Also known as: businesses of insurance · insurance business
Written by attorneys · grounded in primary & secondary sources — see below
Activities that involve the underwriting or spreading of insurance risk through contracts between insurers and policyholders. These activities fall within the scope of state insurance regulation and receive special treatment under federal statutes that defer to state oversight.
Crest Solar faces a class action for pollution injuries. In its initial disclosures, Crest Solar produces its primary liability policies but withholds reinsurance treaties that obligate third-party reinsurers to reimburse it after any judgment payment. The plaintiffs move to compel production of the treaties. The court orders disclosure because the treaties create an obligation by an insurance business to indemnify or reimburse for a possible judgment.
Hartford Fire and other insurers agree on standardized premium rates for commercial property policies sold nationwide. California sues under federal antitrust law. The insurers defend by claiming the conduct is the business of insurance and therefore exempt. The court examines whether the rate-setting directly concerns the spreading of risk between insurer and insured.
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Members of the South-Eastern Underwriters Association fix premium rates and allocate territories for fire insurance policies. The United States prosecutes the arrangement as a Sherman Act violation. The defendants argue the conduct constitutes the business of insurance. The court determines that the core risk-spreading functions remain subject to federal antitrust scrutiny when they involve concerted action among insurers.
Ordinary rate setting and risk pooling among insurers qualify because they directly involve the underwriting and spreading of insurance risk. Activities that merely support insurance operations, such as contracts with providers or suppliers, fall outside the definition.
The McCarran-Ferguson Act exempts the business of insurance from federal antitrust laws when the activity is regulated by state law. The exemption does not apply to acts of boycott, coercion, or intimidation.
Reinsurance agreements must be disclosed when they obligate an insurance business to indemnify or reimburse a party for payments made to satisfy a judgment. The rule covers any such agreement regardless of whether reimbursement occurs after the insured pays the judgment.
…Court then held, based on “the common-sense understanding of the saving clause, the McCarran-Ferguson Act factors defining the business of insurance, and, most importantly, the clear expression of congressional intent that ERISA’s civil enforcement scheme be exclusive,.. . that [the plaintiff’s] state law suit asserting improper…