Escaping the Purpose of the ADA: The “Safe Harbor” Provision and Disability-Based Distinctions in Insurance Policies and Programs

Grant P.H. Shuman, Escaping the Purpose of the ADA: The “Safe Harbor” Provision and Disability-Based Distinctions in Insurance Policies and Programs, 36 Gonz. L. Rev. 549 (2001).

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In 1990 Congress passed the Americans with Disabilities Act (“ADA”)[1] in order to “eliminat[e] … discrimination against individuals with disabilities.”[2] In doing so, Congress enacted a broad law with sweeping implications and broke from “the relatively narrow scope of earlier federal disability legislation. “[3] The ADA touches many facets of life in this country from employment[4] to bowling alleys.[5] The ADA also covers the business of insurance.[6] However, in a sense, the business of insurance and an antidiscrimination statute have little in common because insurance is inherently discriminatory. Insurance concerns the allocation of risk from one party to another, but that risk is evaluated in terms of any number of variables including some that are discriminatory by nature. For instance, insurers routinely charge older people a higher insurance premium than they do younger people.[8] As a result, the tension between the ADA and the insurance business is a matter of course.

In an attempt to solve this dilemma, Congress included a separate section to the ADA on the subject of insurance.[9] Section 12,201 of Title 42 is referred to as the “safe harbor” provision because it shields the risk classification practices of insurers from the brunt of the ADA, so long as such practices are not inconsistent with state law or they are not a subterfuge.[10] In practice, the provision engenders much controversy. The issues raised by the safe harbor provision are twofold. First, courts are divided on whether a plaintiff has standing to bring a claim against an insurer, either as a Title IV action against their employer or the employer’s insurance provider, or a Title 111[12] action against the insurance company. [13] Proving that a plaintiff has standing under the ADA to bring this type of action is not a foregone conclusion in some federal courts. Second, even if a plaintiff has standing, in most courts the plaintiff has the burden of demonstrating, at least initially, that the underwriting practice at issue is a subterfuge. [14] For many plaintiffs, the totality of such a claim presents an onerous burden because, in most cases, the insurance company or employer has singular control over the contested information. In addition, the standard that governs what is or is not a subterfuge appears to be firmly in the favor of insurers. As a result, the tension between the ADA and insurance underwriting practices is palpable indeed…. Read more

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