Opinion ID: 754166
Heading Depth: 2
Heading Rank: 2

Heading: Applicability of the McCarran-Ferguson Act

Text: 24 The petitioners next contend that the McCarran-Ferguson Act (McCarran) precludes coverage for Williams's claim because the BLBA, without clear authorization from Congress, preempts Illinois's prerogative to regulate insurance. With regard to the business of insurance, McCarran  'overturn[ed] the normal legal rules of preemption' by imposing a rule 'that state laws enacted for the purpose of regulating the business of insurance do not yield to conflicting federal statutes unless the federal statute specifically provides otherwise.'  American Deposit Corp. v. Schacht, 84 F.3d 834, 837-38 (7th Cir.1996), cert. denied, --- U.S. ----, 117 S.Ct. 185, 136 L.Ed.2d 123 (1996) (quoting U.S. Dep't of Treasury v. Fabe, 508 U.S. 491, 507, 113 S.Ct. 2202, 2211, 124 L.Ed.2d 449 (1993)). McCarran specifically provides: 25 (a) State regulation 26 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. 27 (b) Federal regulation 28 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.... 29 15 U.S.C. § 1012. McCarran thus establishes a form of inverse preemption, letting state law prevail over general federal rules--those that do not 'specifically relate[ ] to the business of insurance.'  NAACP v. American Family Mut. Ins. Co., 978 F.2d 287, 293 (7th Cir.1992), cert. denied, 508 U.S. 907, 113 S.Ct. 2335, 124 L.Ed.2d 247 (1993). However, McCarran does not aim to tie [Congress's] hands; instead it prescribed the consequences of silence and specificity in other acts past and future. Federal laws that do not conflict with or supersede state rules always apply; federal laws inconsistent with state laws apply when Congress says so directly. Id. at 295. 30 The Supreme Court has adopted a three-part test in order to determine whether section 2(b) of the McCarran Act precludes the application of a federal statute to preempt state insurance law. Under this test, McCarran precludes preemption if: (1) the federal statute at issue does not specifically relat[e] to the business of insurance; (2) the state statute at issue was enacted for the purpose of regulating the business of insurance; and (3) the application of the federal statute would invalidate, impair, or supersede the state statute. Fabe, 508 U.S. at 500-01, 113 S.Ct. at 2208 (internal quotations omitted). As a conjunctive test, all three factors must be satisfied for McCarran to preclude the application of a given federal statute. 31 Under the first Fabe criterion, we consider whether the BLBA specifically relates to the business of insurance. To make this determination, we follow a three-part test adopted by this Court in American Deposit Corp. v. Schacht. Namely, a statute relates to the business of insurance if the law: (1) effectively transfers or spreads a policyholder's risk; (2) is an integral part of the policy relationship; and (3) is aimed solely at entities within the insurance industry. See American Deposit, 84 F.3d at 839 (citing Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129, 102 S.Ct. 3002, 3008, 73 L.Ed.2d 647 (1982)). 32 Applying the three criteria to the statute under consideration, we hold that Congress intended to bypass the McCarran Act in enacting the BLBA. First, the effect of the law is to transfer and spread the policyholder's risk. In the absence of the BLBA, coal companies like Lovilia would be forced to individually bear the costs of providing medical care for their employees; employees who are engaged in an extremely risky and hazardous occupation that often gives rise to the lethal black lung disease. The requirement that coal companies purchase insurance has the effect of spreading the risk of these medical costs among all black lung insurance premium payers. Second, the BLBA is an integral part of the policy relationship between Lovilia and Bituminous. Under the BLBA, all of Lovilia's employees must be provided with workmen's compensation insurance from Bituminous, and the BLBA and federal regulations place an affirmative duty on insurance carriers such as Bituminous to be certain that policies comply with federal law. Third, the BLBA is aimed solely at entities that insure those employees who are exposed to the dangers and hazards of the coal mining industry. The purpose of the BLBA is to ensure that all coal miners are covered by workmen's compensation insurance. 7 The statute specifically directs carriers as to how they must structure their contracts with coal mine operators. See 30 U.S.C. § 933(a). For these reasons, the BLBA satisfies the three-part American Deposit test. Because the BLBA specifically relates to the business of insurance, the McCarran Act does not, as the petitioners contend, preclude the application of the BLBA in Illinois. Thus, the petitioners' various arguments concerning the viability of the BLBA in Illinois are invalid, and we need not continue our analysis of the remaining two Fabe requirements.