## United States Court of Appeals FOR THE EIGHTH CIRCUIT

___________ No. 07-1894

___________ Marva Jean Saunders, et al., *
* Plaintiffs - Appellants, *
* v. *
* Farmers Insurance Exchange, et al., *
* Defendants - Appellees. *

___________ Appeals from the United States No. 07-1897 District Court for the ___________ Western District of Missouri
Marva Jean Saunders, et al., *
* Plaintiffs - Appellants, *
* v. *
* American Family Mutual Insurance * Company, *
* Defendant - Appellee. *-2- ___________ No. 07-1903

___________ Coleman McClain, et al., *
* Plaintiffs - Appellants, *
* v. *
* Shelter General Insurance * Company, et al., *
* Defendants - Appellees. * ------------------------------------------------ * United States of America; Lawyers' * Committee for Civil Rights * Under Law; National Community * Reinvestment Coalition, *
* Amici on Behalf of Appellants. *

___________ Submitted: January 17, 2008 Filed: August 12, 2008

___________ Before LOKEN, Chief Judge, HANSEN and MURPHY, Circuit Judges.

___________ LOKEN, Chief Judge. These are purported class actions on behalf of persons living in a “single, contiguous black community in Kans as City.” Plaintiffs allege, inter alia , that defendant insurance companies (“the Insure rs”) violated the Fair Housing Act, 42 U.S.C. §§ 3601 et seq. , and 42 U.S.C. §§ 1981 and 1982, by “charg[ing] higher1 The federal civil rights statutes on which plaintiffs rely do not “specifically relate” to the business of insurance, so the McCarran-Fergus on Act bars applying these statutes to “invalidate, impair, or s upersede” state insurance laws. Like the Seventh Circuit, we reject the contention by amicus Lawyers’ Committee for Civil Rights Under Law that the McCarran-Fergus on Act does not apply to subsequently enacted federal civil rights legislation such as the Fair Housing Act. See NAACP v. Am. Family Mut. Ins. Co. , 978 F.2d 287, 294 (7th Cir. 1992) (the term “‘No Act of Congress’ could not be more comprehensive”), cert. denied , 508 U.S. 907 (1993). AccordMurff v. Prof’l Med. Ins. Co. , 97 F.3d 289, 292 n.4 (8th Cir. 1996), cert. denied , 520 U.S. 1273 (1997). -3- premium rates for the same type of homeo wner’s coverage to homeowners in the Community . . . than [they] charged homeo wners in white communities.” In Saunders v. Farmers Insurance Exchange , 440 F.3d 940 (8th Cir. 2006), after years of related litigation, we affirmed the dismissal of other claims that minority residents of the community were denied coverage due to the Insurers’ discriminatory underwriting criteria. But we reversed the district c ourt’s dismissal of the price discrimination claims under the “filed rate doctrine, ” and we remanded those claims.

In remanding, we noted that the discrimi natory pricing claims might be barred by the McCarran-Ferguson Act, 15 U.S .C. §§ 1011-1015, as construed by the Supreme Court in Humana Inc. v. Forsyth , 525 U.S. 299 (1999). Enacted in response to the decision in United States v. South-Eastern Underwriters Ass’n , 322 U.S. 533 (1944), the McCarran-Ferguson Act preserves the traditional role of state insurance regulation by providing, in pertinent part, that no federal statute “shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance . . . unl ess such Act specifically relates to the business of insurance.” 15 U.S.C. § 1012(b). In Humana , the Court construed the word “impair” to mean, in addition to a “direct conflict” with state law, any application of federal law th at would “frustrate any declared state policy or interfere with a State’s administrative regime.” 525 U.S. at 310. We concluded that the record on the prior appeal was not adequate to decide that issue. 12 The HONORABLE FERNANDO J. GAITAN, JR ., Chief Judge of the United States District Court for the Western District of Missouri. -4- On remand, the Insurers renewed their Rule 12(b)(6) motions to dismiss, arguing that analysis of plaintiffs’ lengthy complaints and the Missouri insurance laws establishes that the McCarran-Ferguson Ac t bars plaintiffs’ price discrimination claims. Without objecting to deciding the issue on Rule 12 motions, plaintiffs argued that the McCarran-Ferguson Act does not pr eclude their federal civil rights claims. The district court 2granted defendants’ motions , concluding that the price discrimination claims would “impair” the Missouri laws that regulate the business of insurance within the meaning of 15 U.S.C. § 1012(b) as construed in Humana

. Saunders v. Farmers Ins. Exch. , 515 F. Supp. 2d 1009 (W.D. Mo. 2007). Plaintiffs appeal. Reviewing de novo the grant of motions to dismiss, we affirm. Benton v. Merrill Lynch & Co. , 524 F.3d 866, 870 (8th Cir. 2008) (standard of review).

I. Plaintiffs’ Price Discrimination Claims.

Plaintiffs’ complaints allege that the In surers “used a multi-tiered rate structure based in whole or in part on the racial composition of Kansas City zip code areas” with the “intentional and/or unintentiona l unlawful effect of extracting higher premium rates from homeowners” in the predominantly black community. Their allegations of issues common to the class include:

Whether [the Insurers] used separate rating territories to charge higher premium rates for risks located in the Community . . . than for comparable risks located in white communities. Whether [the Insurers] can provide any loss histories, or other actuarial or statistical data, to support [the ir] use of such segregated and discriminatory rating territories.3 A HUD regulation interprets § 3604(b) as applying to the business of homeowners insurance. See 24 C.F.R. § 100.70(d)(4); American Family , 978 F.2d at 297-301. However, “HUD has never applied a disparate impact analysis to insurers.” Nationwide Mu t. Ins. Co. v. Cisneros , 52 F.3d 1351, 1362 (6th Cir. 1995), cert. denied , 516 U.S. 1140 (1996). -5- Plaintiffs allege that the Insurers vi olated 42 U.S.C. § 3604(b), which bars race discrimination “in the terms, conditions, or pr ivileges of sale or rental of a dwelling, or in the provision of services or facilitie s in connection therewith,” as well as § 1981 and § 1982. Their prayers for relief seek a d eclaration that the Insurers violated these civil rights statutes, an injunction agains t “any further conduct vi olating plaintiffs’ rights,” compensatory and punitive damage s, and attorneys’ fees and costs.

Plaintiffs’ allegations of unintentiona l unlawful discrimination seek relief on a disparate impact theory of Fair Housing Ac t liability, that is, cha llenges to “practices that are fair in form, but discriminatory in operation.” Griggs v. Duke Power Co. , 401 U.S. 424, 431 (1971). In a number of prior cases, we have recognized a disparate impact cause of action under the Fair H ousing Act against governmental authorities. See, e.g. , Darst-Webbe Tenant Ass’n Bd . v. St. Louis Hous. Auth. , 417 F.3d 898, 902- 03 (8th Cir. 2005). Applying Departme nt of Housing and Urban Development standards, we have recogni zed a disparate impact FairHousing Act claim against private actors in another context. SeeUnited States v. Badgett , 976 F.2d 1176 (8th Cir. 1992). But at least with respect to insurers, the question is not free from doubt. See NAACP v. Am. Family Mut. Ins. Co. , 978 F.3d 287, 290-91 (7th Cir. 1992). However, the Insurers have not raised the issue and therefore we assume, without deciding, that private insurers may be liable under the Fair Housing Act on a disparate impact theory. 3

Seeking to deflect the significance of their disparate impact theory on the McCarran/Ferguson Act analysis, plaintiffs on appeal note that they “complain of racially disparate treatment, or intentional discrimination, as well as disparate impact.”-6- They did not argue this distinction in th e district court, which is reason enough to ignore it on appeal. Moreover, after twelve years of litigation, plaintiffs provide no factual basis for their conclu sory allegations that the In surers intentionally charged rates based on a homeowner’s race. Their f actually explicit allegations are that the Insurers used rating zones base d on facially neutral risk factors that have a disparate racial impact. It is these disparate impact allegations that satisfied the threshold pleading requirement of Rule 8(a)(2) -- “allegations plausibly suggesting (not merely consistent with)” unlawful conduct. Bell Atl. Corp. v. Twombly , 127 S. Ct. 1955, 1966 (2007). Viewing the complaints in th eir entirety, the lengthy litigation history, and plaintiffs’ categorical argument that no Fair Housing Act claims are barred by the McCarran/Ferguson Act, we c onclude their conclusory a llegations of discriminatory intent are mere “labels . . . and a formulai c recitation of the elements of a cause of action.” Id. at 1965. The point is important. Our opinion should not be read as deciding whether disparate tr eatment claims against Miss ouri insurers are barred by the McCarran/Ferguson Act. In this case, “[t]he allegations of intentional race discrimination . . . do not appear to be pr eempted, but they are a diversion.” Dehoyos v. Allstate Corp. , 345 F.3d 290, 300 (5th Cir. 2003) (Jones, J., dissenting).

II. Missouri’s Regulatory Regime.

Like most States, Missouri thoroughly regulates the business of insurance. The premium rates charged by property and casualty insurers are governed by Chapter 379 of the Missouri Statutes. Insurers must f ile their rates and polic y forms and, in the case of homeowners insurance, may onl y charge the filed rates. See Mo. Rev. Stat. §§ 379.321, 379.356. In se tting rates, insurers must consider “past and prospective loss experience within and outside this state,” “catastrophe hazards,” “past and prospective expenses both countrywide and thos e specifically applicable to this state,” “a reasonable margin of underwriting profit and contingencies,” and “all other relevant factors, including trend factors.” § 379.318(1). In establishing rates, insurers may group risks by classifications that “measure any differences among risks that can be demonstrated to have a probable eff ect upon losses or expenses.” § 379.318(2).4 Public hearings are conducted in accord ance with detailed, recently amended administrative hearing procedures found in Mo. Code. Regs. Ann. tit. 20 § 800-1.100 (effective May, 30, 2008). See also Mo. Rev. Stat. § 374.046. -7- Missouri prohibits rates that are “excessive . . . or unfairly discriminatory,” terms carefully defined in § 379.318(4):

No rate shall be held to be exce ssive unless such rate is unreasonably high for the insurance coverage provided and a reasonable degree of competition does not exist in the area . . . . Unfair discrimination shall be defined to include, but shall not be limited to, the use of rates . . . which unfairly discriminate betweenrisks having essentially the same hazard and having substantially the same degree of protection against fire and allied lines.

Plaintiffs note that two provisions in Chap ter 375 specifically address the issue of race discrimination, prohibiting an insurer from can celing or refusing to insure or refusing to continue to insure because of race. Mo. Rev. Stat. §§ 375.007, 375.936(11)(g). But they cite no authority extending those statutes beyond their plain meaning to cover a disparate impact claim of racially discri minatory pricing. Thus, discrimination in pricing is governed exclusively by § 379.318(4).

The Missouri Department of Insurance is “charged with the execution of all laws . . . in relation to insurance and insu rance companies doing business in this state.” § 374.010. The Director of Insurance may examine an insurer “at any time he may deem it advisable,” but at least once every f our years. § 379.343. If the Director finds that “any rate” filed by an insurer may not comply with the provisions of Chapter 379, he “shall hold a public hearing in connection therewith.” § 379.346.2. 4 If he finds after a hearing that the rate does not comply, he “shall issue an order . . . stating when, within a reasonable period of time thereafter, the further use of such rate . . . shall be prohibited.” § 379.346.3. The Director may also order the insurer to cease and desist violating the insurance laws, to take affirm ative steps to comply with those laws, and-8- to pay a civil penalty and the reasonable co sts of investigation. § 374.046.1. The authorized amount of civil penalties is specified. Charging unfairly discriminatory rates is a level two violation for which the maximum penalty is $1,000 per violation or $50,000 per year for multiple violati ons. §§ 374.049.2(2), 379.361. The Director may suspend or revoke an insurer’s licen se for a willful violation. § 379.361.1.

A person “aggrieved by any ratecharged” may ask the in surer to review the rate and, if the request is denied, may “file a written complaint and request for hearing with the director,” who must hold a hearing if he finds that the complaint is made in good faith and with probable cause. § 379.348. Plaintiffs filed no administrative complaints in these cases. We assume -- though it appears the Supreme Court of Missouri has never considered the question -- that a decision by the Director not to hold a hearing in response to a § 379.348 co mplaint could be judicially reviewed under the contested case provisions of the Missouri Administrative Procedure Act. See Mo. Rev. Stat. §§ 536.063(1), 536.100; cf. Farm Bureau Town & Country Ins. Co. of Mo. v. Angoff, 909 S.W.2d 348 (Mo. banc 1995). Under that statute, the court reviews whether the agency action was in excess of its authority; unsupported by substantial evidence; procedurally unlawfu l; arbitrary, capricious or unreasonable; or an abuse of discretion. § 536.140.

In July 2006 amendments, the Legislature au thorized the Director to file a civil action in state court seeking various remedies against a non-complying insurer, including “an order of restitution or dis gorgement” in favor of “identifiable consumers” who have suffered “financial lo ss” from a violation of the insurance laws. § 374.048.2(d). This remedy applies to viol ations of the rate-regulating provisions of Chapter 379. § 379.361.2. As with the administrative re medies, punitive damages are unavailable and civil penalties are limited to $1,000 per violati on. § 374.049.3(2). No provision of the Missouri insurance statutes allows an aggrieve d insured to file a lawsuit in state court challenging an unlaw ful rate. Only the Director, in his discretion, may do so. Plaintiffs also c oncede there is no implied private right of action under Missouri law to enforce the mandate in § 379.318(4) that rates not be5 There appears to be no direct conf lict because, as the court observed in Dehoyos , 345 F.3d at 297-98 n.5, “the federal regulatory goal of disallowing racially discriminatory insurance pricing is in harmony with the state’s goal of disallowing racially discriminatory insurance pricing.” See Mo. Rev. Stat. § 379.318(4), defining unfair discrimination “to include, but . . . not be limited to” risk and hazard discrimination. However, the Supreme Court observed in Humanathat “the term ‘supersede’ ordinarily means to displace (and thus render ineffective) while providing a substitute rule.” 525 U.S. at 307 (quotation omitted). The Missouri insurance laws allow rate classifications based on factors such as loss experience and define when a rate is “unfairly discriminatory” in terms specific to the business of insurance -- “risks having essentially the same hazard.” § 379.318(4). In this disparate impact case, plaintiffs seek to displace the state law definition of unfair discrimination with a federal rule that is based on a single factor -- disparate racial impact -- and looks suspiciously like a “substitute rule.” Arguabl y, therefore, these pricing claims would “supersede” state law, as that term was defined in Humana . But the issue was not raised in this case, and we need not decide it. -9- excessive or unfairly discriminatory. Cf. Dierkes v. Blue Cross & Blue Shield of Mo. , 991 S.W.2d 662, 667 (Mo. banc 1999). In Dierkes , the Court dismissed claims “based solely on the statutory violation” butallowed common law fraud and breach-ofcontract claims against an insurer for misr epresenting that its policies met all “state and federal requirements” because those cl aims existed “independent of the foregoing statute.” Id. at 667-68.

III. Applying The McCarran-Ferguson Act and Humana
. The McCarran-Ferguson Act bars the application of federal statutes to “invalidate, impair, or supers ede” state laws regulating insurance. In this case, it is not argued that the federal laws invoked by plaintiffs would invalidate or supersede state law. 5 Rather, the issue is whether the theo ry of liability asserted and the relief sought by plaintiffs would impair st ate law by interfering with Missouri’s comprehensive administrative regime.-10- In Humana , the Supreme Court resolved a c onflict in the circuits when it clarified that Congress in using the word “impair” intended to encompass more than direct conflicts with state law but did not intend “to cede the field of insurance regulation to the States.” 525 U.S. at 308. The Court went on to conclude that the McCarran-Ferguson Act did not bar the ci vil RICO fraud claim at issue because Nevada’s insurance laws also prohibited insurance fraud, and those laws permitted statutory and common law private actions to remedy such misconduct and allowed the recovery of damages exceeding the treble damages available under RICO. Therefore, the RICO claims at issue co mplemented rather than impaired Nevada’s administrative regime. Id. at 311-13.

In applying Humana ’s fact-intensive interpretation of the word “impair,” our focus must be on the precise federal claims asserted. Federal civil rights statutes are drafted broadly, so a statute might “impair” state insurance laws when applied in some ways, but not in others. For example, a federal claim alleging that an insurer’s coverage denial was the product of overt racial animus would doubtless be in harmony with state insurance regulation, while a su it challenging the racially disparate impact of industry-wide rate classifications may usurp core rate-maki ng functions of the State’s administrative regime. Compare Moore v. Liberty Nat’l Life Ins. Co. , 267 F.3d 1209, 1222-23(11th Cir. 2001), cert. denied , 535 U.S. 1018 (2002). “It is one thing to say that an insurance company may not refuse to deal with. . . persons . . . . It is another thing to require federal courts to determine whether limitations on coverage are actuarially sound and consistent with state law.” Doe v. Mut. of Omaha Ins. Co. , 179 F.3d 557, 564 (7th Cir. 1999), cert. denied , 528 U.S. 1106 (2000).

The Missouri insurance laws require in surers to establish rates based upon economic factors such as loss experience th at are essential to insurer solvency, and permit insurers to classify risks based upon standards that “measure any differences among risks that can be demonstrated to have a probable effect upon losses or6 As the Seventh Circuit observed in American Family , 978 F.2d at 290, “Insurance works best when the risks in th e pool have similar characteristics. . . . To curtail adverse selection, insurers seek to differentiate risk classes with many variables. Risk discrimination is not race discrimination.” -11- expenses.” Mo. Rev. Stat. § 379.318.1-2. 6 These state statutes prescribing what rates may be charged are essential to the core of Missouri’s regulation of the business of insurance. See SEC v. Nat’l Sec., Inc. , 393 U.S. 453, 458-59, 463 (1969). In these cases, plaintiffs ask a federal court to de termine that the Insurers’ filed rates are unlawful using a different fede ral standard -- disparate raci al impact -- and then to award damages based upon the lower rates they would have paid absent discrimination plus injunctive relief to preven t further violations of federal law. But in Missouri, the Director of Insurance has been delegated the e ssentially legislative task of rate-making by review ing Insurer risk classificati ons and pricing differentials. If a federal court may assess damages ba sed upon what a non-discriminatory rate would have been, and then pres cribe the future rate in an injunctive decree, “[a] more complete overlap with the state [agenc y’s] pricing decisions is impossible to conceive.” Dehoyos , 345 F.3d at 302 (Jones, J., dissenting).

Moreover, unlike Nevada law at issue in Humana , 525 U.S. at 312, neither the Missouri insurance laws nor Missouri comm on law provide a private right of action for unfairly discriminatory in surance rates. Rather, a ggrieved insureds must seek relief from the Director of Insurance, who has the exclusive authority to conduct an administrative hearing, or to commence an action in state court to remedy an insurer violation and the insured’s financial injury. By mandating an exclusively administrative remedy, Missouri law preser ves the agency’s primary authority to determine whether rates are excessive or unfairly discriminatory, § 379.318(4), subject only to judicial review for arbitrary and cap ricious agency action. Even if the same legal standards apply under fe deral and state law (which would not be the case), transferring their administration from state agency to federal court “obviously would7 We reiterate that our decision is limite d to the impact of the specific claims asserted and relief sought by plaintiffs on the exclusively admi nistrative insurance rate-setting regime under Missouri law. The McCarran-Ferguson Act’s application might well be different if other disparate impact claims were asserted or if Missouri were to allow private actions challe nging unfairly discriminatory rates. -12- interfere with the administration of the state law. The states are not indifferent to who enforces their laws.” Doe , 179 F.3d at 564.

In response, plaintiffs rely on Dierkes to argue that the Missouri insurance laws do not exclude remedies available unde r other state laws. But Dierkes held only that the insurance laws do not preclude comm on law claims “arising under a private agreement or from private misconduct . . . . not new rights created solely by the statute.” 991 S.W.2d at 668. The state law right not to pay “unfairly discriminatory” insurance rates is solely a cr eature of the insurance statut es. By barring private actions to enforce that right, and by granting the Di rector of Insurance exclusive authority to seek the limited remedies for violations of Chapter 379 prescribed by statute, Missouri law creates an administrative regime that would be frustrated and interfered with, if not supplanted, by “a rate-pay er’s cause of action to rec over damages measured by the difference between the filed rate and the rate that would have been charged absent some alleged wrongdoing.” Taffet v. Southern Co. , 967 F.2d 1483, 1491 (11th Cir.) (en banc), cert. denied , 506 U.S. 1021 (1992); see LaBarre v. Credit Acceptance Corp. , 175 F.3d 640, 643 (8th Cir. 1999). 7

For the first time on appeal, plaintiffs -- joined by the United States as amicus -- argue that Missouri allows private actions against insurers for rate discrimination under the Missouri Human Rights Act (MHRA), Mo. Rev. Stat. §§ 213.010 et seq. They fail to cite a case in which a state or federal court has applied the MHRA, which does not specifically mention insurance, to unlawful discrimination in the provision or pricing of insurance. More significan tly, after the Insurers moved to dismiss plaintiffs’ price discrimination claim as barred by the McCarran-Ferguson Act,-13- plaintiffs failed to raise this issue, even though in Saunders we specifically stated that the availability of state remedies was crucial to the issue of preclusion under the McCarran-Ferguson Act after Humana . 440 F.3d at 946. Therefore, plaintiffs did not preserve the issue for appeal . We decline to consider it, or its significance. See Snider v. United States , 468 F.3d 500, 512 (8th Cir. 2006); Von KerssenbrockPraschma v. Saunders , 121 F.3d 373, 375-76 (8th Cir. 1997).

The judgment of the district court is affirmed.

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