McCarran-Ferguson Act

McCarran-Ferguson Act

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The McCarran–Ferguson Act, 15 U.S.C.
United States Code
The Code of Laws of the United States of America is a compilation and codification of the general and permanent federal laws of the United States...

 §§ 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
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...

 ruled in United States v. South-Eastern Underwriters Association
United States v. South-Eastern Underwriters Association
United States v. South-Eastern Underwriters Association, 322 U.S. 533 is a United States Supreme Court decision that held that the Sherman Act, the federal antitrust statute, applied to insurance. To reach this decision, the Court held that insurance could be regulated by the United States...

that the federal government could regulate insurance companies under the authority of the Commerce Clause
Commerce Clause
The Commerce Clause is an enumerated power listed in the United States Constitution . The clause states that the United States Congress shall have power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." Courts and commentators have tended to...

 in the U.S. Constitution.

The Act was sponsored by Senators Pat McCarran
Pat McCarran
Patrick Anthony McCarran was a Democratic United States Senator from Nevada from 1933 until 1954, and was noted for his strong anti-Communist stance.-Early life and career:...

 (D
Democratic Party (United States)
The Democratic Party is one of two major contemporary political parties in the United States, along with the Republican Party. The party's socially liberal and progressive platform is largely considered center-left in the U.S. political spectrum. The party has the lengthiest record of continuous...

-Nev.
Nevada
Nevada is a state in the western, mountain west, and southwestern regions of the United States. With an area of and a population of about 2.7 million, it is the 7th-largest and 35th-most populous state. Over two-thirds of Nevada's people live in the Las Vegas metropolitan area, which contains its...

) and Homer Ferguson
Homer S. Ferguson
Homer Samuel Ferguson was a United States Senator from Michigan. He was born in the Pittsburgh suburb of Harrison City, Pennsylvania to parents Samuel Ferguson and Margaret Bush Homer Samuel Ferguson (February 25, 1889 December 17, 1982) was a United States Senator from Michigan. He was born in...

 (R
Republican Party (United States)
The Republican Party is one of the two major contemporary political parties in the United States, along with the Democratic Party. Founded by anti-slavery expansion activists in 1854, it is often called the GOP . The party's platform generally reflects American conservatism in the U.S...

-Mich.
Michigan
Michigan is a U.S. state located in the Great Lakes Region of the United States of America. The name Michigan is the French form of the Ojibwa word mishigamaa, meaning "large water" or "large lake"....

).

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
Boycott
A boycott is an act of voluntarily abstaining from using, buying, or dealing with a person, organization, or country as an expression of protest, usually for political reasons...

, coercion
Coercion
Coercion is the practice of forcing another party to behave in an involuntary manner by use of threats or intimidation or some other form of pressure or force. In law, coercion is codified as the duress crime. Such actions are used as leverage, to force the victim to act in the desired way...

, and intimidation
Intimidation
Intimidation is intentional behavior "which would cause a person of ordinary sensibilities" fear of injury or harm. It's not necessary to prove that the behavior was so violent as to cause terror or that the victim was actually frightened.Criminal threatening is the crime of intentionally or...

. By contrast, most other federal laws will not apply to insurance whether the states regulate in that area or not.

History


United States v. South-Eastern Underwriters Association
United States v. South-Eastern Underwriters Association
United States v. South-Eastern Underwriters Association, 322 U.S. 533 is a United States Supreme Court decision that held that the Sherman Act, the federal antitrust statute, applied to insurance. To reach this decision, the Court held that insurance could be regulated by the United States...

(322 U.S. 533) came before the Supreme Court
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...

 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, boycott
Boycott
A boycott is an act of voluntarily abstaining from using, buying, or dealing with a person, organization, or country as an expression of protest, usually for political reasons...

s and other coercive tactics to maintain its monopoly
Monopoly
A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity...

.

The question before the Court was whether or not insurance was a form of "interstate commerce" which could be regulated under the Commerce Clause
Commerce Clause
The Commerce Clause is an enumerated power listed in the United States Constitution . The clause states that the United States Congress shall have power "To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes." Courts and commentators have tended to...

 of the United States Constitution
United States Constitution
The Constitution of the United States is the supreme law of the United States of America. It is the framework for the organization of the United States government and for the relationship of the federal government with the states, citizens, and all people within the United States.The first three...

 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
Robert H. Jackson
Robert Houghwout Jackson was United States Attorney General and an Associate Justice of the United States Supreme Court . He was also the chief United States prosecutor at the Nuremberg Trials...

 of the Supreme Court said:
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.

Controversy


The New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards
Convention on the Recognition and Enforcement of Foreign Arbitral Awards
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, also known as the New York Convention, was adopted by a United Nations diplomatic conference on 10 June 1958 and entered into force on 7 June 1959...

(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.

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