St. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531 (1978)
U.S. Supreme CourtSt. Paul Fire & Marine Ins. Co. v. Barry, 438 U.S. 531 (1978)
St. Paul Fire & Marine Insurance Co. v. Barry
Argued March 27, 1978
Decided June 29, 1978
438 U.S. 531
Respondents, licensed physicians practicing in Rhode Island and their patients, brought a class action against petitioners, four insurance companies writing medical malpractice insurance in the State, alleging a conspiracy in violation of the Sherman Act in which three of the four companies refused to deal on any terms with the policyholders of the fourth as a means of compelling them to submit to new ground rules set by the fourth, whereby coverage on an "occurrence" basis would not be renewed and coverage would issue only on a "claims made" basis. Petitioners' motion to dismiss the antitrust claim on the ground that it was barred by the McCarran-Ferguson Act was granted by the District Court. The Court of Appeals reversed, holding that the complaint stated a claim within the "boycott" exception in § 3(b) of that Act, which provides that the Sherman Act shall remain applicable "to any agreement to boycott, coerce, or intimidate, or act of boycott, coercion, or intimidation."
1. The antitrust claim is not mooted by the fact that, after the complaint was filed, Rhode Island formed a Joint Underwriters Association to provide medical malpractice insurance and to require all personal injury liability insurers in the State to pool expenses and losses in providing such insurance. Since Rhode Island now permits the writing of such insurance outside of the Association, it cannot be said that "subsequent events ma[ke] it absolutely clear that the allegedly wrongful behavior could not reasonably be expected to recur," United States v. Phosphate Expert Assn., 393 U. S. 199, 393 U. S. 203. Pp. 438 U. S. 537-538.
2. The "boycott" exception of § 3(b) applies to certain types of disputes between policyholders and insurers, and is not limited to concerted activity directed against competitor insurers or agents or, more generally, against competitors of members of the boycotting group. Pp. 438 U. S. 538-551.
(a) The language of § 3(b) is broad and unqualified, covering "any" act or agreement amounting to a "boycott, coercion, or intimidation." Had Congress intended to limit its scope to boycotts of competitor insurer companies or agents, and to preclude all Sherman Act
protection for policyholders, it presumably would have made this explicit. The customary understanding of "boycott" at the time of enactment, as elaborated in the Sherman Act decisions of this Court, does not support a definition of the term that embraces only those combinations that target competitors of the boycotters as the ultimate objects of a concerted refusal to deal. Pp. 438 U. S. 541-546.
(b) The legislative history, while not unambiguous, provides no substantial evidence that Congress sought to attach a special meaning to the language of § 3(b) that would exclude policyholders from all Sherman Act protection from restrictive agreements and practices by insurers falling outside of the realm of state-supervised cooperative action. Congress intended to preserve Sherman Act review of certain forms of regulation by private combinations and groups, including but not limited to the eradication of "blacklisting" and other exclusionary devices directed at independent insurance companies or agents. Pp. 438 U. S. 546-550.
(c) Nor does the structure of the McCarran-Ferguson Act support the proposed limitation on the reach of § 3(b). Section 3(b) is an exception to § 2(b), which limits the general applicability of the federal antitrust laws "to the business of insurance to the extent that such business is not regulated by State law." Congress intended in the "boycott" clause of § 3(b) to carve out of the overall framework of plenary state regulation an area that would remain subject to Sherman Act scrutiny. Pp. 438 U. S. 550-551.
3. The type of private conduct alleged to have taken place here, directed against policyholders, constitutes a "boycott" within the meaning of § 3(b). Pp. 438 U. S. 552-555.
(a) Such conduct accords with the common understanding of a boycott. The agreement binding petitioners erected a barrier between respondents and any alternative source of the desired coverage, effectively foreclosing all possibility of competition anywhere in the relevant market. Pp. 438 U. S. 552-553.
(b) The conduct with which petitioners are charged appears to have occurred outside of any regulatory or cooperative arrangement established by the laws of Rhode Island. This is not a case where a State has decided that regulatory policy requires that certain risks be allocated in a particular fashion among insurers or has authorized insurers to decline to insure particular risks. Here, a group of insurers decided to resolve by private action the problem of escalating damages claims and verdicts by coercing policyholders of one of the insurers to accept a severe limitation of coverage. Pp. 438 U. S. 553-555.
555 F.2d 3, affirmed.
POWELL, J., delivered the opinion of the Court, in which BURGER, C.J., and BRENNAN, WHITE, MARSHALL, BLACKMUN, and STEVENS, JJ., joined. STEWART, J., filed a dissenting opinion, in which REHNQUIST, J., joined, post, p. 438 U. S. 555.