Missouri: U.S. Court of Appeals Rules McCarran-Ferguson Act Prohibits Challenge to State's Rate Setting Rules

NAMIC’s trade association partner, the Missouri Insurance Coalition, informs us of the recent Saunders et al. v. Farmers Insurance Exchange (07-1894) decision by the U.S. 8th Circuit Court of Appeals interpreting the federal McCarran-Ferguson Act.

The court covers Arkansas, Missouri, Iowa, Minnesota, Nebraska, South Dakota, and North Dakota.

In the case, the plaintiffs complained of discrimination in rates, allegedly in violation of a federal statute. The court framed the issue as “…whether the theory of liability asserted and the relief sought by plaintiffs would impair state law by interfering with Missouri’s comprehensive administrative regime.”

The court found that Missouri’s regulatory scheme for determining what rates could be charged was “essential to the core of Missouri’s regulation of the business of insurance” and that state law specifically granted the authority to enforce this law to the insurance regulator. The appellate court then affirmed the trial court’s finding that plaintiffs’ challenge would “impair” Missouri’s laws regulating insurance, and that violated McCarran-Ferguson.

“McCarran-Ferguson is often misconstrued. Simply put, it provides that unless a federal law specifically applies to the business of insurance, it cannot be used to overturn a state law that regulates insurance. It is a general policy preference for making insurance law and regulation a state function,” said Mark Johnston, NAMIC’s Midwest state affairs manager. "NAMIC supports state-based regulation and that is why we work so strongly to advocate on behalf of the federalism principles of McCarran – Ferguson."

Direct questions to NAMIC State Affairs Manager Mark Johnston.

Posted: Tuesday, September 09, 2008 12:00:00 AM. Modified: Tuesday, September 09, 2008 10:40:18 AM.

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We are 1,400 property/casualty insurance companies serving more than 135 million auto, home and business policyholders, with more than $196 billion in premiums accounting for 50 percent of the automobile/homeowners market and 31 percent of the business insurance market. We are the largest and most diverse property/casualty trade association in the country, with regional and local mutual insurance companies on main streets across America joining many of the country’s largest national insurers who also call NAMIC their home. More than 200,000 people are employed by NAMIC members.