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Feb 2015

In a case of first impression in Massachusetts, Rick Riley and Melissa Arnold recently obtained summary judgment in a federal court action filed by PSI, LLC, the corporate owner of two properties operated as “sober homes” (i.e., transitional homes for recovering drug and alcohol abusers). PSI alleged that the defendant insurance carrier, Nautilus Insurance Company,  violated two federal statutes, the Fair Housing Act and the American With Disabilities Act, by allegedly charging a higher premium than would have been charged had the two homes been classified as three-family residences.  (Prior to PSI’s purchasing the properties, they were both occupied as three-family residences.) PSI proceeded on the theories of: (1) disparate treatment; (2) disparate impact; and (3) failure to provide a reasonable accommodation when requested.

The defense argued that the classification applied to the sober homes (“Halfway Houses – Other Than Not-for-Profit”) was applied to other communal properties not inhabited by any protected class of persons and therefore the plaintiff could not prove that the premium quoted to them was  set at the level it was “because” of any disability of the occupants of the sober homes. The Court rejected each of the plaintiff’s theories and granted Nautilus’ motion for summary judgment.

With respect to the disparate treatment claim, the Court agreed with Nautilus’ argument that even if PSI were able to establish a prima facie case of discrimination (the first hurdle in establishing a disparate treatment claim), Nautilus satisfied its burden of advancing a legitimate and non-discriminatory reason for its actions by presenting evidence that: (1) the properties were not in fact operating as three-family properties; and (2) that such operations (30-bed sober homes) posed a different and greater liability risk than a three-family home (i.e., there is greater foot traffic because the unrelated residents are likely to have non-overlapping circles of visitors as well as the fact that the duration of the tenancy is shorter resulting in a greater variety of individuals residing in, and visiting, the premises). The Court also noted that Nautilus had applied this “neutral classification” to other types of housing that was not specifically designed to house members of any protected class (such as transitional housing for the homeless). Ultimately, the Court ruled that the plaintiff failed to present admissible evidence rebutting the insurance company’s legitimate, nondiscriminatory reasons for classifying (and setting premiums for) the properties at issue as it did.

With respect to the disparate impact claim, the Court held that the plaintiff failed to satisfy even its threshold burden of establishing that the challenged practice caused, or predictably will cause, a discriminatory effect, to wit, that the housing practice actually or predictably results in discrimination or results in a disproportionate burden on members of a protected class. (Notably, the question of whether a Fair Housing Act can be proven by evidence of disparate impact is now pending before the US Supreme Court.)

The Court next held that the sober homes’ request that the insurance company charge the same premium that it would have charged had the properties been three-family homes was not a request for a “reasonable accommodation”, as the request was a request not linked to the disability of the occupants and was not necessary to allow the residents equal opportunity to enjoy the housing in question.

The Court’s decision can be found at: PSI, LLC v. Nautilus Insurance Company, 2014 U.S. Dist. LEXIS 178803 (D. Mass. 2014). It can also be obtained by contacting either Rick Riley or Melissa Arnold via email. (See the Contact Us page for email addresses of all the firm’s attorneys.)

 


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