7th Circuit Upholds Fort Wane & Indiana Laws Which Prohibit Insurance Redlining

The Fort Wayne, Indiana, city human relations commission was authorized under both its own ordinance and the state fair housing act to investigate claims of insurance redlining, the 7th Circuit ruled in May.

A white homeowner, Richard Kesterke, filed a complaint with the Fort Wayne Metropolitan Human Relations Commission (Metro) alleging that United Farm Bureau Mutual Insurance Co. had "refused to renew his homeowner's insurance policy because he lived in a racially mixed neighborhood." He alleged that Farm Bureau was engaging in the impermissible practice of "redlining."

Kesterke claimed that Farm Bureau's actions violated both the Fort Wayne fair housing ordinance and the Fair Housing Act. The Court said, "Metro is a 'certified' agency, which means that HUD has determined that the Fort Wayne General Ordinance under which Metro operates is 'substantially equivalent' to the federal Fair Housing Act," and Metro can process complaints under both acts.

The Act Protects Whites in Mixed Areas

The 7th Circuit rejected Farm Bureau's claim that the Act did not cover the nonrenewal of a homeowners policy for a white homeowner living in a racially mixed neighborhood. They said, "Implicit in this argument is the notion that white people are not harmed by discrimination or segregation, and thus could not have been intended beneficiaries of the federal Fair Housing Act; and that it is perfectly acceptable to create segregated neighborhoods provided that the means used are to move white people out by declining to renew their insurance. We find both propositions offensive and repugnant to the purposes and goals of the Fair Housing Act. The race of the person complaining of impermissible redlining is irrelevant."

When Metro began investigating Kesterke's complaint, Farm Bureau brought suit in state court against Metro to enjoin its investigation. They argued that Metro lacked jurisdiction. Farm Bureau urged that investigation of racial discrimination claims should be left to the insurance commissioner because Indiana insurance law prohibits unfair discrimination.

Metro removed the suit to federal court. Upon cross-motions for summary judgment, the district court decided that Metro had jurisdiction. Farm Bureau appealed the district court's finding of subject matter jurisdiction and the granting of summary judgment in favor of Metro.

Ft. Wayne Ordinance Identical

The court noted that the relevant portion of the Fort Wayne ordinance was virtually identical to the language of the Fair Housing Act., and that it had held that the Fair Housing Act reached redlining in NAACP v. American Family Mutual Insurance Co.

The 7th Circuit court found, for reasons "much the same as those set forth in American Family," that Indiana's public policy of providing equal opportunity in housing set out in the Indiana Civil Rights Act "is furthered by allowing the investigation of redlining by its local fair housing agencies." The court added that "a person's inability to obtain or retain insurance for racial reasons can swiftly defeat Indiana's goal of eliminating housing discrimination and segregation."

Ft. Wayne Could Investigate Under Both Acts

The court ruled that the district court had subject matter jurisdiction because the Fort Wayne commission had been charged with investigating Kesterke's claims under both the local ordinance and the Fair Housing Act, and in its state court suit Farm Bureau had asked the court to enjoin the investigation of both the federal and the local claims. But the court concluded that Farm Bureau's appeal of Kesterke's federal claim was moot because HUD and subsequently dismissed Kesterke's Fair Housing Act compliant.

The 7th Circuit decision was written by Judge Donald P. Lay, an 8th Circuit judge sitting on the three judge appeals panel by designation.

The court also ruled that application of the Fair Housing Act to Kesterke's complaint was not barred by the McCarran-Ferguson Act.

Counsel: Carolyn W. Spingler of Hunt, Suedhorff, Borrow & Eilbacher, Fort Wayne (United Farm Bureau); Samuel L. Bolinger, Assistant Attorney General (Fort Wayne Metropolitan Human Relations Commission)

[United Farm Bureau Insurance Co. Inc. v. Metropolitan Human Relations Commission, No. 93-1739,1994, U.S. App. Lexis 11915 (CA7 5-23-94)]