NEW ORLEANS - An insurance company caught in a battle between St. Tammany Parish and a developer that wanted to build affordable housing next to an affluent community has seen its obligations to pay any damages trimmed, though not entirely eliminated.
Safety National will possibly need to open the checkbook for Military Road Revitalization Company, should it prevail on claims that the blockage of its plans unfairly treated minorities in the parish.
The ruling opens problems for St. Tammany, too, which could find itself without insurance to pay on other claims asserted by Military Road.
"Despite allegations in the second amended complaint that St. Tammany intended to bring about discriminatory effects, it is possible that the jury will accept the allegations of discriminatory impact while rejecting allegations of intent," New Orleans federal judge Lance Africk wrote Aug. 14.
"It is therefore possible that a jury would find that St. Tammany violated the law unintentionally, which would not be excluded from coverage pursuant to the exclusionary provision. Because the question of whether Safety National is liable for this claim will depend on the facts found at trial, the Court declines to dismiss Military Road's claim against Safety National for disparate impact pursuant to the (Fair Housing Act)."
Military Road couldn't get its project past the St. Tammany Parish Council and was forced to sell its property. It then sued the parish in federal court and included its insurer as a defendant under the state Direct Action Statute, which provides a right of action against insurance companies that cover defendants.
Judge Africk tossed claims against Safety National including for punitive damages and intentional discrimination under the Fair Housing Act. However, allowed to proceed against the insurer is a claim that St. Tammany Parish's actions had a disparate impact on minorities.
Military Road sought to build the Covington Trace Ridge Apartments on five acres on Military Road in Covington. It would have been a 100-unit, mixed-income community with 51% of the units set aside for households with income levels of 80% or less of the area's median income.
It was for individuals who work in Covington but can't afford to live there. Military Road said the majority would have been from protected classes like African Americans and Hispanics.
Though it sounds like a noble idea, St. Tammany Parish officials protested. The Parish Council responded with a May 4, 2023, moratorium on rezoning and/or construction of multifamily buildings in certain areas, though not where Military Road sought to build.
Five days later, Military Road went to the councilmembers, one of whom, David Fitzgerald, said his constituents would be upset with him if it were built. The council also prepared a resolution to investigate the parish president for allowing the project.
Military Road says this was done as a political ploy to spark community outrage over the apartment complex.
Two weeks after the first moratorium, the parish introduced another - this time allegedly to target Military Road's site. The company said it was clearly retaliatory and "specifically aimed to stop the project, and in particular, to keep out workforce or low-to-moderate income residents, who are mostly African American and Hispanics, in the affluent neighborhood adjacent to the property."
It was passed June 1, 2023, then extended that December for another six months. Military Road was left unable to seek permits or start building, causing it to seek a buyer.
It found one. On April 24, 2024, allegedly after learning Military Road sold the property, the council partially lifted its moratorium. By then, Military Road had already sued, arguing the council's actions perpetuated racial segregation.
Africk's ruling doesn't apply to claims against St. Tammany Parish. It dismisses claims against Safety National that it violated the Louisiana Equal Housing Opportunity Act, the Americans with Disabilities Act and Rehabilitation Act.
Safety National escaping the claim for punitive damages could prove costly for St. Tammany, should they ever be assessed in the case.