Insurance Antitrust Legal News: September 2012 - Volume 1, Number 3

6th Circuit Holds McCarran-Ferguson Act Bars Antitrust Claims against Title Insurers

by James M. Burns

On July 17, the Sixth Circuit Court of Appeals issued its long awaited decision in Katz v. Fidelity National Title Insurance Company, a class action proceeding in which the plaintiffs alleged that a collection of title insurers had unlawfully conspired to set unreasonably high title insurance premiums. In ruling for the defendants and affirming the dismissal of plaintiffs' claims, the court joins a host of other courts around the country that have found similar allegations defective as a matter of law. Unlike in those other cases, however, in which the courts found that plaintiffs' claims failed based upon the Filed Rate Doctrine (most prominently the Third Circuit's recent decisions in In re New Jersey Title Insurance Antitrust Litigation and McCray v. Fidelity National Title Insurance), in Katz the Sixth Circuit held that the claims failed based upon the McCarran-Ferguson Act.

Specifically, the plaintiffs in Katz alleged that title insurance rates that had been filed and approved by the Ohio Department of Insurance were still subject to challenge because it was "impossible for the Department of Insurance to review, regulate or supervise the reasonableness of the rates collectively set by defendants," given that they were "principally based on undisclosed costs." At the trial court level, the court held that plaintiffs' claims failed under both the Filed Rate Doctrine and the McCarran-Ferguson Act. Plaintiffs appealed.

Unlike the Third Circuit, which chose to focus on the Filed Rate Doctrine issue, the Sixth Circuit focused on whether the McCarran-Ferguson Act provided a complete defense to plaintiffs' claims. After acknowledging the three prong test for McCarran's applicability – (1) is the conduct at issue "the business of insurance;" (2) is the conduct "regulated by state law;" and (3) is the conduct not an act of "boycott, coercion or intimidation" - - the Sixth Circuit waded into the parties' arguments. Plaintiffs' principal contention on appeal was that McCarran did not apply to the alleged conduct because the "business of insurance" requirement of the Act was not satisfied. Specifically, the maintained that title insurance policies typically result in "at most, 3.4% premium loss," and argued, therefore, that title insurance involved an insufficient amount of real "risk spreading" to constitute insurance. Citing the Supreme Court's...