Roanoke Times
                 Copyright (c) 1995, Landmark Communications, Inc.

DATE: TUESDAY, June 29, 1993                   TAG: 9306290072
SECTION: BUSINESS                    PAGE: B-8   EDITION: METRO 
SOURCE: Journal of Commerce
DATELINE: WASHINGTON                                LENGTH: Medium

INSURERS CAN BE TRIED

An insurance antitrust immunity law doesn't shield the insurers against charges by 19 state attorneys general that a conspiracy reduced commercial liability coverage offered to states, local governments and businesses, the court said. The 5-4 ruling by a sharply divided court on the last day of the term means an antitrust suit can go forward in a San Francisco trial court.

"We hold that most of the domestic defendants' alleged conduct is not immunized from antitrust liability" under the McCarran-Ferguson Act, Justice David Souter said for the court, referring to the 1945 statute that gave insurers limited antitrust immunity.

Conceding a point raised by the insurers, Souter said the appeals court was wrong in holding that the insurance companies lost their antitrust immunity by allegedly conspiring with the foreign companies.

But he added that the appeals court was right in ruling that most of the allegations amounted to an illegal boycott, thus stripping the insurance companies of any immunity.

It was alleged that U.S. insurance companies had enlisted the support of foreign reinsurers who threatened a boycott of the U.S. market if more restrictive liability policy terms were not imposed. Insurers countered that their collective action was a reaction to court interpretations that provided pollution coverage and other forms of liability insurance, which insurers never intended to offer.

The defendants maintained that their activities amounted to nothing more than developing standardized policy language under the supervision of state regulation, which is protected from federal antitrust enforcement under McCarran-Ferguson.

Insurers' potential liability in the case could run into the hundreds of millions of dollars, as "states are going to seek money damages for insurance coverage that cities, counties and other government entities would have gotten if not for the illegal boycott," said Eugene Anderson, senior partner at Anderson Kill Olick & Oshinsky of New York and Washington.

Still, insurance companies said they generally were pleased with the outcome because of the court's narrow definition of what constitutes an illegal boycott.

"Justice [Antonin] Scalia said we didn't engage in a boycott because of an agreement between insurers, both domestic and foreign, on acceptable terms of insurance," said Stephen M. Shapiro, the attorney representing the insurers.

"A boycott would have to go beyond that, such as a complete refusal to deal" with anyone; "we don't believe the states can prove that," he said.

"From our point of view, the impact of this case is not dollars but what impact it might have on the development of standardized policy forms for the benefit of consumers."

The insurers also hailed the court's unanimous finding that the insurance companies did not forfeit their antitrust immunity by conspiring with foreign insurers to restrict coverage terms under standard policies circulated by the Insurance Services Office, a trade group representing about 1,400 property and casualty insurers.

ISO is among the 32 defendants named in the insurance lawsuit. Others include ITT Corp.'s Hartford Fire Insurance Co.; Aetna Casualty & Surety Co.; Cigna Corp.; and Sears, Roebuck & Co.'s Allstate unit.

Scalia, who reflected the difficulty the court had with the case by writing part of the majority opinion and part of the dissenting opinion, said it would be "not a `boycott' but rather a concerted agreement to terms . . . where parties refuse to engage in a particular transaction until the terms of that transaction are agreeable."

The case began in 1988 when several state attorneys general alleged violation of the Sherman Act by the four insurers and several major reinsurers, including Lloyd's of London, for their alleged collective refusal to write commercial general liability insurance. The states said the insurers engaged in a conspiracy to coerce other insurers to change the terms under which they sell insurance.