Opinion ID: 2829342
Heading Depth: 2
Heading Rank: 1

Heading: The Language of the Insurance Code Is Inconsistent

Text: with a Disparate Impact Theory of Liability The Texas Insurance Code prohibits “unfairly discriminatory” insurance rates as those that charge differently “because of” or “based wholly or partly on” race. See Tex. Ins. Code §§ 544.002(a )( 1), 560.002(c)(3). Texas courts considering this language in the employment context have used the “because of” and “based . . . on” race language in the disparate treatment context, but not in the area of disparate impacts. In University of Texas v. Poindexter , 306 S.W.3d 798 (Tex. App.—Austin 2009, no pet.), the court of appeals held that “[d] isparate -treatment discrimination addresses employment actions that treat an employee worse than others based on the employee’s race, color, religion, sex, or national origin. In such disparate-treatment cases, proof and finding of discriminatory motive is required.” Id. at 804 n.1 (emphasis added); accord Massarsky v. Gen. Motors Corp. , 706 F.2d 111, 117 (3d Cir. 1983) (noting that a plaintiff could establish intentional discrimination when his “employer applied an expressly race-based or sex-based standard in its treatment of the plaintiff” (emphasis added)). In Wal-Mart Stores, Inc. v. Davis , 979 S.W.2d 30 (Tex. App.—Austin 1998, pet. denied), the court of appeals described disparate impact claims as ethose that “involve facially neutral practices . . . that operate to exclude a disproportionate percentage of persons in a protected group and cannot be justified by business necessity. . . . Disparate treatment [exists where] the defendant . . . treats some people less favorably than others because of their race, color, religion, sex, or national origin.” Id. at 44 (emphasis added). The United States Supreme Court has similarly distinguished between disparate treatment discrimination and disparate impact discrimination, noting that the former is discrimination against others “because of their race,” while the latter encompasses “practices that are facially neutral . . . but that in fact fall more harshly on one group than another.” Int’l Bhd. of Teamsters v. United States , 431 U.S. 324, 335–36 n.15 (1976); see also Smith , 544 U.S. at 239 (plurality opinion). Significantly, the phrase “because of race” is also used in the Texas Labor Code, which makes an employer liable for taking action adverse to an employee “because of race.” See Tex. Lab. Code § 21.051. Under the Labor Code, a plaintiff must show causation by demonstrating that race was a motivating factor in the employer’s decision, the standard for proving intentional discrimination, or disparate treatment. See id. § 21.125(a) (“Except as otherwise provided by this chapter, an unlawful employment practice is established when the complainant demonstrates that race . . . was a motivating factor for an employment practice, even if other factors also motivated the practice . . . .”); cf. Quantum Chem. Corp. v. Toennies , 47 S.W.3d 473, 480 (Tex. 2001) (holding that in a claim for age discrimination, an employee must show that age was a motivating factor in the employer’s decision to terminate the employee); Herbert v. City of Forest Hill , 189 S.W.3d 369, 375 (Tex. App.—Fort Worth 2006, no pet.) ( holding that to prove causation in a race discrimination case, a plaintiff “must establish that race was a motivating factor for [the] employment practice” (internal quotation marks omitted)). In addition, the Texas Legislature expressly provided for disparate impact protection in Texas Labor Code § 21.122(a )( 1), 4 where it defined the burden of proof for disparate impact cases in the employment context: An unlawful employment practice based on disparate impact is established under this chapter only if a complainant demonstrates that a respondent uses a particular employment practice that causes a disparate impact on the basis of race . . . and the respondent fails to demonstrate that the challenged practice is job-related for the position in question and consistent with business necessity . . . . Id. No such section appears in the Texas Insurance Code. The Texas Legislature, well aware of how to create a cause of action for disparate impact discrimination, chose not to do so in the field of insurance, specifically with regards to the use of credit scoring. 5 Because the Legislature chose not to include a section expressly providing for or defining a disparate impact claim in the Texas Insurance Code, but did do so in the Texas Labor Code, we conclude that the Legislature did not intend to provide for disparate impact liability for the use of credit scoring in pricing insurance.