The Antitrust Suits and the Public Understanding of Insurance

Abstract

The social significance of the insurance antitrust suits extends beyond the specific legal issues of McCarran-Ferguson Act interpretation and the economics of boycotts. Few people have forgotten the extraordinary insurance disruptions of 1985-1986. For liability insurance reasons, jails, day care centers, and ski lifts were closed; police patrols were suspended; and playground equipment and diving boards were removed from public schools and parks. For similar reasons, nurse-midwives could not obtain insurance and doctors fled from obstetric specialties. Though perhaps more quietly, producers removed scores of products from markets and product innovation declined. The insurance antitrust suits represent a national trial of the source of these disruptions. Narrowly, the suits claim that one principal phenomenon of the crisis, the withdrawal of occurrence, pollution, and defense cost insurance coverage, was generated by collusive practices of insurers, rather than by the expansion of tort liability. But the suits' broader social import stems from their implied allegation that the insurance industry possesses a combination of unbridled power and a voracious desire for profits that give it the ability and impetus to engage in massive manipulation of product and service markets, even of such central, yet vulnerable, services as municipal parks, day care, and obstetrics. In this respect, the suits represent the delegation to a jury, not merely of legal issues involving standard insurance forms, but of the broader charges of power, manipulation, and excessive profit making and of issues regarding the role and impact of state insurance regulation. The resolution of the suits may signal the direction of statutory and regulatory policies toward the insurance industry for the decade to come.