Yesterday, an en banc panel of the Ninth Circuit certified a question of Texas insurance law to the Texas Supreme Court. If the Texas Supreme Court accepts the certified question, it will order merits briefing and (most likely) set the case for argument under Texas Rule of Appellate Procedure 58.7.

The en banc panel’s opinion was released in this PDF. The original split decision of a three-judge panel (which is now partially superseded) was published at Ojo v. Farmers Group, Inc., 565 F.3d 1175 (9th Cir. 2009).

The central issue is whether an allegedly discriminatory provision of a homeowners insurance policy can be challenged under the federal Fair Housing Act or, instead, is “reverse-preempted” by conflicting state law under the McCarran-Ferguson Act. (( The McCarran-Ferguson Act is the looking glass through which we view insurance regulation. Most famously, it creates special exceptions to antitrust laws for insurers. It also gives state legislatures the first crack at regulating insurers. Congress can specifically state its intention to have a federal statute override conflicting state regulations. But if it does not, then the general principle is that state laws — unlike almost any other field of law — trump any conflicting federal statute. If you’re following along, you’ll see that this “reverse preemption” is itself just an expression of Congress’s intent. ))

The en banc panel of the Ninth Circuit determined that, absent a conflicting state law, the FHA would indeed prohibit a discriminatory provision in a homeowners insurance policy. But to take its next step — which would involve construing Texas law — the panel decided to formally certify the question.

Having resolved these issues, in a separate order filed concurrently with this opinion we certify to the Supreme Court of Texas the dispositive question of whether Texas law permits an insurance company to price insurance by using credit-score factors that have a racially disparate impact that, were it not for the McCarran-Ferguson Act, would violate the FHA.

The “separate order” was not posted on the Ninth Circuit’s website, so that’s all I know (so far) about how the question was framed.


The district court had interpreted Texas law to conflict with the federal FHA and, accordingly, to “reverse-preempt” it under the McCarran-Ferguson Act. In particular, it held that a 2003 Texas statute relating to credit scoring in the issuance of insurance policies was meant to affirmatively bless that practice, even if it had a disparate impact. (See the discussion in the original panel opinion at 1184-85.)

The original Ninth Circuit panel held that the Texas and federal statutes were harmonious, not in conflict: “the goals of the federal FHA and Texas FHA, including the 2003 credit scoring law, are to prevent unlawful discrimination based on race, regardless of whether the discrimination involves disparate treatment or disparate impact.” Id. at 1189; see also id. at 1184-87 (discussing the statutes).

Judge Bea, dissenting from that original panel decision, would have concluded that Texas law did not contain a “disparate impact” claim and thus Ojo’s pleading failed because he challenged only the racially disparate results without alleging that the insurer’s methodology improperly took race into account. Id. at 1192 (Bea, J., dissenting).