Source: https://supreme.justia.com/cases/federal/us/508/491/
Timestamp: 2019-04-22 04:27:02+00:00

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In proceedings under Ohio law to liquidate an insolvent insurance company, the United States asserted that its claims as obligee on various of the company's surety bonds were entitled to first priority under 31 U. S. C. § 3713(a)(1)(A)(iii). Respondent Fabe, the liquidator appointed by the state court, brought a declaratory judgment action in the Federal District Court to establish that priority in such proceedings is governed by an Ohio statute that ranks governmental claims behind (1) administrative expenses, (2) specified wage claims, (3) policyholders' claims, and (4) general creditors' claims. Fabe argued that the federal priority statute does not pre-empt the Ohio law because the latter falls within §2(b) of the McCarran-Ferguson Act, which provides, inter alia: "No Act of Congress shall be construed to ... supersede any law enacted by any state for the purpose of regulating the business of insurance .... " The court granted summary judgment for the United States on the ground that the state statute does not involve the "business of insurance" under the tripartite standard articulated in Union Labor Life Ins. Co. v. Pireno, 458 U. S. 119, 129. The Court of Appeals disagreed and, in reversing, held that the Ohio scheme regulates the "business of insurance" because it protects the interests of the insured.
Held: The Ohio priority statute escapes federal pre-emption to the extent that it protects policyholders, but it is not a law enacted for the purpose of regulating the business of insurance to the extent that it is designed to further the interests of creditors other than policyholders. Pp. 499-510.
ute to the extent that the latter furthers policyholders' interests. Pireno does not support petitioners' argument to the contrary, since the actual performance of an insurance contract satisfies each prong of the Pireno test: performance of the terms of an insurance policy (1) facilitates the transfer of risk from the insured to the insurer; (2) is central to the policy relationship between the insurer and the insured; and (3) is confined entirely to entities within the insurance industry. Thus, such actual performance is an essential part of the "business of insurance." Because the Ohio statute is integrally related to the performance of insurance contracts after bankruptcy, it is a law "enacted ... for the purpose of regulating the business of insurance" within the meaning of §2(b). This plain reading of the McCarran-Ferguson Act comports with the statute's purpose. Pp. 500-506.
(c) Petitioners' contrary interpretation based on the legislative history is at odds with § 2(b)'s plain language and unravels upon close inspection. Pp. 506-508.
(d) The preference accorded by Ohio to the expenses of administering the insolvency proceeding is reasonably necessary to further the goal of protecting policyholders, since liquidation could not even commence without payment of administrative costs. The preferences conferred upon employees and other general creditors, however, do not escape pre-emption because their connection to the ultimate aim of insurance is too tenuous. Pp. 508-510.
939 F.2d 341, affirmed in part, reversed in part, and remanded.
BLACKMUN, J., delivered the opinion of the Court, in which REHNQUIST, C. J., and WHITE, STEVENS, and O'CONNOR, JJ., joined. KENNEDY, J., filed a dissenting opinion, in which SCALIA, SOUTER, and THOMAS, JJ., joined, post, p. 510.
Robert A. Long, Jr., argued the cause for petitioners.
With him on the briefs were Solicitor General Starr, Assistant Attorney General Gerson, Deputy Solicitor General Mahoney, and William Kanter.
JUSTICE BLACKMUN delivered the opinion of the Court. The federal priority statute, 31 U. S. C. § 3713, accords first priority to the United States with respect to a bankrupt debtor's obligations. An Ohio statute confers only fifth priority upon claims of the United States in proceedings to liquidate an insolvent insurance company. Ohio Rev. Code Ann. § 3903.42 (1989). The federal priority statute preempts the inconsistent Ohio law unless the latter is exempt from pre-emption under the McCarran-Ferguson Act, 59 Stat. 33, as amended, 15 U. S. C. § 1011 et seq. In order to resolve this case, we must decide whether a state statute establishing the priority of creditors' claims in a proceeding to liquidate an insolvent insurance company is a law enacted "for the purpose of regulating the business of insurance," within the meaning of § 2(b) of the McCarran-Ferguson Act, 15 U. S. C. § 1012(b).
We hold that the Ohio priority statute escapes preemption to the extent that it protects policyholders. Accordingly, Ohio may effectively afford priority, over claims of the United States, to the insurance claims of policyholders and to the costs and expenses of administering the liquidation.
A brief of amici curiae was filed for the State of Michigan et al. by Frank J. Kelley, Attorney General of Michigan, Thomas L. Casey, Solicitor General, and Harry G. Iwasko, Jr., and Janet A. VanCleve, Assistant Attorneys General, and by the Attorneys General for their respective States as follows: Grant Woods of Arizona, Robert A. Butterworth of Florida, Robert T. Stephan of Kansas, J. Joseph Curran, Jr., of Maryland, Marc Racicot of Montana, Robert J. Del Tufo of New Jersey, Daniel E. Lungren of California, Larry EchoHawk of Idaho, Michael E. Carpenter of Maine, Hubert H. Humphrey III of Minnesota, Frankie Sue Del Papa of Nevada, and Tom Udall of New Mexico.
But when Ohio attempts to rank other categories of claims above those pressed by the United States, it is not free from federal pre-emption under the McCarran- Ferguson Act.
The Ohio priority statute was enacted as part of a complex and specialized administrative structure for the regulation of insurance companies from inception to dissolution. The statute proclaims, as its purpose, "the protection of the interests of insureds, claimants, creditors, and the public generally." § 3903.02(D). Chapter 3903 broadly empowers the State's Superintendent of Insurance to place a financially impaired insurance company under his supervision, or into rehabilitation, or into liquidation. The last is authorized when the superintendent finds that the insurer is insolvent, that placement in supervision or rehabilitation would be futile, and that "further transaction of business would be hazardous, financially or otherwise, to [the insurer's] policyholders, its creditors, or the public." § 3903.17(C). As liquidator, the superintendent is entitled to take title to all assets, § 3903.18(A); to collect and invest moneys due the insurer, § 3903.21(A)(6); to continue to prosecute and commence in the name of the insurer any and all suits and other legal proceedings, § 3903.21(A)(12); to collect reinsurance and unearned premiums due the insurer, §§ 3903.32 and 3903.33; to evaluate all claims against the estate, § 3903.43; and to make payments to claimants to the extent possible, § 3903.44. It seems fair to say that the effect of all this is to empower the liquidator to continue to operate the insurance company in all ways but one-the issuance of new policies.
"(2) This subsection does not apply to a case under title 11.
"(b) A representative of a person or an estate (except a trustee acting under title 11) paying any part of a debt of the person or estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government."
"(6) The reasonable expenses of a guaranty association or foreign guaranty association in handling claims.
"(B) Class 2. Debts due to employees for services performed to the extent that they do not exceed one thousand dollars and represent payment for services performed within one year before the filing of the complaint for liquidation. Officers and directors shall not be entitled to the benefit of this priority. Such priority shall be in lieu of any other similar priority that may be authorized by law as to wages or compensation of employees.
"(C) Class 3. All claims under policies for losses incurred, including third party claims, all claims against the insurer for liability for bodily injury or for injury to or destruction of tangible property that are not under policies, and all claims of a guaranty association or foreign guaranty association. All claims under life insurance and annuity policies, whether for death proceeds, annuity proceeds, or investment values, shall be treated as loss claims. That portion of any loss, indemnification for which is provided by other benefits or advantages recovered by the claimant, shall not be included in this class, other than benefits or advantages recovered or recoverable in discharge of familial obligations of support or by way of succession at death or as proceeds of life insurance, or as gratuities. No payment by an employer to an employee shall be treated as a gratuity. Claims under nonassessable policies for unearned premium or other premium refunds.
"(D) Class 4. Claims of general creditors.
"(E) Class 5. Claims of the federal or any state or local government.
ure, shall be allowed in this class only to the extent of the pecuniary loss sustained from the act, transaction, or proceeding out of which the penalty or forfeiture arose, with reasonable and actual costs occasioned thereby. The remainder of such claims shall be postponed to the class of claims under division (H) of this section.
"(F) Class 6. Claims filed late or any other claims other than claims under divisions (G) and (H) of this section.
"(G) Class 7. Surplus or contribution notes, or similar obligations, and premium refunds on assessable policies. Payments to members of domestic mutual insurance companies shall be limited in accordance with law. "(H) Class 8. The claims of shareholders or other owners."
"The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business.
"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 Clayton Act, and the Act of September 26, 1914, known as the Federal Trade Commission Act, as amended, ... shall be applicable to the business of insurance to the extent that such business is not regulated by State Law."
industry.'" App. to Pet. for Cert. 36a (quoting Pireno, 458 U. S., at 129).
4 One judge concurred separately on the ground that the McCarranFerguson Act was not intended to modify the longstanding, traditional state regulation of insurance company liquidations. See 939 F. 2d, at 352 (opinion of Edgar, J.).
The McCarran-Ferguson Act was enacted in response to this Court's decision in United States v. South-Eastern Underwriters Assn., 322 U. S. 533 (1944). Prior to that decision, it had been assumed that "[i]ssuing a policy of insurance is not a transaction of commerce," Paul v. Virginia, 8 Wall. 168, 183 (1869), subject to federal regulation. Accordingly, "the States enjoyed a virtually exclusive domain over the insurance industry." St. Paul Fire & Marine Ins. Co. v. Barry, 438 U. S. 531, 539 (1978).
5 Compare the result reached by the Sixth Circuit in this litigation with Gordon v. United States Dept. of Treasury, 846 F.2d 272 (CA4), cert. denied, 488 U. S. 954 (1988), and Idaho ex rel. Soward v. United States, 858 F.2d 445 (CA9 1988), cert. denied, 490 U. S. 1065 (1989).
insurance industry. To allay those fears, Congress moved quickly to restore the supremacy of the States in the realm of insurance regulation. It enacted the McCarran- Ferguson Act within a year of the decision in South-Eastern Underwri ters.
The first section of the McCarran-Ferguson Act makes its mission very clear: "Congress hereby declares that the continued regulation and taxation by the several States of the business of insurance is in the public interest, and that silence on the part of the Congress shall not be construed to impose any barrier to the regulation or taxation of such business by the several States." 15 U. S. C. § 1011. Shortly after passage of the Act, the Court observed: "Obviously Congress' purpose was broadly to give support to the existing and future state systems for regulating and taxing the business of insurance." Prudential Ins. Co. v. Benjamin, 328 U. S. 408, 429 (1946). Congress achieved this purpose in two ways. The first "was by removing obstructions which might be thought to flow from [Congress'] own power, whether dormant or exercised, except as otherwise expressly provided in the Act itself or in future legislation." Id., at 429-430. The second "was by declaring expressly and affirmatively that continued state regulation and taxation of this business is in the public interest and that the business and all who engage in it 'shall be subject to' the laws of the several states in these respects." Id., at 430.
of insurance ... unless such Act specifically relates to the business of insurance." 15 U. S. C. § 1012(b). The parties agree that application of the federal priority statute would "invalidate, impair, or supersede" the Ohio priority scheme and that the federal priority statute does not "specifically relat[e] to the business of insurance." All that is left for us to determine, therefore, is whether the Ohio priority statute is a law enacted "for the purpose of regulating the business of insurance."
"The relationship between insurer and insured, the type of policy which could be issued, its reliability, interpretation, and enforcement-these were the core of the 'business of insurance.' Undoubtedly, other activities of insurance companies relate so closely to their status as reliable insurers that they too must be placed in the same class. But whatever the exact scope of the statutory term, it is clear where the focus was-it was on the relationship between the insurance company and the policyholder." Ibid.
ests of an insurance company's shareholders, it did not fall within the scope of the McCarran- Ferguson Act. Ibid. The Arizona statute, however, also required the Director, before granting approval, to make sure that the proposed merger "would not 'substantially reduce the security of and service to be rendered to policyholders.'" Id., at 462. The Court observed that this section of the statute "clearly relates to the 'business of insurance.'" Ibid. But because the "paramount federal interest in protecting shareholders [was] perfectly compatible with the paramount state interest in protecting policyholders," id., at 463, the Arizona statute did not preclude application of the federal securities laws.
In the present case, on the other hand, there is a direct conflict between the federal priority statute and Ohio law. Under the terms of the McCarran-Ferguson Act, 15 U. S. C. § 1012(b), therefore, federal law must yield to the extent the Ohio statute furthers the interests of policyholders.
Minimizing the analysis of National Securities, petitioners invoke Royal Drug and Pireno in support of their argument that the liquidation of an insolvent insurance company is not part of the "business of insurance" exempt from pre-emption under the McCarran- Ferguson Act. Those cases identified the three criteria, noted above, that are relevant in determining what activities constitute the "business of insurance." See Pireno, 458 U. S., at 129. Petitioners argue that the Ohio priority statute satisfies none of these criteria. According to petitioners, the Ohio statute merely determines the order in which creditors' claims will be paid, and has nothing to do with the transfer of risk from insured to insurer. Petitioners also contend that the Ohio statute is not an integral part of the policy relationship between insurer and insured and is not limited to entities within the insurance industry because it addresses only the relationship between policyholders and other creditors of the defunct corporation.
insurance contract or by setting the rate charged by the insurance company. But we do not read Pireno to suggest that the business of insurance is confined entirely to the writing of insurance contracts, as opposed to their performance. Pireno and Royal Drug held only that "ancillary activities" that do not affect performance of the insurance contract or enforcement of contractual obligations do not enjoy the antitrust exemption for laws regulating the "business of insurance." Pireno, 458 U. S., at 134, n. 8. In Pireno, we held that use of a peer review committee to advise the insurer as to whether charges for chiropractic services were reasonable and necessary was not part of the business of insurance. The peer review practice at issue in that case had nothing to do with whether the insurance contract was performed; it dealt only with calculating what fell within the scope of the contract's coverage. Id., at 130. We found the peer review process to be "a matter of indifference to the policyholder, whose only concern is whether his claim is paid, not why it is paid" (emphases in original). Id., at 132. Similarly, in Royal Drug, we held that an insurer's agreements with participating pharmacies to provide benefits to policyholders was not part of the business of insurance. "The benefit promised to Blue Shield policyholders is that their premiums will cover the cost of prescription drugs except for a $2 charge for each prescription. So long as that promise is kept, policyholders are basically unconcerned with arrangements made between Blue Shield and participating pharmacies." 440 U. S., at 213-214 (footnote omitted).
contract in fact will be enforced. Without performance of the terms of the insurance policy, there is no risk transfer at all. Moreover, performance of an insurance contract also satisfies the remaining prongs of the Pireno test: It is central to the policy relationship between insurer and insured and is confined entirely to entities within the insurance industry. The Ohio priority statute is designed to carry out the enforcement of insurance contracts by ensuring the payment of policyholders' claims despite the insurance company's intervening bankruptcy. Because it is integrally related to the performance of insurance contracts after bankruptcy, Ohio's law is one "enacted by any State for the purpose of regulating the business of insurance." 15 U. S. C. § 1012(b).
6The dissent contends that our reading of the McCarran-Ferguson Act "runs counter to the basic rule of statutory construction that identical words used in different parts of the same Act are intended to have the same meaning." Post, at 515. This argument might be plausible if the two clauses actually employed identical language. But they do not. As explained above, the first clause contains the word "purpose," a term that is significantly missing from the second clause. By ignoring this word, the dissent overlooks another maxim of statutory construction: "that a court should '''give effect, if possible, to every clause and word of a statute."'" Moskal v. United States, 498 U. S. 103, 109-110 (1990), quoting United States v. Menasche, 348 U. S. 528, 538-539 (1955), and Montclair v. Ramsdell, 107 U. S. 147, 152 (1883).
The broad category of laws enacted "for the purpose of regulating the business of insurance" consists of laws that possess the "end, intention, or aim" of adjusting, managing, or controlling the business of insurance. Black's Law Dictionary 1236, 1286 (6th ed. 1990). This category necessarily encompasses more than just the "business of insurance." For the reasons expressed above, we believe that the actual performance of an insurance contract is an essential part of the "business of insurance." Because the Ohio statute is "aimed at protecting or regulating" the performance of an insurance contract, National Securities, 393 U. S., at 460, it follows that it is a law "enacted for the purpose of regulating the business of insurance," within the meaning of the first clause of § 2(b).
Our plain reading of the McCarran- Ferguson Act also comports with the statute's purpose. As was stated in Royal Drug, the first clause of § 2(b) was intended to further Congress' primary objective of granting the States broad regulatory authority over the business of insurance. The second clause accomplishes Congress' secondary goal, which was to carve out only a narrow exemption for "the business of insurance" from the federal antitrust laws. 440 U. S., at 218, n.18. Cf. D. Howard, Uncle Sam versus the Insurance Commissioners: A Multi-Level Approach to Defining the "Business of Insurance" Under the McCarran-Ferguson Act, 25 Willamette L. Rev. 1 (1989) (advocating an interpretation of the two clauses that would reflect their dual purposes); Note, The Definition of "Business of Insurance" Under the McCarran- Ferguson Act After Royal Drug, 80 Colum. L. Rev. 1475 (1980) (same).
policyholders in preference to other creditors is identical to the primary purpose of the insurance company itself: the payment of claims made against policies. And "mere matters of form need not detain us." National Securities, 393 U. S., at 460. The Ohio statute is enacted "for the purpose of regulating the business of insurance" to the extent that it serves to ensure that, if possible, policyholders ultimately will receive payment on their claims. That the policyholder has become a creditor and the insurer a debtor is not relevant.
"It is not the intention of Congress in the enactment of this legislation to clothe the States with any power to regulate or tax the business of insurance beyond that which they had been held to possess prior to the decision of the United States Supreme Court in the Southeastern Underwriters Association case." H. R. Rep. No. 143, 79th Cong., 1st Sess., 3 (1945).
From this statement, petitioners argue that the McCarranFerguson Act was an attempt to "turn back the clock" to the time prior to South-Eastern Underwriters. At that time, petitioners maintain, the federal priority statute would have superseded any inconsistent state law.
the Court applied the federal priority statute only when the State had not specifically legislated the priority of claims. 298 U. S., at 549-550 ("But it is settled that an inchoate lien is not enough to defeat the [Federal Government's] priority .... Unless the law of Florida effected ... either a transfer of title from the company, or a specific perfected lien in favor of the Florida creditors, the United States is entitled to priority"). Moreover, other cases issued at the same time reached a different result. See, e. g., Conway v. Imperial Life Ins. Co., 207 La. 285, 21 So. 2d 151 (1945) (Louisiana statute specifically providing that deposited securities are held by state treasurer in trust for benefit and protection of policyholders supersedes federal priority statute).
"What we have in mind is that the insurance business, being interstate commerce, if we merely enact a law relating to interstate commerce, or if there is a law now on the statute books relating in some way to interstate commerce, it would not apply to insurance. We wanted to be sure that the Congress, in its wisdom, would act specifically with reference to insurance in enacting the law." 91 Congo Rec. 1487 (1945).
"embod[ied] a legislative rejection of the concept that the insurance industry is outside the scope of the antitrust laws-a concept that had prevailed before the South-Eastern Underwriters decision." Royal Drug, 440 U. S., at 220.
Petitioners' argument appears to find its origin in the Court's statement in National Securities that "[t]he McCarran-Ferguson Act was an attempt to turn back the clock, to assure that the activities of insurance companies in dealing with their policyholders would remain subject to state regulation." 393 U. S., at 459. The Court was referring to the primary purpose underlying the Act, namely, to restore to the States broad authority to tax and regulate the insurance industry. Petitioners would extrapolate from this general statement an invitation to engage in a detailed point-by-point comparison between the regime created by McCarran-Ferguson and the one that existed before. But it is impossible to compare our present world to the one that existed at a time when the business of insurance was believed to be beyond the reach of Congress' power under the Commerce Clause.
8 The dissent assails our holding at both ends, contending that it at once goes too far and not quite far enough. On the one hand, the dissent suggests that our holding is too "broad" in the sense that "any law which redounds to the benefit of policyholders is, ipso facto, a law enacted to regulate the business of insurance." Post, at 511. But this is precisely the argument we reject in the text, as evidenced by the narrowness of our actual holding. Uncomfortable with our distinction between the priority given to policyholders and the priority afforded other creditors, the dissent complains, on the other hand, that this is evidence of a "serious flaw." Post, at 517. But the dissent itself concedes that a state statute regulating the liquidation of insolvent insurance companies need not be treated as a package which stands or falls in its entirety. Post, at 518. Given this concession, it is the dissent's insistence upon an all-or-nothing approach to this particular statute that is flawed. The dissent adduces no support for its assertion that we must deal with the various priority provisions of the Ohio law as if they were all designed to further a single end. That was not the approach taken by this Court in National Securities, which carefully parsed a state statute with dual goals and held that it regulated the business of insurance only to the extent that it protected policyholders. Supra, at 502. And the dissent misinterprets our pronouncement on the clash of priorities as a "compromise holding," post, at 517, forgetting that the severability of the various priority provisions is a question of state law.
ing any issue of severability-is a question of state law to be addressed upon remand. Cf. Stanton v. Stanton, 421 U. S. 7, 17-18 (1975) (invalidating state statute specifying greater age of majority for males than for females and remanding to state court to determine age of majority applicable to both groups under state law).
We consider two conflicting statutes, both attempting to establish priority for claims of the United States in proceedings to liquidate an insolvent insurance company. The first is the federal priority statute, 31 U. S. C. § 3713, which requires a debtor's obligations to the United States to be given first priority in insolvency proceedings. The second, Ohio's insurance company liquidation statute, Ohio Rev. Code Ann. § 3903.42 (1989), provides that claims of the Federal Government are to be given fifth priority in proceedings to liquidate an insolvent insurer. Under usual principles of pre-emption, the federal priority statute trumps the inconsistent state law. See Florida Lime & Avocado Growers, Inc. v. Paul, 373 U. S. 132, 142-143 (1963). The question is whether the McCarran- Ferguson Act, which provides an exemption from pre-emption for certain state laws "enacted ... for the purpose of regulating the business of insurance," 59 Stat. 34, as amended, 15 U. S. C. § 1012(b), alters this result.
that portions of Ohio's priority statute are saved from preemption by the McCarran-Ferguson Act. I agree that National Securities is the right place to begin the analysis. As the Court points out, National Securities is the one case in which we have considered the precise statutory provision that is controlling here to determine whether a state law applicable to insurance companies was a law enacted for the purpose of regulating the business of insurance. I disagree, however, with the Court's interpretation of that precedent.
The key to our analysis in National Securities was the construction of the term "business of insurance." In National Securities we said that statutes designed to protect or regulate the relationship between an insurance company and its policyholder, whether this end is accomplished in a direct or an indirect way, are laws regulating the business of insurance. 393 U. S., at 460. While noting that the exact scope of the McCarran- Ferguson Act was unclear, we observed that in passing the Act "Congress was concerned with the type of state regulation that centers around the contract of insurance." Ibid. There is general agreement that the primary concerns of an insurance contract are the spreading and the underwriting of risk, see 1 G. Couch, Cyclopedia of Insurance Law § 1.3 (2d ed. 1984); R. Keeton, Insurance Law § 1.2(a) (1971), and we have often recognized this central principle. See Union Labor Life Ins. Co. v. Pireno, 458 U. S. 119, 127, and n. 7 (1982); Group Life & Health Ins. Co. v. Royal Drug Co., 440 U. S. 205, 211-212 (1979).
reserved for them under the McCarran-Ferguson Act will find it difficult, as do I, to reconcile our precedents in this area with the decision the Court reaches today. The majority's broad holding is not a logical extension of our decision in National Securities and indeed is at odds with it.
risk from insured to insurer, the type of risk spreading that is the essence of the contract of insurance.
Further, insurer insolvency is not an activity of insurance companies that "relate[s] so closely to their status as reliable insurers," ibid., as to qualify liquidation as an activity constituting the "core of the 'business of insurance.'" Ibid. Respondent maintains, and the majority apparently agrees, that nothing is more central to the reliability of an insurer than facilitating the payment of policyholder claims in the event of insurer insolvency. This assertion has a certain intuitive appeal, because certainly the payment of claims is of primary concern to policyholders, and policyholders have a vital interest in the financial strength and solvency of their insurers. But state insolvency laws requiring policyholder claims to be paid ahead of the claims of the rest of the insurer's creditors do not increase the reliability or the solvency of the insurer; they operate, by definition, too late in the day for that. Instead they operate as a state-imposed safety net for the benefit of those insured. In my view, the majority too easily dismisses the fact that the policyholder has become a creditor and the insurer a debtor by reason of the insurance company's demise. Ante, at 506. Whereas we said in National Securities that the focus of the McCarran- Ferguson Act is the relationship between insurer and insured, 393 U. S., at 460, the Ohio statute before us regulates a different relationship: the relationship between the policyholder and the other competing creditors. This is not the regulation of the business of insurance, but the regulation of creditors' rights in an insolvency proceeding.
Superintendent of Insurance to liquidate an insolvent insurance company, the process of winding up the activities of the insolvent insurance company begins. No new policies issue, and existing policies are recalled and settled. See § 3903.19. The Ohio priority statute does not regulate the ongoing business of insurance; it facilitates disbursement of a defunct insurance business' assets in a way the Ohio Legislature deems equitable. As we were careful to note in National Securities, the McCarran- Ferguson Act "did not purport to make the States supreme in regulating all the activities of insurance companies." 393 U. S., at 459 (emphasis omitted). The McCarran- Ferguson Act does not displace the standard preemption analysis for the state regulation of insurance companies; it does so for the state regulation of the business of insurance. Ibid. That the Ohio statute is within the class of state laws applicable to insurance companies does not mean the law regulates an integral aspect of the contractual insurance transaction.
"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, ... unless such Act specifically relates to the business of insurance: Provided, That ... [the federal antitrust statutes] shall be applicable to the business of insurance to the extent that such business is not regulated by State Law."
The phrase "business of insurance" is used three times and in two different clauses of the Act. The first clause of § 1012(b) is directed to the States, and provides that state laws enacted for the purpose of regulating the business of insurance are saved from pre-emption if there is no conflicting federal law which relates specifically to the business of insurance. The second clause of § 1012(b) is directed at insurers, and allows insurers an exemption from the federal antitrust laws for activities regulated by state law which qualify as the business of insurance. Respondent has argued that cases such as Royal Drug and Pireno, which addressed whether certain activities of insurers constituted the "business of insurance" under the second clause of § 1012(b), do not control cases in which the first clause of § 1012(b) is at issue. On the way to accepting respondent's suggestion, the majority observes, ante, at 504, that the phrase "business of insurance" in the first clause of § 1012(b) is "not so narrowly circumscribed" as the identical phrase in the second clause.
to limit their reach in this way. Indeed while we have had numerous opportunities to examine and to apply the McCarran-Ferguson Act in different contexts, we have never hinted that the meaning of the phrase "business of insurance" changed whether we addressed laws "enacted for the purpose of regulating the business of insurance" or activities of insurers constituting the "business of insurance." Further, the suggestion that Pireno's three-tier test has application only in antitrust cases is discredited by our decisions citing the Pireno test in contexts unrelated to antitrust. For instance, we have employed the Pireno test to determine whether certain state laws fall within the pre-emption saving clause of the Employee Retirement Income Security Act of 1974. See Pilot Life Ins. Co. v. Dedeaux, 481 U. S. 41, 48-49 (1987); Metropolitan Life Ins. Co. v. Massachusetts, 471 U. S. 724, 742-743 (1985).
Royal Drug and Pireno are best viewed as refinements of this Court's analysis in National Securities, tailored to address activities of insurance companies that would implicate the federal antitrust laws were it not for the McCarranFerguson Act. Although these cases were decided in accordance with the rule that exemptions from the antitrust laws are to be construed narrowly, see Pireno, 458 U. S., at 126; Royal Drug, 440 U. S., at 231, I see no reason why general principles derived from them are not applicable to any case involving the scope of the term "business of insurance" under the McCarran- Ferguson Act.
policyholder and insurance company relationship as to constitute the business of insurance. Pireno considers: "[FJirst, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry." 458 U. S., at 129.
It regulates an activity which is too removed from the contractual relationship between the policyholder and the insurance company. First, the risk of insurer insolvency addressed by the statute is distinct from the risk the policyholder seeks to transfer in an insurance contract. The transfer of risk from insured to insurer is effected "by means of the contract between the parties-the insurance policyand that transfer is complete at the time that the contract is entered." Id., at 130. As to the second prong, the Ohio statute does not regulate the relationship between the insured and the insurer, but instead addresses the relationship among all creditors the insurer has left in the lurch. Finally, it is plain that the statute is not limited to entities within the insurance industry. The statute governs the rights of all creditors of insolvent insurance companies, including employees, general creditors, and stockholders, as well as government entities.
ulates the business of insurance. If so, the order in which Ohio chooses to rank creditor (and policyholder) priority is beyond the concern of the Act.
Even though Ohio's insurance liquidation statute is not a law enacted for the purpose of regulating the business of insurance, I underscore that no provision of federal law precludes Ohio from establishing procedures to address the liquidation of insolvent insurance companies. The State's prerogative to do so, however, does not emanate from its recognized power to enact laws regulating the business of insurance under the McCarran- Ferguson Act, but from the longstanding decision of Congress to exempt insurance companies from the federal bankruptcy code. 11 U. S. C. §§ 109 (b)(2), (d). The States are not free to enact legislation inconsistent with the federal priority statute, and in my view the majority errs in applying the McCarran- Ferguson Act to displace the traditional principles of pre-emption that should apply. I would reverse the judgment of the Court of Appeals.
United States Department Of Treasury et al.

References: § 3713
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 § 3713
 § 3903
 § 1011
 § 2
 § 1012
 § 3903
 § 3903
 § 3903
 § 3903
 § 3903
 § 3903
 § 3903
 v. 
 v. 
 v. 
 v. 
 v. 
 § 1011
 v. 
 § 1012
 § 1012
 § 1012
 v. 
 v. 
 v. 
 § 2
 § 2
 v. 
 v. 
 § 3713
 § 3903
 v. 
 § 1012
 § 1
 § 1
 v. 
 v. 
 § 3903
 § 1012
 § 1012
 § 1012
 § 1012
 § 1012
 v. 
 v.