Opinion ID: 3064680
Heading Depth: 4
Heading Rank: 3

Heading: disability or partial disability.

Text: Id. Section § 544.003 contains various exceptions to certain subsections of § 544.002. Section 544.003(b) states that “a person does not violate Section 544.002(a)(2) [age, gender, marital status, or geographic location] or (3) [disability or partial disability]” if the increased insurance coverage charge “is based on sound underwriting or actuarial principles reasonably related to actual or anticipated loss experience.” Id. § 544.003(b). Significantly, the district court emphasized that, “[d]iscrimination on the basis of race is conspicuously excluded” from the exceptions provided in § 544.003(b). Subsection (c) of § 544.003 provides another exception to § 544.002: an insurer does not violate the unfair discrimination provision of § 544.002(a)(2) or (3) if the “refusal, limitation, or charge” is otherwise “required or authorized by law or a regulatory mandate.”9 Tex. Ins. Code § 544.003(c). This provision is particularly important because, in 2003, Texas enacted a new insurance law authorizing and regulating the use of credit scoring by insurers. Act of June 11, 2003, 78th Leg. ch. 206, 2003 Tex. Sess. Law Serv. 206 (Vernon), codi- 9 As is the case with § 544.003(b), § 544.003(c) refers only to § 544.002(a)(2) and (3), conspicuously omitting any mention of § 544.002(a)(1), which is the subsection that prohibits race-based discrimination. OJO v. FARMERS GROUP 5709 fied in Tex. Ins. Code § 559 et seq. (hereinafter “2003 credit scoring law”). In pertinent part, the 2003 credit scoring law requires insurers who use credit scores in underwriting to disclose certain credit scoring information, notify applicants of any adverse actions, and file their credit scoring models with the Texas Department of Insurance. Tex. Ins. Code §§ 559.053-559.054, § 559.151. Importantly, nowhere does Texas insurance law explicitly require insurers to file, reveal, or make known the specific factors used in its credit scoring models. Farmers attempts to invoke the public filing requirements, enumerated in Tex. Ins. Codes §§ 559.053-559.054 and § 559.151, as a shield against any scrutiny of its credit scoring practices. But Ojo does not challenge Farmers’ use of credit scoring per se. He challenges only the use of certain “undisclosed factors” used in Farmers’ credit scoring model. The sections pertaining to filing requirements do not explicitly require that insurers file or make public the specific factors used in calculating a homeowner’s risk assessment rate. Because Ojo should be permitted discovery so that he can “unearth[ ]” details—specific factors—regarding Farmers’ homeowners’ insurance credit scoring system, we reverse the district court. See generally Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002) (recognizing that, at least insofar as a claim of employment discrimination is concerned, “[i]t may be difficult to define the precise formulation of the required prima facie case . . . before discovery has unearthed relevant facts and evidence.”). Ojo deserves his day in court. [4] Moreover, the 2003 Texas credit scoring legislation imposes another critical limitation on insurers doing business in that state. An insurer “may use credit scoring, except for factors that constitute unfair discrimination, to develop rates, rating classifications, or underwriting criteria.” Id. § 559.051 (emphasis added). Section 559.002 makes actionable a violation of § 559.001: “An insurer may not use a credit score that is computed using factors that constitute unfair discrimina5710 OJO v. FARMERS GROUP tion.” Id. § 559.052. Furthermore, in the same 2003 legislation that authorized credit scoring, Texas also enacted a statute defining “unfairly discriminatory” for purposes of insurance rates “used under this code.” Tex. Ins. Code art. 1.02(b). The statute provides, inter alia, that a rate is unfairly discriminatory if it is “based in whole or in part on the race . . . of the policyholder or an insured.” Tex. Ins. Code art.
The 2003 credit scoring law also empowers the Texas Commissioner of Insurance (“Commissioner”) to “adopt rules that prescribe the allowable differences in rates charged by insurers due solely to the difference in credit scores.” Id. § 559.004(b). Accordingly, Farmers points to a regulation adopted by the Commissioner stating that differences in rates charged due “solely to credit scoring” are permissible, provided that they are “based on sound actuarial principles and supported by data filed with the department.” 28 Tex. Admin. Code § 5.9941(a) (2008).