Homeowners' insurers are concerned that a new disparate impact rule proposed by the U.S. Department of Housing and Urban Development could fundamentally alter risk-based pricing. There is speculation that HUD is waiting to announce a final rule to see if the Supreme Court takes up Township of Mount Holly v. Mount Holly Gardens Citizens in Action Inc.

The case stems from an attempt by the New Jersey municipality to redevelop a less-affluent part of town. Opponents argued that the plan would price minorities out of the community and therefore create a disparate impact in violation of the FHA. At issue are the questions of whether a disparate impact exists, if there is a claim to be brought under the FHA, and how to proceed, said Richard J. Andreano, Jr., who leads the Mortgage Banking Group at Ballard Spahr. The firm represents the project's developer, which is not a party to the litigation.

Mr. Andreano said that although the case is not about insurance, it could have a long-term effect on how insurance companies do business. "They could do everything fully and appropriately based on safety and soundness principles of insurance law and still be subject to claim that they violated federal law, which has got to be very unsettling to an insurance company," he said.