Katz et. al. v. Fidelity National Title Insurance Company 685 F.3d 588 (6th Cir.

July 17, 2012) The McCarran-Ferguson Act Judge Danny J. Boggswriting for a unanimous Sixth Circuit panelexplained that the insurance exemption embodied in the McCarran-Ferguson Act applies to title insurance, even though the insurance policies spread only a small amount of risk. In one of several recent antitrust challenges to title-insurance rate-setting, plaintiffs in this case alleged that twenty-two title-insurance companies and the Ohio Title Insurance Rating Bureau violated state and federal antitrust laws by conspiring to set unreasonably high insurance rates. The Sixth Circuit sought to determine whether the McCarran-Ferguson Act barred the federal claims. This act exempts the business of insurance from the federal antitrust laws, to the extent that business is regulated by state law and does not amount to a boycott. Here, as is true in many McCarran-Ferguson Act decisions, the primary issue was whether the challenged activity constitutes the business of insurance. The U.S. Supreme Court has developed three criteria to determine whether a particular business or practice is part of the business of insurance exempted from federal antitrust law: first, whether the practice has the effect of transferring or spreading a policyholders 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. Union Labor Life Ins. Co. v. Pireno, 458 U.S. 119, 129 (1982). The parties did not dispute the second and third factorsthe title insurance was an integral part of the policy relationship and was limited to entities within the insurance industry. The issue on appeal was whether the practice has the effect of transferring or spreading a policyholders risk. The Sixth Circuit concluded that it does. The crucial legal conclusion was that the first Pireno factor requires only that a product spread some risk; it does not specify any particular quantity. The amount of risk is relevant in that it bears on the first factors weight in the multifaceted Pireno analysis. But because the second and third factors were concededly met, even a small amount of risk-spreading was sufficient to meet the business-of-insurance test for the McCarran-Ferguson Act. The court acknowledged that title-insurance policies are priced well above most estimates of the risk involved. But that was enough: Rigid insistence on substantial risk-spreading is not required. Notably, the court also compared the exemption provided by the McCarran-Ferguson Act to arguments centered on the filed-rate doctrine. The filed-rate doctrine prevents private parties from recovering antitrust damages based on a rate properly filed with, and approved by, an appropriate regulatory body. Many courts considering antitrust challenges to title insurance examined whether the filed-rate doctrine applied, but the Sixth Circuit explained that this doctrine was limited because it deals only with private parties remedies, and does not, itself, remove actors from all antitrust scrutiny. The McCarran-Ferguson Act, however, if it applied, would completely bar an antitrust action. Thus, the Sixth Circuit viewed it appropriate to consider first, whether the McCarran-Ferguson Act applies, because it is the more complete

EAST\51277372.1 #1837983v.1

barrier to the federal antitrust claims. Having applied the McCarran-Ferguson Act, the filed-rate doctrines limitation on remedy is irrelevant.

EAST\51277372.1 #1837983v.1