Note: I didn’t write this by myself, but rather I was merely one of three co-authors, the others being Anne Sadovsky, CSP, CAM, CAPS, RAM and DJ Ryan, Fair Housing Specialist, Kimball, Tirey & St. John, LLP, and is based on an article that we wrote years ago for NAA’s Units Magazine.  But even though the article is old (and that may well be an adjective some might dare to use for all 3 authors), it is still relevant (and that should be an adjective that you should use for all 3 authors).  So here goes:  

Pick up any magazine within the multi-family housing industry or attend an educational conference, and it is likely you will find something about fair housing.  This issue is important to our industry for many reasons, including the dollar impact of not being in compliance with the fair housing laws. If you are charged with discrimination, the defense costs are high, not to mention perhaps having to pay to either settle the case or satisfy a judgment.  You have protected your business and yourself from the ramifications of a fire, a slip-and-fall, or the myriad of other events that create liability for you as a landlord.  But what about fair housing insurance coverage?  Do you have it?  Do you not have it?  Do you know?  Do you really need it?  Do you care (probably, since you are reading this post)?  Is there really any such thing? 

Yes, there is coverage available. But it is up to you to find it, evaluate it, and make good business decisions regarding your needs. This post won’t give you all the answers, and will most likely raise more questions for you, but it is a good starting point for you to dialogue with your insurance agent or carrier.  So, here goes…

The first step is to see if you have coverage:

1. Keep in mind that your General Liability and Directors & Officers policies will likely not provide you with fair housing protection.  Personal Liability policies may (or may not!) provide coverage, but Professional Liability will often do so.
2. Check the AM Best’s rating (FSR – Financial Strength Rating) for your carrier’s ability to meet its obligations to you as a policyholder.
3. Discuss whether the carrier is “admitted” or “non-admitted/unauthorized” in the state or states in which you have properties and do business.
4. Next, open up a discussion with your agent/carrier about “Discrimination Coverage” or “Tenant Discrimination Liability Insurance.” The term “fair housing insurance” is not generally used in the insurance industry.

Now, let’s say that your agent/carrier assures you that you have the coverage or that you will be able to buy it. You’re all set now, right?  No, not at all.  As a smart business person you need to know what it is that you have bought or will buy.  And what you think you “see” is not necessarily what you might actually “get.”  You need to know:

1. Are you covered for intentional acts of discrimination?
2. Are you covered for punitive damages? There have been fair housing cases with punitive damages in excess of a million dollars, and one non-landlord fair housing case with punitive damages awarded at one hundred million dollars (that’s $100,000,000 and not a typo!).
3. Are you covered for civil penalties, emotional distress, compensatory damages, legal fees and settlements?
4. There are so many people for whose acts you are responsible.  Are you covered for the issues created not just by your regular employees, but also part-time, temporary, and leased employees, as well as volunteers?  What about issues created by residents, or your contractors and vendors?
5. What if the alleged fair housing issue arises in the social media arena?  Are you covered for an inappropriate post by an employee?  What if that employee was not at work at the time of the post, but was “on call”?
6. Are you only covered during the leasing/application process?  What about coverage as relates to residents during their tenancy with you?  (In fact, most complaints are filed by current residents for harassment, evictions, different terms and conditions of their leases, and denial of requests for disability accommodation.)
7. Are you covered for groundless or false claims?  Defending these can cost thousands of dollars!
8. Are you only covered for actual lawsuits?  What about formal complaints made to HUD?  What about an informal claim made to you?  Keep in mind that you likely have a responsibility to notify your carrier even when someone just mentions a fair housing issue to you.  What is the time frame for notification?  And what can it cost you for failure or delay in notification…you may invalidate the coverage entirely!
9. Are you covered for prior acts, those which may have occurred before your policy went into effect?
10. Can you choose your own attorney?  The answer is “not always” and this can be to your detriment.  Attorneys who are familiar with fair housing complaints, the various enforcing agencies and investigators, can often get a situation handled quickly and resolve it efficiently because of their expertise.  A carrier’s attorney may not be able to do that and can run up hours of legal fees while trying to learn about this specialized area of the law.
11. Will the carrier pay up front, as you accrue expenses, before the case concludes?  Keep in mind that fair housing cases (and their costs) can, and do, go on for years and years.  Your carrier may give you a “Reservation of Rights Letter” – they’ll pay you now, but if the event turns out to be non-insurable at its conclusion (perhaps for intentional discrimination), then you will be required to give the money back and pay your own judgment to boot!
12. Who controls a possible settlement; you or the carrier?  Most cases are settled, and few actually make it into an administrative or federal district courtroom.
13. Is there a “hammer clause” regarding settlement?  If you refuse to agree to a settlement offer and insist on going to court, but then lose more than you could have settled for, guess who pays the difference?  (Hint- if there is a hammer clause, it won’t be your carrier who pays.)
14. Will a settlement affect your tax credit properties?  If you are found to have discriminated, you bet. If you settle and thus “admit” liability or lose in a lawsuit, you stand a good chance of losing your tax credit status.

A fire can occur at your community, someone can slip and fall.  There could be wind damage, hail damage, a tragic drowning in your pool.  You have likely protected yourself from these possibilities with insurance.   But be sure that you have done what you can to also protect yourself from the wrongful denial of a reasonable modification or accommodation request; sexual harassment or harassment based on protected class status; eviction or differential treatment because of protected class status; saying the wrong thing; treating applicants differently; linguistically profiling on the telephone; having community rules that unreasonably target children; automatically evicting the mentally disabled; not allowing assistance animals in pet-free properties; failing to have accessible housing where required or failing to allow modifications for the disabled.  These are the most common bases for fair housing complaints.

Make smart business decisions.  You may be disinclined to pay the premiums for tenant discrimination insurance yet just a few hours work on a fair housing issue may result in legal fees that are as high as the premium for coverage would have been.  Know what you are buying. Hopefully the ideas shared above will help you evaluate that. And consider this closing message from this trio of authors…complying with fair housing law is the right thing to do and avoiding fair housing complaints in the first place is the best insurance of all.