Delaware Department of Insurance v. United States

The McCarran-Ferguson Act (15 U.S.C. § 1011, et seq.) was enacted to “restore the supremacy of the States in the realm of insurance regulation.” United States Dep’t of Treasury v. Fabe, 508 U.S. 491, 505 (1993). The first clause of § 1012(b) “grant[s] the States broad regulatory authority over the business of insurance.” Id. Ten Circuit Courts of Appeals use a three factor test which mirrors the statute in determining preemption under § 1012(b). Here, the Third Circuit added an additional factor, misapplied from later in the statute’s second clause which relates only to antitrust cases. The Court thus erroneously held that a Delaware insurance statute intended to promote the free flow of information between insurers and their regulators did not preempt the IRS code authorizing a summons. The Court found that the “conduct at issue” did not constitute “the business of insurance.” The Court’s error requires the Insurance Commissioner to violate his own statute. The question presented in this case is: 1. When determining whether a state insurance statute preempts a federal law of general application under the McCarranFerguson Act, are the three statutory factors set forth in the first clause of § 1012(b) the only proper factors to consider, or may a court first constrain the inquiry by assessing whether the “conduct at issue” constitutes the “business of insurance?”