# United States v. South-Eastern Underwriters Association

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## What Was United States v. South-Eastern Underwriters Association?

The term _United States v. South-Eastern Underwriters Association_ refers to a landmark U.S. Supreme Court case involving the federal [antitrust](https://www.investopedia.com/terms/a/antitrust.asp) statute and the [insurance](https://www.investopedia.com/terms/i/insurance.asp) industry. The case was decided on June 5, 1944. The Supreme Court ruled that the industry is subject to regulation by the United States Congress, under the Commerce Clause. This means that the court determined insurance to be a business that crosses state lines and is, therefore, subject to antitrust laws. Congress passed a law a year later exempting the insurance industry from federal scrutiny.

### Key Takeaways

*   _United States v. South-Eastern Underwriters Association_ was a 1944 Supreme Court case that ruled the insurance industry should be subject to federal regulation.
*   The ruling gave lawmakers authority over interstate and international commerce, including insurance policies sold out of state.
*   Congress passed the McCarran-Ferguson Act in 1945, which exempted the insurance industry from most federal regulation.
*   Passed in 2021, the Competitive Health Insurance Reform Act of 2020 allows federal authorities to take action against insurers that engage in anticompetitive behavior.

## Understanding United States v. South-Eastern Underwriters Association

The [insurance](https://www.investopedia.com/terms/i/insurance.asp) industry is an important part of the [financial sector](https://www.investopedia.com/terms/f/financial_sector.asp). But there have been questions about how insurers should be regulated, largely because these companies do business in multiple states. The debate of whether insurers should be regulated on a state or federal level became key for lawmakers in the early 20th century.

The case of _United States v. South-Eastern Underwriters Association_ came before the Supreme Court on appeal from a Northern District of Georgia court. The South-Eastern Underwriters Association had control of 90% of fire and other insurance [markets](https://www.investopedia.com/terms/m/market.asp) in six southern states. This was believed to have given the company an unfair monopoly, brought on through [price fixing](https://www.investopedia.com/terms/f/fixing.asp).

The case focused on whether insurance was a type of interstate commerce that should fall under the United States Commerce Clause and the [Sherman Antitrust Act](https://www.investopedia.com/terms/s/sherman-antiturst-act.asp), which was passed into law in 1890 and outlawed monopolies of any kind. The Supreme Court held that insurers that conducted significant portions of their business across state lines actually engaged in interstate [commerce](https://www.investopedia.com/terms/c/commerce.asp). The ruling held that the industry could be regulated by federal law.

The following year, Congress made a move to overturn the Supreme Court ruling when it passed the McCarran-Ferguson Act. The Act prescribed that insurance [regulation](https://www.investopedia.com/terms/r/regulation-i.asp) was a matter for individual states to decide—not the federal government. The McCarran-Ferguson Act, therefore, exempted the insurance industry from most federal regulations, including [antitrust laws](https://www.investopedia.com/ask/answers/09/antitrust-law.asp).

## The McCarran–Ferguson Act and the Health Insurance Industry Fair Competition Act

The McCarran-Ferguson Act is commonly thought of as a form of regulation. However, the Act neither regulates the insurance industry nor requires states to regulate the products offered by insurance companies. Rather, it offers an "Act of Congress," which does not clearly aim to regulate the "business of insurance" by not preempting state laws or regulations that do regulate insurance transactions.

> **Important**
>
> The McCarran-Ferguson Act does not regulate the insurance industry.

Competition for interstate insurance remains a key element of [health care](https://www.investopedia.com/terms/h/health_care_sector.asp) reform. In February 2010, the House of Representatives voted to amend the McCarran–Ferguson Act by passing the Health Insurance Industry Fair Competition Act. Similar attempts to update insurance antitrust provisions are ongoing with efforts to replace or amend the [Affordable Care Act](https://www.investopedia.com/terms/a/affordable-care-act.asp) (ACA), also known as Obamacare.

During his first term, President Donald Trump also signed the Competitive Health Insurance Reform Act of 2020 into law on Jan. 13, 2021. The bill, which was introduced by Rep. Peter DeFazio (D-OR), places restrictions on the insurance industry, allowing federal authorities to take action against companies that engage in any behavior that may stifle competition, such as price-fixing. Although it was lauded by the Department of Justice, the industry objected, saying it added unnecessary financial burden and red tape on insurers.

## What Did the 1944 U.S. v. Southeastern Underwriters Association Case Determine?

The court decision gave regulatory control of the insurance industry to the federal government, superseding any non-compliant state law.

## What Is the Difference Between Insurance and Underwriter?

An insurer is a person or company that provides customers with insurance coverage, taking on any risks involved. An underwriting agency doesn't insure risks itself; rather, it works on behalf of the insurer, assessing the risk levels in each insurance contract.

## What Was the Primary Effect of the McCarran-Ferguson Act?

The McCarran-Ferguson Act had a direct impact on employee benefits. The law gives states the primary authority to regulate insurance policies; therefore, employers offering insurance benefits to their employees must comply with state insurance laws.

## The Bottom Line

_United States v. South-Eastern Underwriters Association_ was a 1944 Supreme Court case that ruled the insurance industry should be subject to federal regulation. In response, Congress enacted the McCarran-Ferguson Act of 1945 which limited antitrust laws' applicability to the business and assured state authority would continue over insurance.

> **Article Sources**
>
> 1.  Cornell Law School. "[United States v. South Eastern Underwriters Ass'n et al](https://www.law.cornell.edu/supremecourt/text/322/533)."
>     
> 2.  Lexology. "[Passage of Competitive Health Insurance Reform Act Repeals 75 Year Old Health Insurers’ Federal Antitrust Exemption](https://www.lexology.com/library/detail.aspx?g=6c191e84-3127-47d0-b7df-1c3a11b3a01d)."
>     
> 3.  National Association of Insurance Commissioners. "[McCarran-Ferguson Act](https://content.naic.org/cipr_topics/topic_mccarran_ferguson_act.htm)."
>     
> 4.  Our Documents (National Archives). "[Sherman Anti-Trust Act (1890)](https://www.ourdocuments.gov/doc.php?flash=false&doc=51)."
>     
> 5.  Congress.gov. "[H.R. 4626-Health Insurance Industry Fair Competition Act](https://www.congress.gov/bill/111th-congress/house-bill/4626)."
>     
> 6.  Congress.gov. "[H.R.1418 - Competitive Health Insurance Reform Act of 2020](https://www.congress.gov/bill/116th-congress/house-bill/1418/)."
>     
> 7.  Healthcare Finance. "[Justice Department welcomes passage of the Competitive Health Insurance Reform Act of 2020](https://www.healthcarefinancenews.com/news/justice-department-welcomes-passage-competitive-health-insurance-reform-act-2020)."
>     
> 8.  The United States Department of Justice. "[Justice Department Welcomes Passage of The Competitive Health Insurance Reform Act of 2020](https://www.justice.gov/opa/pr/justice-department-welcomes-passage-competitive-health-insurance-reform-act-2020)."