Nevels v. Western World Ins. Co., Inc.

• Decision Date: 10 December 2004
• Docket Number: No. C04-1024Z.,C04-1024Z.
• Citation: 359 F.Supp.2d 1110
• Parties: Penny NEVELS, et al., Plaintiffs, v. WESTERN WORLD INSURANCE COMPANY, INC., Defendant.
• Court: U.S. District Court — Western District of Washington

359 F.Supp.2d 1110

Penny NEVELS, et al., Plaintiffs, v. WESTERN WORLD INSURANCE COMPANY, INC., Defendant.

No. C04-1024Z.

United States District Court, W.D. Washington, at Seattle.

December 10, 2004.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Carlie A Ware, John P. Relman, Reed N. Colfax, Shilpa S. Satoskar, Kelli M. Evans, Relman & Associates, Washington, DC, Jesse Andrew Wing, MacDonald, Hoague & Bayless, Seattle, WA, for Penny Nevels Individually and as Representatives of a Class of All Others Similarly situated, Karla Carano Individually and as a Representative of a Class of All Others Similarly Situated, Maria J Fritz Individually and as Representative of a Class of All Others Similarly Situated, Fair Housing Center of South Puget Sound, Fair Housing Council of Oregon, Steven H Abrams, Becky Marie Abrams, Plaintiffs.

Christopher Hanback, Rafe Petersen, Holland & Knight (DC), Washington, DC, Medora A Marisseau, Bullivant Houser Bailey, Seattle, WA, for Western World Insurance Company Inc, Defendant.

Jeffrey Lowell Needle, Seattle, WA, for Smith, Paul National Fair Housing Alliance and National Alliance for the Mentally Ill Counsel for Amici National Fair Housing Alliance and National Alliance for the Mentally Ill, Jeffrey Needle National Fair Housing Alliance and National Alliance for the Mentally Ill Counsel for Amici National Fair Housing Alliance and National Alliance for the Mentally Ill, Amicus.

ORDER

ZILLY, District Judge.

BACKGROUND

I. Introduction

This matter comes before the Court on Defendant's Motion to Dismiss, docket no. 23. The instant case involves a class action lawsuit brought by adult family home operators against Western World Insurance Company ("Defendant") alleging violations of the Fair Housing Act, 42 U.S.C. § 3601 et seq. ("FHA"). In particular, Plaintiffs allege that Defendant discriminated against Plaintiffs by refusing to renew property and/or liability insurance coverage for adult family homes because adults with mental illnesses reside, or are eligible to reside, in the homes. 1st Amend. Compl. docket no. 19, ¶ 3. Plaintiffs' factual allegations are not disputed. D. Reply Br., docket no. 34, p. 3.

Adult family homes¹ are single-family residential homes for elderly adults and adults with disabilities that provide personal and/or medical care in a family-like setting. 1st Amend. Compl., docket no. 19, ¶ 21. Adult family homes provide an alternative to institutional care by allowing people with disabilities to live in conventional residential neighborhoods. Id. at ¶ 22. Care-givers render a range of services, including meals, assistance with dressing, assistance with medication, and social and recreational activities. Id. at ¶ 23. Adult family homes typically house between two and six residents, id., and they have provided service to hundreds of thousands of persons who would otherwise find themselves institutionalized. Amicus Br., docket no. 26, p. 6. Until July 20, 2003, the State of Washington required adult family homes to carry liability insurance. 1st Amend. Compl., docket no. 19, ¶ 13.

II. Plaintiffs

A. Fair Housing Center of South Puget Sound & Fair Housing Council of Oregon

In 2002, Plaintiff Fair Housing Center of South Puget Sound² ("FHCSPS") began receiving calls from owners and operators of adult family homes complaining that Defendant had cancelled or refused to renew insurance policies covering their homes because they provided housing for residents with mental illnesses or were licensed to provide housing for people with mental illnesses. Id. at ¶¶ 25-26. FHCSPS commenced an investigation of Defendant's allegedly discriminatory practices and allege that Defendant had cancelled and/or refused to renew property and/or liability insurance policies for approximately 150 adult family homes in Washington. Id. at ¶ 28. Plaintiff Fair Housing Council of Oregon³ ("FHCO") also received calls from adult family home operators in Oregon who complained that Defendant cancelled and/or declined to renew insurance policies because the adult family homes provided housing for individuals with mental illnesses. Id. at ¶ 30.

B. Penny Nevels

Plaintiff Penny Nevels is the co-owner and operator of an adult family home in Seattle, Washington. Id. at ¶ 32. Nevels is licensed by the State of Washington to provide housing and care for three residents with mental illnesses and dementia. Id. at 33. Effective January 10, 2001, Nevels was covered by a liability insurance policy from Defendant. Id. at 38. In November, 2002, less than two months before the renewal date on her policy, Nevels received a written "Notice of Cancellation or Nonrenewal," which stated:

CONDITIONAL NON-RENEWAL — WESTERN WORLD INSURANCE COMPANY NO LONGER WRITES ADULT FAMILY HOMES LICENCED WITH THE MENTAL ILLNESS DESIGNATION... TO CONSIDER

FOR RENEWAL COVERAGE, WE WILL NEED A REVISED COPY OF YOUR ADULT FAMILY HOME LICENSE WITHOUT THE MENTAL ILLNESS DESIGNATION.

Notice of Cancellation, docket no. 19, Ex. D (emphasis in original).

In order to renew her policy, Nevels would have been required to evict her mentally ill resident and bar individuals with mental illnesses from residing in her home. Additionally, Nevels needed to continue her liability insurance coverage as a condition of her adult family home license.⁴ 1st Amend. Compl., docket no. 19, ¶ 43. Nevels refused to remove the mental illness designation from her license, and Defendant declined to renew her liability insurance policy on January 10, 2003. Id. at ¶¶ 39, 44. Although Nevels obtained liability insurance at a much higher premium through another company, she failed to renew the new policy in January 2004 because the increased premium payments constituted a significant financial hardship. Id. at ¶¶ 46-47. Nevels is unable to find affordable liability insurance, and she is currently uninsured. Id. at ¶ 48.

C. Karla Caraño

Plaintiff Karla Caraño owns and operates an adult family home in Snohomish, Washington. Id. at ¶ 51. Caraño is licensed to care for individuals with mental illnesses. Id. at ¶ 52. In December 2001, Carano obtained property and liability insurance from Defendant. Id. at ¶ 59. In November 2002, Caraño received a written "Notice of Cancellation and Nonrenewal" from Defendant, which stated:

WESTERN WORLD INSURANCE COMPANY DOE [sic] NOT ACCEPT ADULT FAMILY HOMES LICENCED FOR OR CARING FOR MENTAL ILLNESS RESIDENTS... A PHYSICAL INSPECTION OF THIS HOME INDICATES A RESIDENT DIAGNOSED [sic] AS SCHIZOPHRENIA [sic]. THIS RISK NO LONGER QUALIFIES FOR COVERAGE WITH THIS COMPANY.

Notice of Cancellation, docket no. 19, Ex. A (emphasis in original).

Caraño refused to remove the mental illness designation from her license, and Defendant refused to renew her property and liability insurance in December 2002. 1st Amend. Compl., docket no. 19, ¶¶ 59, 64. At the time of cancellation, Washington State required adult family homes to be covered by liability insurance. Caraño obtained replacement insurance at a much higher cost. Id. at ¶ 66. In April 2004, Caraño cancelled her new liability policy because the premiums constituted a significant financial hardship. Id. at ¶ 67. Caraño is unable to find affordable liability insurance, and she is currently uninsured. Id. at ¶ 68.

D. Maria J. Fritz

Plaintiff Maria J. Fritz owns and operates an adult family home in Kent, Washington. Id. at ¶ 71. Fritz is licensed by the State of Washington to care for adults with mental illnesses, dementia, and developmental disabilities. Id. at ¶ 72. In January 2002, Fritz obtained a liability insurance policy from Defendant. Id. at ¶ 76. In December 2002, Fritz received a call from her state licensor, who informed her that Defendant would not be renewing her insurance coverage because her license contained designations that allowed her to provide housing and care for people with mental illnesses. Id. at ¶ 78. Two weeks later, Fritz received a written "Notice of Cancellation or Nonrenewal," which stated:

CONDITIONAL NON-RENEWAL — WESTERN WORLD INSURANCE COMPANY NO LONGER WRITES ADULT FAMILY HOMES LICENCED WITH THE MENTAL ILLNESS DESIGNATION... TO CONSIDER FOR RENEWAL COVERAGE, WE WILL NEED A REVISED COPY OF YOUR ADULT FAMILY HOME LICENSE WITHOUT THE MENTAL ILLNESS DESIGNATION.

Notice of Cancellation, docket no. 19, Ex. E (emphasis in original).

Fritz did not want to evict her mentally ill residents, nor did she wish to bar mentally ill people from residing in her home in the future. 1st Amend. Compl., docket no. 19, ¶ 83. Fritz refused to remove the mental illness designation from her license, so Defendant refused to renew her liability policy in January 2003. Id. at ¶¶ 80, 84. Fritz obtained liability insurance at approximately five times the cost of her Western World policy. Id. at ¶ 86. Fritz cancelled the new policy in September 2003 because the cost was prohibitive. Id. at ¶ 87. Fritz is currently without liability insurance. Id. at 88.

E. Becky and Steve Abrams

Plaintiffs Becky Marie Abrams and Steven Abrams owned and operated an adult family home in Redmond, Washington. Id. at 91. Mr. and Mrs. Abrams were licensed by the State of Washington to care for individuals with mental illnesses and dementia. Id. at ¶ 92. Beginning in May 2002, Defendant provided Mr. and Mrs. Abrams with property and liability insurance. Id. at ¶ 98. In March 2003, Mr. and Mrs. Abrams received a written "Notice[s] of Cancellation or Nonrenewal," which stated:

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

Notice of Cancellation, docket no. 19, Ex. F (emphasis in original).

Mr. and Mrs. Abrams contacted their insurance agent, who informed them that Defendant would not renew their insurance unless they removed the mental illness designation from their license. 1st Amend. Compl., docket no. 19, ¶ 103. In order to keep their...