McCarran–Ferguson Act

The McCarran–Ferguson Act, 15 U.S.C. §§ 1011-1015, is a United States federal law that exempts the business of insurance from most federal regulation, including federal anti-trust laws to a limited extent. The McCarran–Ferguson Act was passed by Congress in 1945 after the Supreme Court ruled in United States v. South-Eastern Underwriters Association that the federal government could regulate insurance companies under the authority of the Commerce Clause in the U.S. Constitution.

The Act was sponsored by Senators Pat McCarran (D-Nev.) and Homer Ferguson (R-Mich.).

Intent

The McCarran–Ferguson Act does not itself regulate insurance, nor does it mandate that states regulate insurance. "Acts of Congress" that do not expressly purport to regulate the "business of insurance" will not preempt state laws or regulations that regulate the "business of insurance."

The Act also provides that federal anti-trust laws will not apply to the "business of insurance" as long as the state regulates in that area, but federal anti-trust laws will apply in cases of boycott, coercion, and intimidation. By contrast, most other federal laws will not apply to insurance whether the states regulate in that area or not.

For example, the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the "Convention") does not preempt state law. In Foster v. Neilson, this Court held “Our constitution declares a treaty to be the law of the land. It is, consequently, to be regarded in courts of justice as equivalent to an act of the Legislature, whenever it operates of itself without the aid of any legislative provision.” Foster v. Neilson, 27 U.S. 253, 314 (1829). See also Valentine v. U.S. ex rel. Neidecker, 57 S.Ct. 100, 103 (1936); Medellin v. Dretke, 125 S.Ct. 2088, 2103 (2005); Sanchez-Llamas v. Oregon, 126 S.Ct. 2669, 2695 (2006). Thus, over a course of 181 years, the United States Supreme Court has repeatedly held that a self-executing treaty is an act of the Legislature (i.e., act of Congress). Thus, as Castro has emphasized, the Convention, whether self-executing or not, is barred from preempting state law under the McCarran-Ferguson Act.

Despite this clarity from the U.S. Supreme Court and its refusal to hear cases regarding the matter, many attorneys continue to insist on judicial review of the effect of the Convention on the McCarran-Ferguson Act.

History

United States v. South-Eastern Underwriters Association (322 U.S. 533) came before the Supreme Court in 1944 on appeal from a district court located in north Georgia. The South-Eastern Underwriters Association controlled 90 percent of the market for fire and other insurance lines in six southern states and set rates at non-competitive levels. Furthermore, it used intimidation, boycotts and other coercive tactics to maintain its monopoly.

The question before the Court was whether or not insurance was a form of "interstate commerce" which could be regulated under the Commerce Clause of the United States Constitution and the Sherman Anti-Trust Act. The general opinion in law before this case, according to the Court, was that the business of insurance was not commerce, and the District Court concurred with the opinion. In his partial dissent at 322 U.S. 588, Justice Robert H. Jackson of the Supreme Court said:

4. Any enactment by Congress either of partial or of comprehensive regulations of the insurance business would come to us with the most forceful presumption of constitutional validity. The fiction that insurance is not commerce could not be sustained against such a presumption, for resort to the facts would support the presumption in favor of the congressional action. The fiction therefore must yield to congressional action, and continues only at the sufferance of Congress. 5. Congress also may, without exerting its full regulatory powers over the subject, and without challenging the basis or supplanting the details of state regulation, enact prohibitions of any acts in pursuit of the insurance business which substantially affect or unduly burden or restrain interstate commerce.

In short, the dissent stated that the conclusion that insurance was not commerce under the law rested with Congress, and that the Court should follow the lead of Congress.

As a result, on March 9, 1945, the McCarran–Ferguson Act was passed by Congress. Among other things, it:

• partially exempts insurance companies from the federal anti-trust legislation that applies to most businesses
• allows for the state regulation of insurance
• allows states to establish mandatory licensing requirements
• preserves certain state laws of insurance.

External links

• "McCarran-Ferguson Act from Rupp's Insurance & Risk Management Glossary". NILS Publishing. 2002. Archived from the original on November 25, 2005. Retrieved 2006-03-04.
• [1] Text of US vs. Southeastern Underwriters
• [2] Text of the McCarran–Ferguson Act
• Weller, Charles D (1978). "The McCarran-Ferguson Act's Antitrust Exemption for Insurance:Language, History, and Policy". Duke Law Journal. 22. Duke Law Journal: 587–643.
• Koch, Steven (1981). "McCarran-Ferguson Act Immunity from the Truth in Lending Act and Title VII". The University of Chicago Law Review.
• "Comments to the Antitrust Modernization Commission Regarding the McCarran-Ferguson Act" (PDF). American Bar Association. April 2006. Recommends that the McCarran–Ferguson Act be repealed and replaced with certain “safe harbor” exemptions from the antitrust laws.
• Brostoff, Steven (March 5, 1990). "The surprising history of McCarran-Ferguson". National Underwriter Life & Health-Financial Services. Retrieved 2009-10-28.