Supreme Court Allows Suit against Insurers

THE JOURNAL RECORD, June 29, 1993 | Go to article overview

Supreme Court Allows Suit against Insurers


WASHINGTON (AP) _ The U.S. Supreme Court ruled Monday that a huge antitrust lawsuit filed against four giant insurers and other industry members may move forward to trial.

The 1988 suit, filed by 19 states, alleges that four insurance firms _ Aetna Casualty and Surety, Allstate, Insurance Company of North America and Hartford Fire _ conspired with underwriters to shrink coverage offered in commercial general liability insurance to state and local governments and businesses.

The justices, by a 5-4 vote, said the lawsuit _ which state officials call "a nuclear attack on the insurance industry" _ may continue in a federal trial court in San Francisco.

While the decision was the product of splintered voting, its result appeared to be clear: The contested conduct is not exempt from federal antitrust law.

"We have done nothing wrong," said Michael J. Monroe, a spokesman for Cigna Corp., whose Insurance Co. of North America subsidiary was named in the suit.

"We will continue to vigorously contest what remains of the lawsuit," he said.

The four firms are primary insurers that sell directly to policyholders. Their underwriters, sometimes called reinsurance firms, indemnify primary insurers for designated parts of their risks.

The controversy grows out of what has been called the liability crisis of the 1980s, and the insurance industry's response of curtailing coverage of claims that had imposed the greatest underwriting losses.

The suit, filed by the 19 states and numerous local governments and private companies, contends that the four primary insurers and their reinsurers plotted to force unwilling competitors to stop insuring certain risks, such as all pollution coverage.

Since 1945, Congress has left regulation of the insurance industry up to the individual states. The McCarran-Ferguson Act exempts the insurance industry from federal antitrust laws so long as their activities do not involve boycott, coercion or intimidation.

Noting the 1945 act, U.S. District Judge William Schwarzer in San Francisco threw out the lawsuit. But the 9th U.S. Circuit Court of Appeals reinstated it last year.

Monday, the nation's highest court said the appeals court was correct, at least partially, and said the lawsuit can go forward.

The high court unanimously reversed the appeals court's ruling that a U.S. insurance company loses its exemption from federal antitrust law when it allegedly conspires with foreign underwriters. …

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