December 11, 1970 

Honorable Oscar H. Mausy Opinion No. M- 746 

Chairman, Senate Committee 

to Study the Texas Tort Re: Whether certain insurance 

Claims Act companies have violated 

Texas Senate Antitrust laws of the state 

Austin, Texas or Federal government in 

the sale of insurance to 

certain political subdivisions under the Texas 

Torts Claims Act, under 

Dear Senator Mausy: the facts submitted? 

You have requested our opinion as to, 

"Whether certain insurance companies 

have violated either the State or Federal 

Antitrust laws in the sale of insurance to 

certain political subdivisions under the 

Texas Torts Claims Act, under the facts 

submitted?" 

The facts submitted to this office in connection with this 

request are as follows: 

A survey by your committee of certain counties, 

cities, school districts, water districts, junior and senior 

colleges and State agencies in Texas, dated October 7, 1970 

resulted in 699 of such governmental subdivisions replying 

to the survey, reporting a total purchase of $2,756,449.00 

worth of bodily injury liability insurance coverage. One 

hundred sixty seven of these 699 counties, cities and school 

districts reported the purchase of $92,328.00 worth of 

property damage liability insurance coverage and the survey 

indicates that these 167 entities, at some time during the 

last year, in order to secure the needed bodily injury liability coverage, had been required by some 57 different named 

insurance companies and agencies, to purchase this property 

damage liability insurance which is alleged to be unnecessary 

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Honorable Oscar II. Mausy, Page 2 (M-746) 

and worthless since the Texas Torts Claims Act excludes property damage liability for all Texas governmental units while 

making such units liable only for bodily injury caused by the 

negligence of a governmental employee. 

The 167 entities were composed of 25 cities, 25 

counties, 115~ school districts, one water district and one 

junior college. Each of these 167 entities was located and 

marked on a map and there is no localized pattern or particular area of the State more affected than other areas, but 

they were widely dispersed geographically throughout the State. 

There were 473 of the political bodies which answered 

this survey who bought bodily injury liability insurance without being required to buy property damage liability coverage. 

These entities were also located and marked on a map and this 

group is also widely dispersed geographically throughout the 

State with at least 40 of these political entities physically 

located in the same place as one or more of the 167 entities 

reporting that they were required to buy the property damage 

liability insurance in order to secure bodily injury liability 

insurance. None of the remaining 127 entities of the 167 

group is located farther than 50 miles from a political subdivision reporting the purchase of bodily injury liability 

coverage alone. 

Out of the 57 named insurance companies or agents who 

were reported to require property damage liability coverage 

of the 167 reporting entities, at least 46 of these companies 

or agents were reported in this same survey to have sold bodily injury liability insurance alone to one or more other reporting political entities. The remaining 11 named insurance 

sellers by their names appear to be four local agencies making 

only one reported sale and seven insurance companies, none of 

which were reported on this survey to have sold insurance to 

more than two of the reporting entities. 

We are advised by the Deputy Assistant Administrator 

of the State Board of Insurance that no evidence of any combination, conspiracy or agreement among the insurance companies named in this survey has come to that agency's attention, 

and that on September 22, 1970, the State Board of Insurance 

gave notice to the public generally and to all insurance companies, corporations, exchanges, mutuals, reciprocals, associations, Lloyd6 or other insurers writing automobile insurance 

in Texas and their agents and representatives, as follows: 

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Honorable Oscar H. Mauzy, Page 3 (M- 746) 

"The Senate~Cbmmittee To Study the Texas 

Tort Claims Act has furnished the State 

Board of Insurance a file of governmental 

units that allegedly have been required to 

purchase property damage liability insur-' 

ante as a prerequisite to securing the bodily injury liability insurance desired by 

the Texas Tort Claims Act. 

"Since the Texas Tort Claims Act did not 

waive governmental immunity for damage to 

property, the Board has held that a company's action requiring the insured to 

accept property damage liability insurance (which is of no specific benefit 

to the insured) is a violation of the 

insurance rating laws of T.exas generally 

and is specifically a violation of Automobile Series 428, dated August 12, 1969. 

"The State Board of Insurance hereby directs each insurer to refund the total 

property damage liability insurance premium or premiums written for a governmental unit.that purchased liability insurance for protection from the hazards 

created by the Texas Tort Claims Act, 

provided that the particular governmental unit concerned requests the premium 

return." 

The Insurance Board has not been advised of any governmental 

unit requesting the referred to premium return that has been 

refused by the insurer. 

The Antitrust laws of Texas codified at Section 15.01 

et. seq., Business and Commerce Code prohibits "monopolies" 

as narrowly defined in Section 15.01, "trusts" as defined 

in Section 15.02 and "conspiracies to restrain trade" as defined in Section 15.03. The monopoly prohibition is a combination or consolidation of two or more corporations and no 

facts in this case indicate such activity. A combination, 

essential to the formation of a prohibited "trust" or prohibited "conspiracy in restraint of trade", cannot exist 

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Honorable Oscar H. Mausy, Page 4 (M-746) 

unless'two or more persons or business entities combine in 

some fashion, and before such combination being independent 

and capable of acting in competition with one another. State 

v. Fairbanks-Morse & Co., 246 SW 26 647, (Tex. Civ. App.m, 

ref. n.r.e.1. The facts submitted do not reflect any such 

prohibited combination. 

The application of the Federal Antitrust Laws to the 

facts submitted must be viewed in reference to the Insurance 

Antitrust Moratorium Act (McCarran-Ferguson Insurance Regulation Act) 15 U.S.C.A., Sets. 1011-1015 (1945). Section 1012 

provides that: 

"NO Act'of Congress shall be construed to 

invalidate, impair, or supersede any law 

enacted by any State for the purpose of 

regulating the business of insurance, or 

which imposes a fee or tax upon such business , unless such Act specifically relates 

to the business of insurance: Provided, 

that after June 30, 1948 the Act of July 2, 

1890, as amended, known as the Sherman Act, 

and the Act of October 15, 1914, as amended, 

known as the ClaytonAct, and the Act of 

September 26, 1914, known as the Federal 

Trade Colnmission Act, as amended, shall 

be applicable to the business of insurance 

to the extent that such business is not 

regulated by State law." 

but this provision is qualified in Sec. 3(b) of the same 

Act, 15 U.S.C.A. Sec. 1013, by declaring: 

*'Nothing contained in this Act shall render 

the said Sherman Act inapplicable to any 

agreement to boycott, coerce, or intimidate, or act of boycott, coercion, or 

intimidation." 

Since the facts presented here show no "agreements" 

between the insurers, we must look at the "acts" of the 

insurance companies, i.e. requiring the purchase of property 

damage liability insurance by certain political subdivisions 

before they would sell bodily injury liability insurance to 

such entity. If the Ilacts" of the insurance companies do not 

amount to "boycott, coercion or intimidation" and the State 

has regulations covering the activity concerned (as we assume 

that they do as contended in the State Board of Insurance 

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Honorable Oscar H. nausy, Page 5 (M-746) 

Notice dated September 22; 1970; as set out above), then no 

cause oft action under the Federal Antitrust Acts would lie 

and any aggrieved party must look to his state statutes and 

regulations for his remedy. Parker v. Brown, 317 U.S. 341, 

(1940-1943 Trade Cases): The Travelers Insurance Co. v. Blue 

Cross of Western Pennsylvania, 298 F. Supp. 1109 (1969 Trade 

Cases) . 

Assuming arguendo that the independent acts of the 

insurance companies constituted a "boycott, coercion or 

intimidation" and that the Sherman Act is applicable to the 

fact situation posed, we can immediately eliminate the 

possibility of a violation of Section 1 of the Sherman Act, 

15 U.S.C.A. Sec. 1, because there is no combination, agreement or conspiracy ,in restraint of trade alleged or shown, 

which is a necessary element of a Section 1 violation. House 

of Materials, Inc. v. Simplicity Pattern Co., 298 F. 2d 867 

72nd Cir., 1962) . 

A monopoly violation of Sec. 2 of the Sherman Act, 15 

U.S.C.A. Sec. 2, presupposes monopoly power in a particular 

market defined as the power to control prices or exclude competition. Hiland Dairy, Inc. v. Kroger Co., 402 F. 26 968 

(8th Cir. 13 69)sion . of the number 

of insurance sellers and the obvious inability of any one of 

them alone to exercise any monopoly power, no violation of 

this antitrust prohibition is alleged or shown herein. 

Finally, if an assumption is made that the acts of 

the insurance companies and agents in "tying" the property 

damage liability insurance to the sale of bodily injury liability insurance is not regulated by State law, then we have 

two other possible Federal Antitrust laws to examine as to their 

applicability to these facts. The first of these is price 

discrimination between different purchasers of "commodities“ 

of like grade and quality as prohibited by the RobinsonPatman Act15 U.S.C.A. Sec. 13(a). This has reference to 

"products" as distinguished from "services!', Baum v. Investors 

Diversified Services, Inc. 409 F. 2d 872, (C. A. , Ill 

1969), and therefore insurance sales are not encompass;d in 

this federal antitrust law. The second and final possible 

federal antitrust law to be reviewed is the Clayton Antitrust 

Act, 15 U.S.C;~A. Sec. 14, which typically applies to "tying 

arrangements 11, but it only applies to the sale or lease of, 

II . . . goods, wares, merchandise, machinery, supplies or 

other commodities" and such things as the lending of money 

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Honorable Oscar Ii. Mausy, Page 6 (M-746) 

and the sale of services has been held not to be included 

in the covered class and it appears clear that insurance 

is not covered therein. U.S.-v. Investors Diversified 

Services, Inc., 102'F;'Supp. 645 (D. C.; Minn., 1952) . 

It is, therefore, our opinion, based on the facts 

submitted, that there has been no violation of the Antitrust 

laws of the state or federal government, and our opinion 

is limited to that consideration. 

S U M M’A R Y 

Based on the facts submitted,~there is 

no violation of the Antitrust laws of the 

state or federal government in the sale of 

insurance to certain political subdivisions 

of the State of Texas under the Texas Tort 

Claims Act. 

Prepared by Wayne R. Rodgers 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE"' 

~. ,. 

Kerns Taylor, Chairman 

W. E. Allen, Co-Chairman 

Robert OWen 

Pat Bailey 

Gordon Cass 

Ralph Rash 

WEADE F. GRIFFIN 

Staff Legal Assistant 

ALFRED WALKER 

Executive Assistant 

NOIA WHITE 

First Assistant 

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