Today’s blog entry come to me courtesy of Clinical Law Professor Leonard Sandler of the University of Iowa, and deals with the question of whether there is an FHA violation when an insurance company allegedly refuses to insure a landlord because the ESA owned by the tenant was one of the prohibited breeds contained in the insurance exclusion. The case is Chhang v. West Coast USA Properties LLC, decided by the U.S. District Court of the Eastern District of California on February 11, 2025, here. As usual, the blog entry is divided into categories and they are: facts; court’s reasoning denying the insurance brokers motion to dismiss the FHA claim; and thoughts/takeaways. Of course, the reader is free to focus on any or all of the sections.

I

Facts Taken from the Opinion

Pharilyn Chhang (“Plaintiff”) filed the operative second amended complaint on September 16, 2024. (Second Am. Compl. (“SAC”), ECF No. 65.) Plaintiff names the following Defendants: (1) West Coast USA Properties LLC (“West Coast”), a California limited liability company that holds title to the Cypress Apartment located at 121 Cypress Street in Madera, California; (2) Sergio Madrigal, the landlord, managing member, agent, and chief executive officer of West Coast; and (3) Dibuduo & Defendis Insurance Brokers, LLC (“D&D”), the insurance broker from which West Coast obtained its Mercury Casualty Company (“Mercury”) policy to insure the Cypress Apartments. (SAC ¶¶ 5-7.)

Plaintiff and Madrigal signed a one-year lease from August 1, 2022 to July 31, 2023 to rent an apartment at the Cypress Apartments. (SAC ¶ 16.) Plaintiff told Madrigal that she lived with her emotional support pit bull terrier, Onyx, and requested an exception to the lease’s rule prohibiting pets. (SAC ¶ 17.) When Madrigal refused, Plaintiff explained she was disabled, and that Onyx was necessary for her use and enjoyment of the apartment. (Id.) Madrigal told Plaintiff that the property’s insurance company prohibited him from renting to a tenant with a dog of Onyx’s breed, even if it was an emotional support animal (“ESA”). (Id.) Plaintiff signed the lease, moved into the apartment, and placed Onyx with friends. (SAC ¶ 18.)

On October 16, 2022, Plaintiff asked that Madrigal reconsider her request for a reasonable accommodation. (SAC ¶ 19.) Madrigal confirmed that the lease could not be modified for insurance reasons. (SAC ¶ 20.)

On October 18, 2022, Christina Quijano, Madrigal’s property manager, asked D&D via email whether West Coast’s insurance policies had any restrictions on allowing pit bulls on the property. (SAC ¶ 24.) Andrew Shaffer of D&D responded with a copy of what he described as Mercury Insurance’s guidelines for habitational exposures, including apartments, which stated:

The following risks are ineligible:

1. Tenants who own or board Akitas, Cane Corsos, Chows, Pit Bulls, Presa Canario (canary dog), Rottweilers, Staffordshire Bull Terriers, wolf hybrids, zoo animals, exotic animals, saddle animals or any animal with a biting history. Any “mixed breed” dog that has any unacceptable breed as part of the dog’s lineage is unacceptable.

(SAC ¶ 25.) Shaffer also advised that knowingly allowing animals of the listed breeds could result in cancellation of West Coast’s policy or denial of claims. (Id.) Plaintiff alleges, however, that the Mercury policy contained no limitation on dog breeds that could be owned by tenants residing on the property. (SAC ¶ 26.) Nor did the policy contain any cancellation provision or other penalty if West Coast allowed a tenant to keep one of the listed dog breeds. (Id.)

On October 25, 2022, Madrigal sent Plaintiff a letter denying her request for a reasonable accommodation. (SAC ¶ 27.) Madrigal advised Plaintiff that they had contacted their insurance carrier regarding Plaintiff’s request to have a pit bull on the property as a service animal. (Id.) Madrigal relayed that the insurance carrier informed them that if Plaintiff’s request was accommodated, the insurance carrier would no longer provide coverage because having a pit bull on the property is too much of a risk and is therefore excluded in the policy. (Id.)

On October 28, 2022, Plaintiff renewed her request to Madrigal via email, stating in pertinent part that denying her request for her ESA based on breed and size restrictions are prohibited, including those imposed by insurance companies. (SAC ¶ 29.)

On November 5, 2022, Madrigal mailed a sixty-day notice to Plaintiff terminating her tenancy without stating a reason. (SAC ¶ 32.) On November 8, 2022, Quijano served a new notice on Plaintiff entitled, “Ninety Day Notice of Termination of Tenancy Due to Owner Move-In” and a cover letter advising Plaintiff that the lease would end on February 8, 2023. (SAC ¶ 35.) Plaintiff vacated the apartment by February 8, 2023, and she and her daughter were homeless until April 25, 2023. (SAC ¶ 38.)

II

Court’s Reasoning Denying the Insurance Brokers Motion to Dismiss the FHA Claim

1. A prohibited activity under the FHA, 24 C.F.R. §100.70(d)(4), is to refuse to provide property or hazard insurance for dwellings or to provide insurance differently because of handicap.
2. Citing to several different court decisions, the court said that courts have concluded that refusing to provide insurance to the landlord rather than to the tenant can violate the FHA. In particular: 1) a large body of case law exists holding that insurers can be held liable under the FHA because they provide the financial assistance necessary to maintain a dwelling, and therefore denial of insurance has the effect of making housing otherwise unavailable to the tenant; and 2) when considering housing discrimination against tenants with disabilities, it does not matter whether the denial of insurance is to the landlord or to the tenant because if a landlord must risk losing her home through loss of insurance, the landlord will be disinclined to rent to persons with disabilities.
3. 42 U.S.C. §3604(c) makes it unlawful to make or cause to be made any statement with respect to the rental of a dwelling that indicates any preference, limitation, or discrimination based on a handicap, or an intention to make any such preference, limitation, or discrimination. In determining whether an oral or written statement violates this section, a plaintiff need not present evidence that the defendant harbored a discriminatory purpose. Instead, a violation occurs if an ordinary listener would believe that it suggests a preference, limitation, or discrimination based on a protected status.
4. 42 U.S.C. §3617 makes it unlawful to coerce, intimidate, threaten, or interfere with any person on account of his having aided or encouraged any other person in the exercise or enjoyment of, any right granted or protected by the FHA.
5. 3617 reaches all practices that have the effect of interfering with the exercise of rights under the federal fair housing laws.
6. While §3617 gets interpreted broadly, the plaintiff still has to show that the defendant’s actions affected the exercise or enjoyment of any right granted or protected by the FHA.
7. Plaintiff did not bring FHA claims against a passive third-party insurance broker that did nothing more than secure a policy for West Coast. Instead, plaintiff alleges that the insurance broker, through its own acts and/or statements violated the FHA in three different ways: 1) making housing otherwise unavailable by refusing to provide insurance or providing insurance differently because of plaintiff’s handicap; 2) making or causing to be made a statement with respect to the rental of the apartment indicating a preference, limitation, or discrimination based on a handicap; and 3) interfering with plaintiff’s exercise or enjoyment of rights granted or protected by the FHA. Accordingly, the alleged duty owed to the plaintiff comes from the insurance broker’s own acts and/or statements that allegedly made housing unavailable to the plaintiff or interfered with her fair housing rights.
8. Plaintiff was informed by the landlord on at least three different occasions that her request for reasonable accommodation to allow her to live with her ESA was denied for insurance reasons.
9. Plaintiff further alleged that the landlord reached out to the insurance broker to inquire whether their insurance policy had any restrictions on allowing pitbull’s on the property.
10. Plaintiff also alleged that other defendants were provided with a purported copy of the insurance guidelines that listed pit bulls as an ineligible risk and further advised the other defendants that allowing certain breeds of animals could result in cancellation of the policy or denial of claims despite the facts possibly being otherwise.
11. Plaintiff also alleged that she received a letter from the landlord stating in part that they could not allow the ESA because the insurance company had said that her breed was excluded from the policy and posed too much of a risk.
12. In a motion to dismiss, plaintiff’s allegations are accepted as true. Accepting those statements and making a reasonable inference that the insurance carrier informed the landlord that pit bulls were a prohibited breed, means that the insurance broker allegedly had knowledge of the plaintiff’s request to have a pit bull on the property as a service animal.
13. Plaintiff’s second amended complaint sufficiently alleges that if the landlord granted plaintiff’s request for reasonable accommodation to allow her ESA to live on the property, the insurance broker allegedly had informed the landlord that the insurance company would no longer provide insurance coverage.
14. The question of whether the insurance broker had knowledge of plaintiff’s requests, or disability, her ESA, or made a discriminatory statement based upon her disability are questions of fact that cannot be determined on a motion to dismiss.
15. Plaintiff sufficiently alleged that the insurance broker had knowledge of plaintiff, her ESA, and her request for accommodation when it allegedly made the statement to the landlord.
16. The court is unpersuaded that the insurance broker did not create a duty owing to the plaintiff under the broad scope of the FHA by its own alleged actions and/or statements.
17. For the same reasons, the court found that plaintiff had also sufficiently alleged violations of similar provisions, though not identical, of the California Fair Employment and Housing Act,

III

Thoughts/Takeaways

1. There were actually three defendants in this case; 1) the California limited liability company holding title to the apartments; 2) the landlord, managing member, agent, and Chief Executive Officer of the limited liability company; and 3) the insurance broker. For purposes of this blog entry and to keep it simple, the references to landlord in this blog entry includes both the limited liability company as well as the landlord, managing member, agent and CEO of the limited liability company.
2. Breed restrictions in insurance policies covering rental units is a very common practice.
3. The particular breed is never the problem, it is the way the dog has been trained or the particular dog that could be the problem.
4. As we discussed here, breed restrictions are also a no go under the ADA.
5. This case stands for the proposition that insurance brokers with breed restrictions in the policy they sell to landlords cannot be used as an excuse by the landlord for failing to comply with the FHA.
6. As for how a landlord should go about dealing with ESA or service animal requests, see this blog entry. See also this blog entry as well.
7. There is a portion of the case where the opinion conflates service animals with ESA’s. As we know, see here for example, they are not at all the same thing.
8. Insurance brokers by having such exclusions in their policies do create a duty to tenants with disabilities.
9. The FHA unfortunately uses the term handicap in places instead of disability. So, the opinion’s reference to “handicap,” are statutorily driven. Stay away from using that term whenever possible. If you have to use the term for statutory reasons, it is better to note why you are using that term and then refer to “disabled,” or “person with a disability,” the rest of the time.