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The McCarran-Ferguson Act: How Far Does It Reach? Some Recent Developments

The McCarran-Ferguson Act: How Far Does It Reach? Some Recent Developments. Chris S. Coutroulis. What Does MFA Say. The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business.

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The McCarran-Ferguson Act: How Far Does It Reach? Some Recent Developments

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  1. The McCarran-Ferguson Act:How Far Does It Reach?Some Recent Developments Chris S. Coutroulis

  2. What Does MFA Say • The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business. • [T]he Sherman Act … the Clayton Act … and the Federal Trade Commission Act … shall be applicable to the business of insurance to the extent that such business is not regulated by State law. 15 U.S.C. § 1012. 2

  3. What Does MFA Do Expressly immunizes from Sherman Act challenge insurer conduct that: • is part of the “business of insurance.” • is regulated by state law; and • does not constitute a boycott of unrelated transactions. 3

  4. The “Boycott Exception” “Nothing contained in this chapter shall render the said Sherman Act inapplicable to any agreement to boycott, coerce, or intimidate, or act of boycott, coercion or intimidation.” 15 U.S.C. § 1013(b). 4

  5. What Constitutes the “Business of Insurance” 3 criteria for determining: • Whether the practice has an effect of transferring or spreading a policyholder’s risk • Whether the practice is an integral part of the policy relationship between the insurer and the insured; and • Whether the practice is limited to entities within the insurance industry. Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119 (1982). 5

  6. Lessons from Gilchrist • Exploit inconsistencies in the other side’s positions – their attempt to get around one problem may expose another problem and reveal you were right on a pivotal issue. • Look past the framing of the allegations to their actual substance and the theory of impact and damage: that will reveal whether the challenged conduct truly implicates the business of insurance. • Be persistent: stick with your best arguments even if they initially (and even later) do not receive the treatment they deserve. As the case ultimately unfolds, you may be vindicated. 6

  7. Synthesizing the Relevant Factors • How directly does the challenged conduct go to the insurer-insured relationship rather than a collateral relationship with a third party? • Does the challenged conduct relate to policy formation and performance? • Does the challenged conduct directly or indirectly impact rates, the ratemaking process, or the pooling and sharing of risks? • Is the challenged conduct itself regulated by state insurance agencies and therefore the type of conduct Congress intended to exempt from antitrust scrutiny? 7

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