McCarran Ferguson Act and 1945 and hartford fire and scalia an dboycott

I would like to devote an entire mini-essay to this case because I think it is among the most complicated ones in the course. If you understand the previous two essays, however, you will at least be prepared for the legal discussion in this case. The Justices in Hartford try to answer my fifth question in the previous essay. That question asked whether the challenged activity can be construed as an "act of boycott...." If so, then the Sherman Act controls. If not, then state regulation is all that applies. The legal question that will divide the Scalia forces and the Souter forces is what a boycott actually is. The "holding" of the case is a bit anti-climatic--the motion to dismiss, which was granted by the lower court, should not have been granted. Case remanded for trial on the allegations in the complaint.

The Case

I like this case because it is fraught with intrigue and power politics in areas of human activity (insurance and reinsurance) that often escape detailed public scrutiny. In fact, the intrigue had to do with the rewriting process of standard commercial general liability policies. As we will learn (or learn now), the Insurance Sevices Office ("ISO") is funded by the insurers and has as its primary task the collection of accurate data on insureds and risks so that the forms it produces, which are the basis for insurance company policies, are not only reflective of the dominant philosophy of the industry at any time but take into consideration the nature of risks that should be insured. Risks change over time (witness the AIDS issue as we studied Waxse). The insurance industry has to be "up on risk," so to speak, or it can find itself underwriting all kinds of dangerous activity that might endanger its solvency.

So, every few years forms are updated. The updating of forms is not a 'ministerial' process--it is a highly charged process, with interests of various insurers clashing in the process. Hartford tells the story that when the process for rewriting the CGL form took place in 1984, debate was hot on four changes-- claims made vs. occurence, retroactive date, the elimination of "sudden and accidental" pollution and the legal defense cost cap. The ISO decided to issue forms that Hartford and three other insurers disagreed with. As a matter of fact, these four insurers were so incensed that they allegedly got the reinsurers involved (reinsurers are nothing else than insurance companies that take on the risk of other insurance companies--to protect them if they have a catastrophic year. And, reinsurers also go and by insurance, and this process is known as retrocession. I guess you could just keep going on this forever....) and got them to agree not to reinsure any insurer that went along with the new ISO form.

Things blew up, and the ISO form was withdrawn. Negotiations went on and the form was slightly revised, with no support services provided for the 1973 CGL form (the one preceding the 1984 form). Suit was brought by the AGs of 19 states and private parties alleging that the action of Hartford and the other three in trying to coerce the reinsurers into not insuring the insurance companies amounted to a violation of 1013(b) of MF.

Scalia on Boycott

So, the legal question before the Court was not really whether what Hartford and the other insurers were alleged to have done constituted a boycott. The only question they were to answer was whether the allegations in the complaint stated a cause of action that would survive a motion to dismiss based on 1013(b) of MF. In order to answer this question, the Court had to decide whether the conduct alleged in the complaints created a question of whether the four insurers had actually participated in a boycott.

What is interesting to me is that despite Scalia's minimalist reading of what a boycott was, the allegations in the complaint were sufficient to survive a motion to dismiss. Justice Scalia provided for us a charming little tour into the history of the term (with a story of a rapacious English landlord in late 19th century Ireland), but the focus of his concern was to argue that a boycott is not a generalized term to describe any kind of alleged agreement that people might have to fix prices or hinder competition. It is, in fact, something that seeks goals collateral to the aim of a "concerted refusal to deal." He quotes form the Eastern States case (234 US 600 (1914)) with approval:

"In other words, the associations' activities were a boycott becasuse they sought an objective--the wholesale dealers' forbearance from retail trade--that was collateral to their transactions with the wholesalers (Id. at 611-12)."

Armed with this minimalist definition of boycott (Souter would have defined it much more broadly, so that a secondary or collateral goal was not necessary), Scalia nevertheless agreed that the complaints had stated a cause of action for a boycott.

Conclusion

You need not know all the details of this case or of the history of the boycott discussion. Suffice it to say that you need to know how and why this case is applying MF to the facts and which facts are important to the case in making its decision to remand the case. As the casebook tells us (note 1 on p. 162), the case was eventually settled on remand. Thus the law on 1013(b) is a little clearer, even though a decision on the merits was never reached in the case.