, as in this unique case.

Whew.  Complicated, isn't it?  Maybe it became more complicated in Szafarowicz than it had to be.  Who am I to judge?

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COURAGE, INSURANCE COVERAGE, AND STIPULATED SETTLEMENTS IN MASSACHUSETTS.

The Supreme Judicial Court of Massachusetts has rendered a decision that has many features, all of them interesting and some of them moving.

The complicated background of the decision in this case is thoroughly explored by Nina E. Kallen, Esquire in her blog article posted in Insurance Coverage Law in Massachusetts on Wednesday, October 16, 2019. I will also write another article this week about some of the other rulings in this important decision that I do not address here today.

In my judgment, one of the more important features of this decision is not readily apparent, however. I am going to ask Ms. Kallen for her comments on it by sending her a copy of this article with an email today. If we miss anything unique to this decision and Massachusetts law here, she is the right person to ask.

The decision came on October 1, 2019 in the case of Commerce Ins. Co. v. Szafarowicz, 131 N.E.3d 782 (Mass. 2019). It involves a couple of stipulated settlement agreements in a Wrongful Death Action. Commerce was defending its insured under a reservation of rights at the time, and Commerce was simultaneously pursuing a separate Declaratory Judgment Action of no coverage. Massachusetts, like most jurisdictions, permits the filing of a DJA while defending an insured under a reservation of rights to deny all coverage.

The insureds stipulated to settlement in the Wrongful Death Action before there was a determination in the Declaratory Judgment Action. The judge in the Wrongful Death Action (we are not told her or his name in the opinion) "ordered that judgment enter in favor of the [deceased claimant's] estate" far in excess of the policy limits. The policy limits were at most $500,000.00 and the original judgment was entered in the Wrongful Death Action in the amount of $5,617,510.00 (later increased to $7,669,254.41). Commerce, 131 N.E.3d at 789.
We do not know the date of the stipulated settlements because the Massachusetts Court does not tell us, but we know that "the judge ordered that judgment enter in favor of the estate" on December 28, 2016. Commerce, 131 N.E.3d at 789.

"[A]nother Superior Court judge resolved the declaratory judgment action" on February 21, 2019. The Declaratory Judgment judge (again, we are not told her or his name, only that this was a different judge from the Wrongful Death judge) held that there was no coverage for the policy's "optional bodily injury coverage of its automobile policy" because, the DJA judge found, the injuries in question "'did not arise out of an accident under the policy.'" Commerce, 131 N.E.3d at 790-91. Accordingly, said the Supreme Judicial Court in Commerce, "Commerce has no obligation to pay any amount of the $7.7 million judgment in the wrongful death action beyond the $20,000 it already paid under its compulsory bodily injury coverage." Commerce, 131 N.E.3d at 791 (emphasis by the Court).

So, to recap what happened on the facts here, the insureds stipulated to a settlement with the claimant's estate in the Wrongful Death Action for what became a judgment of $7.7 Million. That was years before the Declaratory Judgment was concluded. This means, of course, that everyone involved including Commerce, Commerce's lawyers, and the DJA judge knew that the estate was pursuing a damages determination of some 15 times what might be called the "full" policy limits of $20,000 for compulsory bodily injury coverage and $480,000 for optional bodily injury coverage.

To say again, because it bears repetition here, at the time that the DJA judge ruled in the liability insurance company's favor the insureds had already stipulated to damages far exceeding the potential policy limits. (The insureds also stipulated that their driver's negligence caused the accident which resulted in the claimant's death, a stipulation which would have triggered insurance coverage if that particular stipulation was determinative, which clearly it was not).

Nevertheless, Commerce persisted. That is clearly one way to put it. On a human level, of course the deceased claimant's loved ones are the first to command our empathy. Yet on a human level we cannot overlook the behavior of Commerce and its lawyers who for many years must have confronted the risk of losing many times, and for a lot of money, before they obtained a final Declaratory Judgment of no coverage.

That is likely to be the overlooked story of this case that I want to feature in this article today. Right or wrong, the people at the insurance company involved in this case and the lawyers who represented the insurance company in the DJA deserve to have their courage recognized, too.

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THE DISPARATE IMPACT OF INSURANCE COMPANIES ON THE HUD REGULATION.

I left the following Comments among others today on www.regulations.gov. You can too! Leave your own Comments, whatever they may be, on that website with the Docket Info and RIN below. Be heard!

Friday, October 18, 2019

TO: The Department of Housing and Urban Development
via https://www.regulations.gov/.
Re: Your proposed revisions to the Disparate Impact Rule.
Docket No.: FR-6111-P-02.
RIN: 2529-AA98.
Your proposed § 100.500(e) is arbitrary and capricious. Moreover it is a misguided attempt to "reverse preempt" current § 100.70(d)(4).

1. Your new paragraph (e) is arbitrary and capricious.

Your proposed new § 100.500(e) is arbitrary and capricious. You propose to proceed by case-by-case adjudication involving disparate-impact theories of liability concerning insurance, rather than rule-making. You have not provided a reasoned explanation for preferring case-by-case adjudication over rule-making which, after all, is the reason that HUD exists, i.e., to make rules. Under established law, as you know from a decision that you cite in your proposal, "[a]lthough HUD had discretion to decide whether to proceed by case-by-case adjudication or rule-making, it needs to provide a reasoned explanation for preferring case-by-case adjudication over rule-making. HUD's failure to do so was arbitrary and capricious." Prop. Cas. Ins. Ass'n of Am. v. Donovan, 66 F. Supp. 3d 1018, (N.D. Ill. 2014).
This holding was reached during judicial consideration of a previous version of this same regulation. So it is again regarding your current version: Your proposed, revised regulation is arbitrary and capricious with respect to the business of insurance as you have addressed it here, including by your proposed paragraph (e) and your proposed new section 100.500.

 

2. Your new paragraph (e) contravenes the Fair Housing Act's own statutory provisions, which supersede any conflicting proposed regulations of an administrative agency, as here. Further, it is an invalid and void attempt to "reverse preempt" insurance companies from disparate-impact liability for discrimination under the Fair Housing Act, and for these reasons it is unauthorized and unreasonable, as well as arbitrary and capricious.

The HUD Disparate Impact regulation already addresses the denial of "property or hazard insurance" in § 100.70(d)(4):

(d) Prohibited activities relating to dwellings under
                        paragraph (b) of this section include, but are not limited to:
* * *

(4) Refusing to provide municipal services or property or hazard insurance for dwellings or providing such services or insurance differently because of race, color, religion, sex, handicap, familial status, or national origin.

Because of § 100.70(d)(4), "denying 'property or hazard insurance' violates the FHA." Nat'l Fair Hous. Alliance v. Travelers Indem. Co., 261 F. Supp. 3d 20, 30 (D.D.C. 2017).

Your proposed addition of § 100.500(e) would risk immunizing insurance providers who otherwise violate the provisions of section 100.70(d)(4), quoted in full above:

(e) Business of insurance laws.
Nothing in this section is intended to invalidate, impair, or supersede any law enacted by any state for the purpose of regulating the business of insurance.

84 F.R. at 42863.

    The Fair Housing Act already contains a provision governing the effect on State laws including that the FHA shall not be construed to invalidate or limit any such conflicting law, with an exception that you do not recognize in your proposal. Under the FHA, Congress would invalidate any State or local law "that purports to require or permit any action that would be a discriminatory housing practice [under the FHA] shall to that extent be invalid." 42 U.S.C.A. § 3615. Your proposal is unreasonable in that it adds nothing to the law as it currently exists, in other words, there is simply no reason for your proposal. Further, your proposal conflicts with the Statute enacted by Congress on the same subject and your proposal is void as a result.

    The McCarran-Ferguson Act, for its part, famously leaves the regulation of insurance to the States. The Congressional deference to the States in this regard is so strong that the McCarran-Ferguson Act includes a "reverse preemption" provision by which conflicting federal laws are deemed preempted by State insurance laws in appropriate circumstances. See 15 U.S.C.A. § 1012. It has been said that "the key issue in analyzing whether the McCarran-Ferguson Act reverse-preempts this application of the FHA is the specific details of the state insurance law that supposedly contradicts the FHA." Nat'l Fair Hous. Alliance v. Travelers Indem. Co., 261 F. Supp. 3d 20, 34 n.4 (D.D.C. 2017) (italics in original; emphasis by the court). Here as well you have not identified any specific details of any state insurance law that supposedly contradicts the FHA. Your attempt at reverse preemption with the addition of new § 100.500(e) is as a result both invalid and void.

    Thank you for your consideration of these Comments. 

Sincerely Yours,
Dennis J. Wall

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RESISTING UNAUTHORIZED BURDENS AND SPURIOUS DEFENSES.

I left the following Comments among others today on www.regulations.gov. You can too! Leave your own Comments, whatever they may be, on that website with the Docket Info and RIN below. Be heard!

Thursday, October 17, 2019

TO: The Department of Housing and Urban Development
via https://www.regulations.gov/.
Re: Your proposed revisions to the Disparate Impact Rule.
Docket No.: FR-6111-P-02.
RIN: 2529-AA98.
Your proposed revisions to the current Disparate Impact Rule are found at 84 F.R. 42854 -42863, with your Summary and your Supplementary Information.

The Comments below continue several comments on your proposed revisions.

Your proposed § 100.500(d) mis-states FHA law and would impose new, additional requirements not found either in the Fair Housing Act or in FHA law. You simply do not have the authority to rewrite any statutes nor any judicial decisions including ones that you do not like.

1. Your new paragraph (d)(1) incorrectly imposes burdens on persons pursuing discrimination claims on a disparate impact theory that the FHA and that FHA case law do not impose. It is not your place to impose them where Congress and the courts have refused to do so.

(i) The "elements in paragraphs (b)(2) through (5) of this section" as you call them are not proper elements of proof in the context of such claims.

Please see our earlier Comments concerning your new paragraphs (b)(2) through (5) of this section in particular, which are expressly incorporated herein by reference. A pdf copy will be appended to these Comments for this purpose and for your ease of reference.

(ii) This subparagraph (ii) in your new paragraph (d)(1) is an attempt on your part to introduce entirely new legal requirements in FHA law. You would effectively provide that even if an FHA plaintiff has proven the availability of less restrictive means for the defendant to pursue its policy objectives, then still the plaintiff must also prove yet another thing. You would require the FHA plaintiff at that point in a disparate impact discrimination liability case to also prove that the alternative means would not "impos[e] materially greater costs on, or creat[e] other material burdens for, the defendant." This requirement in your new subparagraph (ii) has no justification and no reason for existence.

By proposing your new requirements in subparagraph (ii), you would heap up burdens on FHA disparate treatment discrimination plaintiffs that never previously existed. This you may not do. You completely lack the authority to do so.

 

2. Your new paragraph (d)(2) incorrectly allows defenses to be raised by defendants in FHA discrimination claims that are based on a disparate impact theory, that the FHA and that FHA case law do not recognize.

(i) and (ii). What has been said above applies to these subparagraphs as well. The above Comments, and the Comments that were left previously to your § 100.500(b) (please see attached pdf, for example), are expressly incorporated herein by reference.

(iii). It bears repeating that your introduction of an unrecognized issue that a defendant in such an FHA discrimination case can escape liability by evidence that less restrictive alternatives to the defendant's discriminatory policies "would materially impose greater costs" or would "creat[e] other material burdens for the defendant," do not exist in the statutory language chosen by Congress or in the judicial opinions written by judges in the FHA case law. You do not have the authority to rewrite any of them.

Moreover, your statutory charge is to implement the FHA concerning the effects of discrimination.
Your duties are described in the Fair Housing Act. The Congressional statement of purpose is to facilitate relief from discrimination in the national housing market. Your duties do not include shielding defendants from "materially greater costs" or "other material burdens" as a consequence of their proven discrimination.

Thank you for your consideration of these Comments. As was noted from the beginning, more Comments will follow.
Sincerely Yours,
Dennis J. Wall

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FIGHTING DISAPPEARING DISPARATE IMPACT DISCRIMINATION IN HOUSING.

I left the following Comments among others today on www.regulations.gov.  You can too!  Leave your own Comments, whatever they may be, on that website with the Docket Info and RIN below.  Be heard!

Thursday, October 17, 2019

TO: The Department of Housing and Urban Development
via https://www.regulations.gov/.
Re: Your proposed revisions to the Disparate Impact Rule.
Docket No.: FR-6111-P-02.
RIN: 2529-AA98.
Your proposed revisions to the current Disparate Impact Rule are found at 84 F.R. 42854 -42863, with your Summary and your Supplementary Information.
These are the first of several comments on your proposed revisions.
Your proposed new § 100.500(b) is unreasonable and invalid. You propose to revise existing law on when a plaintiff alleging discrimination under the Fair Housing Act has made a prima facie case under a theory of discrimination by disparate impact. Your proposed revision is not based on facts and it is not based on the law established under the Fair Housing Act you say that you are implementing. You do not have the authority to make new law especially when it is contrary to existing statutes and FHA case law. The entire proposed new section 100.500(b) is found in 84 F.R. at 42862.
The current HUD regulation, § 100.500 as it has existed from long before your proposed revision of it, has been justly described as "similar to the framework the Supreme Court ultimately adopted in Inclusive Communities, and indeed, some courts believe the Supreme Court implicitly adopted the HUD framework altogether." Reyes v. Waples Mobile Home Park Ltd. P'ship, 903 F.3d 415, 424 n.4 (4th Cir. 2018), cert. denied, ___ U.S. ___, 139 S. Ct. 2026 (2019). You of course claim in your proposal not only to have followed the Inclusive Communities decision but to credit that decision as the genesis of your proposal. Without deciding whether the Court followed the HUD regulation, the following Comments will address your proposed revision of the regulation.
(1) Your proposed § 100.500(b)(1) is contrary to the law established under the Fair Housing Act. Further, you have not shown any reason to undo and restate rules and regulations that were enacted by HUD when HUD had access to the relevant law that you rely on in your proposed revisions. This is not an attempt on your part to align the HUD regulation on Disparate Treatment with subsequent case law. as you say. Rather, this is an attempt on your part to re-align and rewrite HUD's previous regulation on Disparate Treatment because you do not approve of it.
You do a couple of things throughout your proposed revisions that are worth noting at the beginning here. You rely throughout your proposal on the 2015 decision by the U.S. Supreme Court in the case of Texas Dep't of Housing & Community Affairs v. Inclusive Communities Project, Inc., 135 S. Ct. 2507 (2015). The requirements you propose under paragraph (b)(1) of your rewritten section 100.500 are not imposed by the Inclusive Communities decision, but are instead contrary to it. This will be discussed below as well.
Another thing that you do throughout your proposal is take words and phrases from judicial opinions and propose them as new law here. Picking out words and phrases does not equal the law. It does not represent the law any more than reading case headnotes does. Certainly your proposed paragraph (b)(1) does not represent FHA law, but rather is contrary to established law. In this regard, it should not have to be pointed out, but I will point it out for the record here, that HUD simply lacks the authority to invent the law let alone to disregard it. Further, any attempts by HUD to do so are unreasonable and invalid due to its lack of authority alone if for no other reason.
Your proposed revision is strikingly reminiscent of a recent federal appellate court's description of a lower court's erroneous view of causation in disparate impact claims brought under the Fair Housing Act. Like that district court, your view would erroneously "seem to require an intent to disparately impact a protected class in order to show robust causality, thereby collapsing the disparate-impact analysis into the disparate-treatment analysis. [Citation omitted.] This goes far beyond the 'robust causality' requirement the Supreme Court described." Reyes v. Waples Mobile Home Park Ltd. P'ship, 903 F.3d 415, 430 (4th Cir. 2018), cert. denied, ___ U.S. ___, 139 S. Ct. 2026 (2019) (italics in original; emphasis by the Fourth Circuit Court of Appeals). Or to put the same thing another way, "determining whether a plaintiff made a prima facie case of disparate-impact liability requires courts [and HUD] to look at whether a protected class is disproportionately affected by a challenged policy.... The extra step of determining whether such a practice that has a disparate impact on a protected class is justified is properly contained" within the defendant's burden of persuasion. See Reyes, 903 F.3d at 424, 430 (italics in original; emphasis by the Fourth Circuit Court of Appeals).

(2) Your proposed paragraph (b)(2) of your proposal to revise section 100.500 does not represent the law which has developed under the Fair Housing Act. Moreover, it would introduce ambiguity which would tend toward the denial of otherwise valid claims under the Act.
Your proposed paragraph (b)(2) is another time when you clearly cherry-picked language from the case law, this time seemingly from the Inclusive Communities decision itself. Yet while the majority opinion used the phrase "robust causal link" one time, Inclusive Communities, 135 S. Ct. at 2523, the Court's one-off use of that phrase was not an effort by the Court to re-define the law of proximate cause, as your proposed revision would do if it is implemented. Rather, the Court used that phrase as a shorthand way to describe the requirement that an FHA plaintiff relying on a theory of disparate impact to show discrimination must allege and prove causation. The Court did not attempt to define "robust causal link" in any way other than using it as a shorthand reference for the requirement in this context to prove causation.

(3) Your new, proposed § 100.500(b)(3) is again made unreasonable by your using an ambiguous, undefined phrase to require FHA plaintiffs to allege and prove "an adverse effect" if those plaintiffs are going to make a prima facie case of FHA violations under a disparate impact theory. This again is also contrary to law under the Fair Housing Act.
FHA law does not require proof of undefined "adverse effects." Other law may require and speak to such proofs, but not this one. The law under the Age Discrimination in Employment Act of 1967 or ADEA, for example, apparently does require proof that employment decisions "adversely affect" a person's employment status, but FHA law does not contain this requirement. You lack the authority to rewrite the statute you say that you are implementing. Only Congress has such authority; you do not.
You seem to want to introduce previously undefined concepts not addressed in the Fair Housing Act or in FHA case law, or in previous HUD rules and regulations. The use of undefined, previously unknown words and phrases in your proposed regulation greatly increases the risk of adverse decisions to FHA claimants, whether the increased risk is inadvertent or not.

(4) Your proposed new paragraph (b)(4) in your proposal to revise section 100.500 would impose a new requirement contrary to established law, and not found in the Fair Housing Act you say you are implementing, that a prima facie case of discrimination under a theory of disparate impact requires proof that the alleged disparity is "significant." To say again, that requirement is new. It is not imposed by the statute and it is contrary to settled law.
What the federal courts have required of disparate impact claims under the FHA is that the plaintiff show that the challenged practice have "a significantly disparate impact." This is not the same as your proposal to require proof of a "significant" disparity.
In addition, what you mean by "significant" is not clear from your proposed revisions. Once again, your proposals would introduce uncertainty and the attendant risk along with that uncertainty of legitimate claims being denied for no good reason.

(5) Your final new proposal to revise section 100.500 is to add a paragraph (b)(5) that would require something you call a "direct link" between impact and injury. Again, this new proposed requirement is not found in the Fair Housing Act and it is not found in the law surrounding the FHA. Rather, this new requirement you propose is another example of twisting words and phrases, like headnotes, in an attempt to re-write statutes and case law more to your liking. This is beyond your authority to do.
What has already been said above applies with equal force here as well: When courts have spoken of "direct" causal links, they were not trying to re-define the law of proximate cause, as your proposed revision would almost certainly do if it is implemented. Rather, the courts have sometimes used that phrase as a shorthand way to describe the requirement that an FHA plaintiff relying on a theory of disparate impact must show discrimination by alleging and proving causation as a part of her prima facie case.

Thank you for your consideration of these Comments. As was noted from the beginning, more Comments will follow.
Sincerely Yours,
Dennis J. Wall

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NO PENNSYLVANIA CGL DUTY TO DEFEND: NO "OCCURRENCE," NO "ACCIDENT."

The Third Circuit recently applied Pennsylvania law to hold that there is no duty to defend under a Commercial General Liability Policy where there is no "accident" and so there is no "occurrence."  Sapa Extrusions, Inc. f/k/a Alcoa Extrusions, Inc. v. Liberty Mut. Ins. Co., 939 F.3d 243 (3d Cir. 2019).

But the ruling involves much more than that truism.

The Third Circuit held, first, that the trial court was wrong to determine the question of whether there is a duty to defend by looking to the headings or titles used in the complaint to describe different counts alleged.  To the contrary, the duty to defend is determined under Pennsylvania law, as it is in most jurisdictions, by looking to the allegations of fact in the complaint and comparing those allegations to the CGL policy at bar.  This is the so-called "four corners rule."  Sapa Extrusions, Inc., 939 F.3d at heading III.A of the appellate court's opinlon (page numbers not available from Westlaw at the time this article is written).

Then and only then will courts applying Pennsylvania law determine whether there is a duty to defend.  In this case, the question of a defense arose under a CGL policy, as has been noted.  The specific claims against the insured in the complaint at issue there involved aluminum parts of windows and frames that allegedly corroded.  Tired of oxidized window and door frames, homeowners sued the insured.  See Sapa Extrusions, Inc., 939 F.3d at heading I.A of the appellate court's opinlon (page numbers not available from Westlaw at the time this article is written).  The issue then was whether there is a duty to defend that insured in those cases under the CGL policies at issue there.

The Third Circuit held that there is no duty to defend the insured in that case because the nature of the alleged defects could not be an "accident neither expected nor intended by the insured" there.  Where there was no "accident," there could be no covered "occurrence" under the CGL polices at issue.  Where there was no covered "occurrence," there is no duty to defend.  Sapa Extrusions, Inc., 939 F.3d at heading IV.C.1 of the appellate court's opinlon (page numbers not available from Westlaw at the time this article is written).

On all these issues, the Sapa decision is squarely in the mainstream of insurance coverage determinations.

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COMMENTS TO HUD PROPOSAL TO ELIMINATE DISPARATE IMPACT PROOF DUE FRIDAY 10.18.19.

Comments to the Department of Housing and Urban Development's proposal to eliminate proof of discrimination by proving disparate impact are due Friday, October 18, 2019.

The HUD proposal would effectively reduce all proof of discrimination to direct proof of intent, such as an admission by the perpetrators that they are guilty.

The proposed HUD rule would run contrary to a Supreme Court decision that is four years old.

Go to https://www.regulations.gov to leave your Comments, whatever your Comments may be.

Please Read The Disclaimer. ©2019 Dennis J. Wall.  All Rights Reserved.

When Judges Say They're "Afraid of Being Fired" For Rulings: A Postscript.

This is a postscript to an article posted here on October 3, 2019.

"With every decision, the judge has to weigh the risk of being fired against the oath of office he or she has taken.  And we have already seen the impact of this travesty with the 'Stay in Mexico' or the MPP program, where judges have confided that they have made rulings out of fear of losing their jobs."  Hon. A. Ashley Tabaddor, Judge of the Immigration Court and President of the National Association of Immigration Judges, the union of Immigration Judges, quoted by Catherine E. Shoichet, Immigration Judges Accuse Justice Department of Unfair Labor Practices, CNN Politics, posted online on Tuesday, September 27, 2019.

The "administration's so-called Migrant Protection Protocols [MPP] program" is the one "which forces some asylum seekers to wait in Mexico while their cases make their way through the system[.]"  Id.

The background behind the headline of this report, that the Immigration Judges are accusing the justice department of Unfair Labor Practices, includes a few things.  For one, the department has called for the judges' union to be terminated.

The justice department has sent the judges anti-Semitic stories as a part of the briefing they send to these judges.

The department has also imposed "case competition quotas and the removal of [immigration judges'] power to administratively close cases."  Id.

When judges are afraid that their rulings will get them fired then perhaps unfair labor practices, while real issues, are the tips of a much larger iceberg.

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TOO MUCH SECRECY MAKES FALWELLS OF US ALL.

Jerry Falwell, Jr. and his wife were sued by a pool boy over their  investment in a gay youth hostel in Miami.  The pool boy complained that he was denied an "ownership stake" in the investment.  The incident was infamous.  There are more nefarious people involved than in any other incident this side of Washington, D.C.

There were reportedly arrangements for payments by Michael Cohen for "sexually compromising photographs involving the Falwells that could have been used as leverage against them."  Patricia Mazzei, Falwells Settle Court Case Over Florida Business Deal, THE NEW YORK TIMES, Tuesday, October 8, 2019, p. A15 (online here; the New York Times may charge for online access).

According to the linked reporting, Mr. Cohen denied making the payments.  The Falwells denied the business investment in which a pool boy would get a cut of the proceeds from a gay youth hostel.  Tom Arnold, estranged (or is it divorced?) husband of a well-known comedienne, reportedly made a "secret recording."

The pool boy sued the Falwells in Florida Circuit Court.  The Falwells removed that case to Federal District Court in the Southern District of Florida.  That was in the middle of September 2019.

Now, less than a month after that, Jerry Falwell, Jr. -- not the preacher, because this one is not ordained -- and his wife settled the pool boy's lawsuit.  Apparently the settlement agreement is totally under seal because the entire docket on the Southern District of Florida's website is literally blacked out, at least in response to repeated attempts to search it this morning on the Public Access to [Federal] Court Electronic Records or "PACER."

Repeated attempts to search the case on PACER this morning as well, yielded only the message:  "No records found."

There is no Order of Court on the docket sealing the contents.  So let's put this in a little context here.

Jerry Falwell, Jr. "is the chancellor of one of the nation's largest Christian colleges, Liberty University," id., and on behalf of Liberty he asks for donations and tuition money.

Mr. Falwell and his wife are clearly paying money in this settlement, or their insurance company is paying money in this settlement on their behalf, regardless of their denial of the pool boy's gay hostel investment allegations.

So why on earth can we not see the terms of this settlement agreement since Mr. Falwell is both asking for and apparently spending our money?  Why can we not see where our money is going, or even if our money is involved if we donate it to Mr. Falwell  or his Liberty?

Beyond those questions that arise because of Mr. Falwell's real involvements with money -- and not necessarily because of his denial of allegations of his other involvements with money -- there are very real questions of why and how his settlement apparently got sealed and blacked out under the Federal Rules of Civil Procedure and the Southern District's Local Rules?

And without even a record on the docket that a Federal Judge ordered the case sealed?   What is going on with the Southern District of Florida?

The case is Bello v. Falwell (Southern District of Florida Case No. 1:19-cv-23825-UU).

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When Judges Say "Afraid of Being Fired" For Their Rulings.

When people involved in lawsuits, including large corporations and individuals and children, cannot depend on getting a fair shake because the judge is afraid of ruling in their favor, that is the essence of bad faith.

There are reports right now that this is exactly what is happening in the current administration's immigration courts.

More than Sad. 

Bad Faith.

See Some Immigration Judges Say They Rule a Certain Way to Avoid Firing, by Mark Pattison, posted on CatholicPhilly.com on Monday, September 30, 2019.

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BAD FAITH IN PENNSYLVANIA MORTGAGE INSURANCE: 5,246 TIMES.

Nationstar Mortgage LLC sued Radian Guaranty Inc. Nationstar alleged claims "for breach of contract, unjust enrichment, conversion and bad faith." The factual basis of these claims is succinctly stated at the beginning of the Court's opinion:

Nationstar contends that Radian denied, rescinded and curtailed mortgage insurance coverage and refused to reimburse Nationstar for premium overpayments on 5,246 residential home mortgage loans.

Nationstar Mort. LLC v. Radian Guar. Inc., No. 18-03798, 2019 WL 1318541, at *1 (E.D. Pa. March 22, 2019).

Radian challenged all of Nationstar's claims with a motion to dismiss. With respect to the alleged bad faith claim, the Pennsylvania federal court denied the motion to dismiss because the plaintiff alleged three groups of core facts to bring its claim within the Pennsylvania bad faith statute in this case:

    Nationstar contends that Radian acted in bad faith when it denied, rescinded, and curtailed coverage for valid claims and refused to reimburse Nationstar for premium overpayments.... Nationstar alleges that Radian knew and understood that if it wrongfully rescinded, denied and/or curtailed claims that third parties would seek to have Nationstar repurchase these loans..... Moreover, Nationstar’s Complaint is replete with allegations arguing that Radian lacked a reasonable basis for its coverage decisions.

Nationstar Mortgage LLC v. Radian Guaranty Inc., 2019 WL 1318541, at *6. To regroup the core facts alleged by Nationstar Mortgage against Radian Guaranty in this case, first, Radian allegedly "denied, rescinded and curtailed" insurance coverage; second, Radian allegedly "refused to reimburse Nationstar for premium overpayments[,]" and third, Radian allegedly "knew and understood" that its actions disclaiming and discouraging coverage claims would have the effect of discouraging "third parties [who otherwise] would seek to have Nationstar repurchase these loans." On the basis of these alleged facts the Pennsylvania federal court refused to dismiss Nationstar Mortgage's bad faith claim against Radian Guaranty.

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