IN THE IOWA DISTRICT
COURT FOR POLK COUNTY
PRUDENTIAL INSURANCE COMPANY OF AMERICA.
Petitioner,
VS.
IOWA CIVIL RIGHTS COMMISSION,
Respondent.
and DORIS CARRUTHERS,
Intervenor.
AA1 529
RULING
STATEMENT
This is an action for judicial
review of a contested case decision and involves an appeal from
the final decision of the Iowa Civil Rights Commission (hereinafter
Commission). The decision of the Commission was filed on May 24,
1989, finding that Prudential is a public accommodation within
the Iowa Civil Rights Act and ordered Prudential to do certain
things. From said decision, Prudential has filed this administrative
appeal.
A motion was filed by the
Iowa Life Insurance association to appear as "amicus curiae".
The Court sustained the motion, and said Association filed a brief
and apppeared at the appeal hearing.
At the hearing, the petitioner
was represented by its attorneys, Patrick M. Roby and Natalie
Gaull; the Association by its attorneys, James R. Swanger and
Kristian Anderson; the Respondent Commission by its attorney,
Rick Autry; and the Intervenor Carruthers by her attorney, James
F. Elliot.
The Court, after reviewing
the entire record made before the respondent, hearing the statements
and arguments of the attorneys, reviewing the briefs filed, and
being fully advised, States:
1. The Court has jurisdiction over the subject matter of this action and over the parties hereto.
2 This is an applicaiton for judicial review of an adverse decision
in a contested case after all administrative remedies have been
exhausted.
ISSUES
1. Whether Prudential is a public accommodation as defined in Iowa Code Section 601A.2(10).
2. Whether Prudential's policy of rejecting life insurance applications of all people whose main source of income is public assistance has the effect of unlawfully discriminating against women.
3. Whether the Commission had jurisdiction to hear this case.
4. Whether the Commission erred in awarding Carruthers a paid-up policy, although she made no attempt to mitigate her damages.
STATEMENT OF THE CASE
In 1984 Doris Carruthers
decided she wanted to buy some life insurance. Carruthers was
35 years old at the time, divorced, with two children. She was
studying to be a licensed practical nurse and had no source of
income except for government assistance. At the time she was receiving
ADC, food stanps, and Title 19 medical care plus mileage money
to attend school. She had seen advertisements for Prudential;
her friends knew a Prudential agent, Dan Jackson. Eventually,
she talked with Jackson and filled out an application for insurance.
Prudential had a policy of not selling insurance to people whose main source of income was derived from public assistance. Jackson knew of this policy and informed Carruthers of it at the time she filled out her application. Carruthers submitted the application anyway, even though Jackson told her she would probably be denied. Prudential did deny Carruthers' application. Jackson was a sales agent for Prudential working out of Prudential's Ottumwa office. That office employed sixteen agents, two sales managers, and two clerks. Prudential advertised its services through the yellow pages locally and through radio and newspapers both locally and nationally.
DISCUSSION
Judicial review of agency action is authorized under Iowa Code Section 17A. 19(8). Said section provides the standards which are to guide the courts on review. The courts may directly rule on questions of law, but fact questions are reviewed through the substantial evidence test. Substantial evidence is defined as when a reasonable mind would accept the evidence as adequate to reach a conclusion. Ellis v. Iowa Department of Job Service, 285 N.W.2d 153 (Iowa 1979).
The first issue is whether
Prudential is a public accommodation as defined by Chapter 601A.
To be subject to the unfair practices prohibited by Section 601A.7,
the actor must be classified as a public accommodation. Public
accommodation is defined in defined in Section 601A.2(10) as:
[E]ach and every place, establishment, or facility of whatever kind, nature, or class that caters or offers services, facilities, or goods for a fee or charge to nonmembers of any organization or association utilizing the place, establishment, or facility ...
The interpretation to be
given this section was closely analyzed in United States Jaycees
v. Iowa Civil Rights Commission, 427 N.W.2d 450 (Iowa) 1988.
The issue in Jaycees was whether the Jaycees, as a membership
organization, was a public accommodation. Id. at 453. More
particularly, the Court considered the "place, nature, or
facility" language of subsection 10. The Court found that
those terms connotes a spatial dimension to public accommodation.
Id at 454. The Court went on to find that since there is
no spatial dimension in just being a member of the Jaycees, the
membership organization is not a public accommodation. Id.
The Jaycees Court
recognized the doctrine of noscitur a sociis, which provides that
the meanings of statutory terms are ascertained in light of the
meaning of words with which they are associated. Id. at
454. Place is defined as a "physical environment", and
establishment and facility both have common definitions which
have spatial connotations. Id. The Court also stated that
even a broad reading of the public acommodation definition has
a spatial context. Id. It cites a law review article by Professor
Bonfield which advocates a broader definition of public accommodation,
which at the time was defined narrowly by statute, but still seems
to maintain a spatial dimension. Id. The definition proposed
by Professor Bonfield is substantially close to the present definition.
In Jaycees, the membership
organization was not a public accommodation because there was
no spatial dimension to membership in the Jaycees. A contrary
example would be a restaurant, which is certainly within the meaning
of public accommodation. A restaurant is a place, and there is
a spatial aspect to it. A customer who enters the restaurant is
entitled by the statute to the services and goods that are ordinarily
offered to customers of the restaurant. Services are not usually
thought to be spatial in nature, but services are expressly protected
under the definition, as long as they are offered by a place,
establishment, or facility. If the restaurant is a sit-down restaurant,
where a waiter or waitress provides services to the customer,
those services will be considered as part of the public accommodation.
In the present case, it
is difficult to distinguish an insurance company from the restaurant.
Jackson, the insurance agent, worked at a Prudential office in
Ottumwa. This office must be considered s a place under the definition.
Like a restaurant, it has a spatial quality. People work there
to provide customers with goods and services relating to insurance.
The office is open to customers who expect the services that are
ordinarily offered by the insurance company. There is no reason
to treat this office any differently than a restaurant; therefore,
it should be covered under the statute.
Proceeding with the analysis,
there is no distinction between someone who does not actually
go to the building to conduct business and someone who does. Many
business transactions can be conducted over the phone or through
the mail. But even then the place of business is still being utilized,
as there has to be a place where the customer can write or call.
By making available a phone number or address through which a
customer may contact the business, the business is establishing
a place which offers goods or services to potential customers.
In each case, there must be some spatial dimension to the business
in order to receive the mail or call. Therefore, businesses which
welcome contact by customers through the mail or by phone must
be considered as a place.
In the present case, agent Jackson had an office in Ottumwa. The office was open to the public and also did business by phone and mail. Prudential advertised the address and phone number of its office in the yellow pages of the phone book. Although Carruthers did not go to the building, and it is unclear whether she wrote or called, Prudential cannot escape its duties just because this transaction was done at a home. Because Prudential had an office which customers could utilize to receive goods and services offered by Prudential, it must be considered a place under Section 601 A.2(10). Therefore, Prudential is a public accommodation for purposes of Chapter 601 A. The agency decision should be affirmed on this ground.
The second issue is whether
Prudential's policy of rejecting all applications for life insurance
from people whose main source of income is from public assistance
is prohibited by section 601A.7. In order to show a violation,
the claimant must prove that she is a member of a protected class.
Section 601A.7. The agency determined that Carruthers showed that
Prudential discriminates on the basis of sex through the disparate
impact of its policy. Prudential claims that the disparate impact
theory is not available in Iowa and, even if it is, it has not
been proven in this case.
Iowa has recognized the
theory of disparate impact in employment discrimination cases
under chapter 601 A. Iowa Civil Rights Commission v. Woodbury
County Community Action Agency, 304 N.W.2d 443, 448 (Iowa
App. 1981). Disparate impact is defined as a situation in which
the practice is facially neutral in its treatment of different
groups, but, in fact, it falls more harshly on one group than
another and cannot be justified by business necessity. Id.
at 449. In these cases, it is possible to show discrimination
from statistics alone. Id.
The present case is one
which challenges a broad policy of a company and is a natural
for disparate impact analysis. There is no reason to limit the
disparate impact theory to the employment discrimintion provisions
of Chapter 601 A. Therefore, the disparate impact theory should
be applied.
In Woodbury, the
Court cited Griggs v. Duke Power Co., 401 U.S. 424 (1971)
as providing the standard for disparate impact claims. Id.
Griggs states that an employer policy that is discriminatory
in operation is prohibited unless the company can show a genuine
business need for the policy. 401 U.S. at 431-32. The Court found
that the employer's "alternate [job] requirements" operated
to discriminate against blacks. The alternate requirements included
having a high school diploma (34 percent of white males in the
population had a diploma while only 12 percent of black males
had one) and a standardized test (58 percent of the whites passed
while only 6 percent of the blacks did). Id. at 430 n.6.
The Griggs test was refined in Green v. Missouri Pacific Railroad
Company, 523 F.2d 0, 1293 (8th Cir. 1975) to protect one class
which is excluded by the practice in question at a substantially
higher rate than another class. Presumably,
the rates of exclusion
cited in Griggs are "substantially higher".
The policy in question in
this case is Prudential's policy of refusing life insurance coverage
to people whose main source of income is public assistance. The
Commission cited evidence which showed that Carruthers was receiving
ADC and that the number of women who applied for ADC was in much
higher proportion than the number of men. The Commission determined
that since a higher proportion of women were on ADC, a higher
proportion of women would be turned down for insurance. Thus,
it found a disparate impact on women. Continuing this finding
is within the standards set by Griggs.
The evidence shows that there were at least ten times more women than men who received ADC. ADC is the primary public assistance program. People who qualify for it qualify for other programs such as Medicaid and food stamps, so it is likely that women are impacted by these programs also. The great disparity of women to men in the ADC program is substantial evidence to support the finding of disparate impact in Prudential's policy. Therefore, the Commissioner's decision should be affirmed on this ground.
The third issue is whether
the Commission had jurisdiction to decide this case. Prudential
and ILIA contend that the Insurance Commissioner has sole, or
at least primary, jurisdiction in matters involving the regulation
of insurance. Jurisdiction is authorized to the Insurance Commissioner
through Chapter 507B, and more specifically through Section 507b.4(7),
which lists unfair discrimination as an unfair or deceptive practice.
The Insurance Commissioner
does not have sole jurisdiction over this dispute. There is no
language in the Code that grants exclusive power to the Insurance
Commissioner to decide all disputes that relate to insurance.
In fact, Iowa Code Section 507B.8 provides that an order from
the Insurance Commissioner shall not relieve or absolve any person
affected by such order from any liability under any other laws
of this state. As discussed earlier in this ruling, the question
in this case is whether Prudential's practice of not providing
insurance to people whose main source of income derives from public
assistance violates Chapter 601 A. Since jurisdiction is granted
to the Civil Rights Commission to decide claims under Chapter
601 A, and there is no prohibition to stop it from hearing cases
relating to insurance, the Civil Rights Commission has jurisdiction
to hear the case.
The second question is whether
the Insurance Commissioner has primary jurisdiction. The doctrine
of primary jurisdiction is usually used when there is concurrent
jurisdiction between a court and an administrative agency. See
Rowen v. LeMars Mutual Insurance Company of Iowa, 230 N.W.2d
905, 912 (Iowa 1975). The doctrine calls for a court to refrain
from making an initial determination on the case in order to let
an agency decide it. 4 Davis, Administrative Law Treatise Section
22:1 (2nd Ed. 1983). The most common reason for
recognizing primary
jurisdiction is that the agency is a specialist on the question
in dispute. It is reasonable to recognize the same doctrine between
administrative agencies, as the same jurisdictional overlaps occur
between agencies, and one may have greater expertise to decide
the issues than the other.
Under the primary jurisdiction
doctrine, an adjucicatory body will not make a determination of
a question that is within the jurisdiction of an administrative
agency prior to the solution of that question by the agency 1)
where the question demands the exercise of administrative discretion
requiring the special knowledge, experience, and services of the
agency, 2) to determine technical and intricate matters of fact,
and 3) where a uniformity of ruling is essential to comply with
the purposes of the regulatory statute administered. Rowen,
230 N.W.2d at 912. Under the above standards, it is clear that
the Civil Rights Commission was correct in not refraining from
making a determination.
Despite the attempts of Prudential and ILIA to characterize the issue in this case as insurance regulation, the real issue is whether Prudential's practice is unlawful discrimination. Before any regulation of insurance is attempted, the discrimination question must be decided. The Civil Rights Commission unquestionably is the best body to make that determination. This is especially true in a case involving disparate impact, which may pose difficult fact questions. Uniformity also is served, as it is best for the Civil Rights Commission to make determinations on discrimination, rather than leaving it to all the other various agencies. Therefore, based on the standards set forth in Rowen, The Court Finds that the Civil Rights Commission correctly recognized its jurisdiction to decide this case.
The fourth issue is whether
the Commission erred in finding that part of Carruthers' damages
could have been avoided through mitigation. Prudential contends
that Carruthers should not be awarded a paid-up policy as she
could have obtained insurance elsewhere. Carruthers testified
that she did not try to get insurance from other companies. However,
she and the Commission claim that the award was reasonable.
Ordinarily, the plaintiff
has a duty to use reasonable and ordinary care and diligence in
effecting a cure or treatment for injuries, if any, and she cannot
recover for consequences which might have been avoided. Shewrey
v. Heuer, 121 N.W.2d 529, 533 (Iowa 1963). The burden to prove
that the plaintiff failed to minimize her damages rests
with the defendant. Id. In the present case, Prudential
proved that Carruthers took no steps to attempt to minimize her
damages. Therefore, there is no question that she filed to attempt
to mitigate.
However, there was no evidence
in the record, to the knowledge of the Court, that Carruthers
could have obtained insurance and, if so, how easily she could
have found a company that would insure her. If there is no company
that would insure her, the damages could not
have been minimized
and it would have been impossible to mitigate. Because the reasonableness
of Carruthers' actions is a fact question, the Court must review
it by the substantial evidence standard. Since a reasonable agency
could find that Prudential failed to meet its burden of proof
on the mitigation issue without a showing of the possibility of
minimizing the damages, the substantial evidence test is satisfied.
Therefore, the commission's decision is correct and it may properly
award a paid-up policy as part of the remedy.
Further, the amount of the fees and costs charged by the Commission to Prudential should be sustained.
RULING
The Court Finds that:
1. Prudential is a public accommodation.
2. There is a disparate impact toward women in Prudential's policy.
3. The Commission does have jurisdiction to decide the case.
4. The Commission did not err by awarding Carruthers a paid-up policy.
5. That the decision is
affirmed on all grounds.
IT IS THEREFORE THE ORDER TO THE COURT that the decision of the respondent agency is affirmed on all grounds.
Costs of this appeal are charged to the petitioner.
Dated this 8th day of March, 1990.
JUDGE OF THE FIFTH JUDICIAL
DISTRICT OF IOWA
Copies to:
Patrick M. Roby/ Natalie Gaull
James R. Swanger/Kristian Anderson
Rick Autry
James F. Elliot