Meicler v. Aetna Casualty and Surety Company

• Decision Date: 12 March 1974
• Docket Number: Civ. A. No. 73-H-515.
• Citation: 372 F. Supp. 509
• Parties: Marcel and Muriel MEICLER, Plaintiffs, v. AETNA CASUALTY AND SURETY COMPANY et al., Defendants.
• Court: U.S. District Court — Southern District of Texas

372 F. Supp. 509

Marcel and Muriel MEICLER, Plaintiffs, v. AETNA CASUALTY AND SURETY COMPANY et al., Defendants.

Civ. A. No. 73-H-515.

United States District Court, S. D. Texas, Houston Division.

March 12, 1974.

Jamail & Gano (Joseph D. Jamail, Don M. Barnett and Robert F. Stein Jr.), Houston, Tex., for plaintiffs.

Talbert, Giessel & Stone (Henry P. Giessel), Houston, Tex., Thompson, Coe, Cousins Irons & Porter (David B. Irons and R. B. Cousins), Dallas, Tex., Vinson, Elkins, Searls, Connally & Smith (Harry M. Reasoner and David T. Harvin), Kenneth J. Will, Fulbright, Crooker & Jaworski (Thomas R. McDade, B. J. Bradshaw and Richard N. Carrell), Butler, Binion, Rice, Cook & Knapp (Garey B. Spradley and Frank J. Knapp), Baker & Botts (Finis E. Cowan, Philip J. John, Jr., David P. Cotellesse, Michael Y. Saunders), Houston, Tex., Sewell, Junell & Riggs, Houston, Tex., Clark, Thomas, Denius, Winters & Shapiro (Barry K. Bishop), Austin, Tex., for defendants.

MEMORANDUM AND ORDER

SEALS, District Judge.

The instant suit was filed as a class action by the named Plaintiffs, Marcel and Muriel Meicler, on behalf of themselves and all persons, firms, partnerships, associations and corporations, similarly situated, which are or have been automobile liability insurance policyholders within the State of Texas since August 1, 1967. Plaintiffs' First Amended Original Class Action Complaint names one hundred and seven insurance companies which are authorized to sell automobile liability insurance in this State as Defendants.¹

It appears that Plaintiffs were owners, as of some unspecified date subsequent to August 1, 1967, of an automobile liability insurance policy issued by one of these Defendants. Upon the expiration of the policy Plaintiffs were informed by the issuing company that they had been placed in a less favorable risk classification. They were further told that the policy would be renewed for the same amount of coverage only if they paid the higher premium rate required by the new classification.

Plaintiffs attempted to purchase insurance from several of the other Defendants under their old classification and premium rate, but found that a policy could not be obtained except under the terms of the new less favorable classification. The Complaint states in pertinent part:

"Such concerted action in re-classifying Plaintiffs and all those similarly situated and concerted refusal by the Defendants to deal with the Plaintiffs and all others (sic) similarly situated amounts to and is a boycott by these Defendants. It is the result of a continuing agreement, understanding and concert of action among the Defendants to unreasonably restrain trade and commerce. Such action on the part of the Defendants has denied Plaintiffs and all others similarly situated the opportunity to purchase automobile liability insurance without the assessment of automatic penalties and increased costs for such insurance."

Two separate causes of action are set forth. First, it is contended that Defendants have violated and are violating the antitrust laws of the United States, Title 15, U.S.C. § 1 et seq., specifically, but not limited to, violations of Sections 1 and 13 thereof. Second, Plaintiffs urge that by virtue of Defendants' arbitrary and capricious actions, they are being ". . . denied equal protection and deprived of their property without due process of law."

I. ANTITRUST ALLEGATIONS

In response to Plaintiffs' antitrust claims, Defendants filed a motion to dismiss for lack of jurisdiction over the subject matter and for failure to state a claim upon which relief can be granted. The motion is predicated upon the Parker v. Brown, 317 U.S. 341, 63 S.Ct. 307, 87 L.Ed. 315 (1943) "state action" doctrine and the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015. Briefly, Parker v. Brown and its progeny stand for the proposition that the Sherman Act is inapplicable where a restraint upon trade or monopoly is the result of valid governmental action. Since this Court is of the opinion that Defendants' motion to dismiss is clearly sustainable under the McCarran-Ferguson Act, it will not be necessary to determine the applicability of Parker v. Brown to this litigation.

Section 1012(b) of the McCarran-Ferguson Act provides as follows:

"No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such business of insurance: Provided, That after June 30, 1948, the Act of July 2, 1890, as amended, known as the Sherman Act, and the Act of October 15, 1914, as amended, known as the Clayton Act, and the Act of September 26, 1914, known as the Federal Trade Commission Act, as amended, shall be applicable to the business of insurance to the extent that such business is not regulated by State Law."

Defendants contend, and this Court agrees, that the general business of automobile insurance and the particular aspect of that business at issue herein, risk classification, is "regulated by state law" in Texas.² Chapter Five Subchapter A of the Texas Insurance Code charges the State Board of Insurance with the responsibility of determining risk classifications for automobile insurance policies issued in this State and determining the premiums to be charged each classification.³ Insurance companies are prohibited by statute from adopting, without Board authorization, any risk classification plan or premium rate which deviates from the plan or rate established by the Board.⁴

Pursuant to the authority granted in Subchapter A, the State Board of Insurance adopted the Texas Driving Insurance Plan on July 27, 1966.⁵ The plan establishes a classification system designed to penalize drivers with bad driving records. It requires each insurer to classify each policy to become effective after August 1, 1967 according to the number of driving record points accumulated over a specified experience period by the applicant or any operator of the vehicle currently resident in the same household. Points are assigned according to the number and seriousness of a driver's traffic offense convictions and/or his accident record.⁶ Once a driver has been assigned and appropriate number of points under the plan, and his policy has been classified accordingly, the issuing company must charge the premium rate for the policy authorized and established by the State Board of Insurance.⁷

It is impossible to ascertain from the pleadings whether Defendants stand accused of merely following the dictates of the Plan or with somehow departing from its terms. There is language in the First Amended Complaint which seems to point in both directions.⁸ Under either circumstance, however, the § 1012(b) exemption would remain applicable. The risk classification aspect of the business of insurance is "regulated by state law" within the meaning of the McCarran-Ferguson Act regardless of whether Defendants are reclassifying policies in accordance with the Plan or not.

If the allegation is that Defendants are violating federal antitrust laws by following the scheme promulgated by the State Board of Insurance, unquestionably their conduct is "regulated by state law." Any other conclusion would render § 1012(b) virtually meaningless. See, Ohio AFL-CIO v. Insurance Rating Board, 451 F.2d 1178 (6th Cir. 1971); California League of Independent Insurance Producers v. Aetna Casualty & Surety Co., 175 F.Supp. 857 (N.D.Cal. 1959).

Although the conclusion is not quite so obvious, the § 1012(b) exemption would remain applicable even if Defendants are charged with having acted in concert to classify policies in a manner contrary to the Texas Driving Insurance Plan. This conclusion is sustainable on two similar but analytically distinct theories. First, where a comprehensive scheme has been adopted for the purpose of regulating a particular aspect of the insurance business, courts have consistently refused to inquire into the wisdom or effectiveness of those regulations in determining the applicability of § 1012(b). Arguments that § 1012(b) does not apply in situations where state regulations are ineffective have fallen on deaf ears. Commander Leasing Co. v. Transamerica Title Ins. Co., 477 F.2d 77 (10th Cir. 1973); Ohio AFL-CIO v. Insurance Rating Board, 451 F.2d 1178 (6th Cir. 1971). The Texas scheme is both comprehensive and detailed and this Court can see no reason for departing from the views expressed in the cases cited above.

Second, if Defendants have conspired to improperly classify policies and thereby increase the cost of insurance for those reclassified, they have violated the Texas antitrust laws. Tex.Bus. and Com.Code Ann. §§ 15.02 and 15.04 V.T. C.A. It has been held, with no mention of enforceability, that the existence of state antitrust laws covering the conduct alleged in a complaint can, without more, trigger the § 1012(b) exemption. Steingart v. Equitable Life Assurance Society of the United States, 1973, 366 F.Supp. 790 (S.D.N.Y., November 23, 1973); Sanborn v. Palm, 336 F.Supp. 222 (S.D.Tex.1971); California League of Independent Insurance Producers v. Aetna Casualty & Surety Co., 175 F. Supp. 857 (N.D.Cal.1959).

In an effort to remove their antitrust allegations from the ambit of § 1012(b), Plaintiffs seek shelter in § 1013(b) of the McCarran-Ferguson Act which provides: "Nothing contained in this chapter shall render the said Sherman Act inapplicable to any agreement to boycott, coerce, or intimidate, or act of boycott, coercion, or imtimidation." It is Plaintiffs' theory that Defendants' conduct in refusing to issue Plaintiffs a policy except after they submitted to re-classification comes within the purview of this section.

This Court is convinced that Plaintiffs' reliance on § 1013(b) is misplaced. It cannot be disputed that the terms boycott and coercion, as commonly defined, might be construed to encompass the type of activity attributed...