Insurance Discrimination Ruled Illegal

December 10, 2004—A place to live is what people with psychiatric disabilities need first, for a stable life in their community. Yet exclusionary policies routinely deny them access to decent housing, whether in a group home or an independent apartment. Since 1990, when amendments to the federal Fair Housing Act (FHA) began covering people with disabilities, the Bazelon Center and its allied advocates have successfully challenged a wide variety of such discriminatory practices by landlords and zoning boards.

One of our victories issued a wake-up call to the insurance industry, which had argued that it is not subject to the FHA. On December 10, 2004, a federal court in Washington state forcefully ruled that it is. The decision recognizes that discrimination in the provision of insurance has a direct impact on the availability of housing in the community.

The lawsuit, Nevels v. Western World Insurance Co., was brought by the operator of a Seattle family home for three residents with mental illnesses and two Fair Housing Councils (South Puget Sound and Oregon) that had received calls from other family home providers. Western World, a New Hampshire-based company selling commercial malpractice liability insurance, had cancelled or refused to renew the providers’ policies because they operated housing for residents with mental illnesses.

Penny Nevels refused to remove the “mental illness” designation from the license for her family home and lost her insurance. She got a policy at a much higher rate from another company, but ultimately couldn’t afford it. She now has no liability insurance.

After insuring Becky Marie and Steven Abrams’ family home for nearly a year, the company sent them a notice stating:

WESTERN WORLD INSURANCE COMPANY DOES NOT WRITE ADULT FAMILY HOMES WITH MENTAL ILLNESS DESIGNATION ON THEIR ... LICENSE OR HOMES WHO CARE FOR MENTAL ILLNESS RESIDENTS.

The Abrams removed the mental illness designation and turned away applicants with mental disabilities. But they couldn’t fill the vacant beds otherwise, so in December 2003 they sold the home.

Without insurance, Judge Thomas Zilly ruled, providers of housing for people with disabilities cannot stay in business and thus “cannot insure that non-segregated, community-based housing for people with mental disabilities will remain available.”

The ruling came in response to Western World’s motion to dismiss the case. While it allows the lawsuit to continue toward trial, explains Bazelon Center senior staff attorney Michael Allen, who assisted in the lawsuit, “it sends a clear signal to the insurance industry that discrimination does not pay.”

Judge Zilly’s decision, also “forcefully rejects the company’s contention that insurance matters are the purview of state regulators,” adds Allen. “It validates our position that refusal to provide insurance because of residents’ mental disabilities is a form of interference with the rights of providers and their residents.”