Discrimination is fundamental to the business of auto and homeowners insurance. Yet state insurance law does remarkably little to police against the risk that this discrimination will unfairly harm minority or low-income communities. Not only do state insurance regulators completely ignore the prospect that facially-neutral insurance practices might disparately impact vulnerable populations, but they affirmatively suppress the production and dissemination of data that would advance a better understanding of this risk. Meanwhile, most states continue to cling to an antiquated, ineffective, and inefficient scheme of “public utility style” rate regulation that purports to prohibit “excessive, inadequate, or unfairly discriminatory” insurance rates. This scheme not only undermines the operation of efficient insurance markets, but also helps to shield the industry and state regulators from scrutiny regarding how insurance practices impact larger social goals—like facilitating socio-economic mobility. This Article argues that insurance law should scrap its regime of public utility style rate regulation in favor of a civil rights approach to anti-discrimination law. Such an approach should, at a minimum, promote the collection and public disclosure of company specific, transaction-level data on insurance applications, purchases, losses, and policyholder membership in legally protected groups—much in the manner of the Home Mortgage Disclosure Act. Further paralleling modern anti-discrimination regimes in consumer finance, this civil rights approach should afford private parties a cause of action against insurers based on a modified disparate impact theory that reflects the important role of risk-based discrimination in insurance markets. This could be accomplished by recognizing that insurance discrimination based on factors that genuinely predict claim frequency or severity, even after controlling for prohibited characteristics, constitutes a “legitimate non-discriminatory” practice under the familiar burden-shifting scheme for disparate impact liability.
In the toxic tort context, both litigation and regulation require reliable scientific data to establish a causal connection between exposure to some substance and alleged harm before allowing recovery or mandating mitigation. On the one hand, it is important for litigation and regulation to be based on causal evidence of actual harms. Otherwise, these interventions could make society worse off by unduly limiting the availability of useful substances and diverting resources away from addressing true risks. On the other hand, for this system to comprehensively address all important environmental externalities, there must exist sufficient incentives to generate the data required for effective risk-management through litigation and regulation. This Article argues that, in many cases, the incentives are insufficient. When it comes to latent harms, in particular, scientific research evaluating causal links is challenging and expensive. Independent researchers, who require funding for their work, are unlikely to systematically analyze the effects of new substances. To date, there are thousands of unstudied substances in use. Given the increasing importance of reliable scientific data for efficient risk management, it is time to evaluate all options for incentivizing its production in order to promote optimal deterrence in the toxic tort context. This Article proposes several ways to combat the persistent data lag, including changes to tort common law and regulation. Most controversially, it proposes a new tort cause of action for informational monitoring and analysis in some circumstances when there exist no reliable studies on the potential harm of a particular substance. A successful claim would lead to the establishment of a scientific panel, paid for by the defendant, to analyze and monitor the link between exposure to the substance and subsequent health outcomes.
