Hartford Fire Insurance Company v. California

PETITIONER: Hartford Fire Insurance Company
RESPONDENT: California
LOCATION: Jackson Circuit Court

DOCKET NO.: 91-1111
DECIDED BY:
LOWER COURT: United States Court of Appeals for the Ninth Circuit

CITATION: 509 US 764 (1993)
ARGUED: Feb 23, 1993
DECIDED: Jun 28, 1993

ADVOCATES:
Laurel A. Price - Argued the cause for the respondents in both cases
Lawrence G. Wallace - on behalf of the United States, as amicus curiae, supporting the Respondents
Molly S. Boast - Argued the cause for the petitioners (Merrett Underwriting Agency Management)
Stephen M. Shapiro - Argued the cause for the petitioners (Hartford Fire Ins.)

Facts of the case

Nineteen States and many private plaintiffs filed complaints alleging that the defendants -- domestic primary insurers, trade associations, and a reinsurance broker, along with London-based as well as domestic reinsurers -- violated Section 1 of the Sherman Act, 15 U.S.C. Section 1, by engaging in various conspiracies aimed at forcing certain other primary insurers to change the terms of their standard domestic commercial general liability insurance policies. After the actions were consolidated for litigation, the district court granted the defendants' motion to dismiss, holding that the conduct alleged fell within the grant of antitrust immunity contained in Section 2(b) of the McCarran-Ferguson Act, 15 U.S.C. Section 1012(b), and that none of the conduct amounted to a "boycott" within the meaning of the Section 3(b), 15 U.S.C. Section 1013(b), exemption to that grant of immunity. The court of appeals reversed.

Question

First, did the plaintiffs sufficiently allege "boycotts," as used in the McCarran-Ferguson Act, Section 3(b)? Second, did international comity counsel against exercising Sherman Act jurisdiction over the conduct of the London-based defendants?

Media for Hartford Fire Insurance Company v. California

Audio Transcription for Oral Argument - February 23, 1993 in Hartford Fire Insurance Company v. California

William H. Rehnquist:

We'll hear argument next in 91-1111, Hartford Fire Insurance Company v. California consolidated with Merrett Underwriting Agency v. California.

Mr. Shapiro, you may proceed.

Stephen M. Shapiro:

Thank you, Mr. Chief Justice and may it please the Court:

I appear on behalf of the domestic insurance defendants who are petitioners in Case Number 91-1111.

We're hear today to contend that the Ninth Circuit's forfeiture ruling in this case was wrong, and in addition that the Ninth Circuit was wrong in overturning Judge Schwarzer's decision on the McCarran boycott issue.

As the Court is aware, the Ninth Circuit held in this case that the domestic defendants forfeited their McCarran Act immunity by acting in concert with foreign reinsurers, and it held in addition that their conduct amounted to a boycott within the meaning of the McCarran-Ferguson Act.

On the forfeiture issue, we agree with the Justice Department that the domestic defendants, which both courts below found were engaged in the regulated business of insurance, did not forfeit their immunity simply by acting in concert with foreign reinsurers.

The Government properly points out that the McCarran immunity literally focuses on the regulated business of insurance and does not focus narrowly on the regulated status of each participant in that process.

Congress understood when it passed the McCarran act that domestic insurers would enter into agreements with reinsurers, including foreign reinsurers, and it believed that antitrust immunity would extend to these insurance practices.

Under this statute, the exemption of domestic insurers does not simply vanish when they deal with entities such as consumer groups or risk managers or foreign reinsurers, all of which are vital participants in the forms-developmentprocess and each of which can easily be characterized as a nonexempt entity or a so-called coconspirator.

William H. Rehnquist:

What, then, do you do with the language in Royal Drug Company, Mr. Shapiro, about when you conspire or agree with someone who's not protected the exempt party loses the exemption?

Stephen M. Shapiro:

Royal Drug, Your Honor, was talking about the business of insurance requirement, which concededly is satisfied here, and the reason that it wasn't satisfied there was that there was an agreement between an insurance company and somebody outside of the insurance industry.

Now, in this case everybody is within the insurance industry and the Justice Department properly points out that Royal Drug is not support for the forfeiture ruling here.

Antonin Scalia:

Well, excuse me, it isn't enough to be within the business of insurance.

You have to be within the business of insurance regulated by the States--

Stephen M. Shapiro:

That's correct, Your Honor.

Antonin Scalia:

--Isn't that right?

Stephen M. Shapiro:

Both courts--

Antonin Scalia:

And that is certainly not conceded that the foreign insurers, or the reinsurers generally, are within the business of insurance regulated by the State.

Stephen M. Shapiro:

--Both courts below found that all domestic defendants, including the reinsurers, were regulated under State law, and the Justice Department agrees that these regulated entities that are acting within the business of insurance don't lose their immunity simply because they enter into discussions or agreements with foreign reinsurers.

The issue of whether they're regulated is not before the Court in our petition or in any cross-petition.

Both courts below correctly decided that my clients, the domestic companies, were regulated.

Antonin Scalia:

It isn't whether your client is regulated, it's whether the business of reinsurance is regulated, isn't it?

I mean, you can't play the game both ways.

You're either talking about the business of insurance or you're talking about individuals, and we're talking about the business of insurance.

Stephen M. Shapiro:

Yes.

The--

Antonin Scalia:

So... so the question is whether the business of reinsurance is, number 1, part of the business of insurance, which I assume it is, and number 2, regulated by the States.

Stephen M. Shapiro:

--It is indeed regulated by the States in two respects.

My clients are accused of participating in the forms-developmentprocess.