Uniforce Temporary Personnel, Inc. v. National Council on Compensation Ins., Inc.

• Decision Date: 18 July 1996
• Docket Number: No. 95-4589,95-4589
• Parties: 1996-2 Trade Cases P 71,485 UNIFORCE TEMPORARY PERSONNEL, INC., Uniforce Services, Inc., Plaintiffs-Appellants, v. NATIONAL COUNCIL ON COMPENSATION INSURANCE, INC., a Florida not for profit corporation, National Council on Compensation Insurance, an unincorporated business entity, National Workers' Compensation Reinsurance Pool, an unincorporated business entity, Does 1-3, Defendants-Appellees, Liberty Mutual Insurance Company, Travelers Insurance Company, Insurance Company of North America, Defendants-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1296

87 F.3d 1296

1996-2 Trade Cases P 71,485

UNIFORCE TEMPORARY PERSONNEL, INC., Uniforce Services, Inc., Plaintiffs-Appellants, v. NATIONAL COUNCIL ON COMPENSATION INSURANCE, INC., a Florida

not for profit corporation, National Council on Compensation

Insurance, an unincorporated business entity, National

Workers' Compensation Reinsurance Pool, an unincorporated

business entity, Does 1-3, Defendants-Appellees,

Liberty Mutual Insurance Company, Travelers Insurance

Company, Insurance Company of North America,

Defendants-Appellees.

No. 95-4589.

United States Court of Appeals, Eleventh Circuit.

July 18, 1996.

Anthony E. DiResta, J.D. Humphries, Varner, Stephens, Humphries & White, Atlanta, GA, for appellants.

Guy C. Quinlan, Rogers & Wells, New York City, James F. Carroll, Eckert Seamans Cherin & Mellot, Ft. Lauderdale, FL, for appellees.

Appeal from the United States District Court for the Southern District of Florida.

Before HATCHETT and BLACK, Circuit Judges, and CLARK, Senior Circuit Judge.

HATCHETT, Circuit Judge:

This appeal presents the issue of whether certain business practices in the insurance industry limit competition in the temporary help industry through monopolization or constitute an agreement in restraint of trade in violation of the Sherman Act. We affirm the district court's ruling that the business practices

employed in this case do not violate the Sherman Act.

BACKGROUND

Uniforce Temporary Personnel, Inc. and Uniforce Services, Inc. (collectively Uniforce) engage in the business of providing temporary employees for other businesses. In order for Uniforce to place its employees with businesses, Uniforce must first obtain workers compensation insurance. Generally, businesses can obtain workers compensation insurance for their employees through one of three markets: (1) the voluntary market, (2) the self-insurance market, and (3) the "assigned risk" or residual market. Uniforce, however, only qualifies for workers compensation insurance from the residual market. The insurance industry calls such workers compensation policies "assigned risk" policies.

Policyholders of "assigned risk" policies pay higher insurance premiums than policyholders of policies obtained through the voluntary or self-insurance market. The premiums are higher because of the combined loss experience of the insurance carriers in the residual market and because these carriers oftentimes contract their duties under the "assigned risk" policies to other insurance carriers called "servicing carriers." These servicing carriers draft the "assigned risk" policies, collect the premiums, provide loss control services, and perform other services required of a worker's compensation carrier. In return for these services, the insurer pays substantial servicing fees.

PROCEDURAL HISTORY

On June 15, 1994, Uniforce filed this lawsuit against the National Council on Compensation Insurance, Inc. (NCCI), the National Workers Compensation Reinsurance Pool (the pool), and insurance companies Liberty Mutual Insurance Company, Travelers Insurance Company, and Insurance Company of North America (collectively insurance carriers), alleging that their business practices in the insurance industry limit competition in the temporary help industry through monopolization of the administration of workers compensation insurance and price fixing in violation of 15 U.S.C. § 2 of the Sherman Act.

In its complaint, Uniforce also alleges that NCCI, the pool, and the insurance carriers' conduct constitutes an agreement in restraint of trade including a conspiracy to restrain the temporary help industry in violation of 15 U.S.C. § 1 of the Sherman Act. ¹ In addition, Uniforce sought a declaratory judgment on the issue of whether NCCI and the pool are insurance carriers and a judgment declaring the state that has overall responsibility for regulating and supervising the business of NCCI and the pool as it affects the temporary help industry.

Prior to discovery, NCCI, the pool, and insurance carriers (hereinafter appellees) moved for summary judgment on the grounds that: 1) the McCarran-Ferguson Act bars Uniforce's federal antitrust claims because the alleged activity involves the business of insurance; and 2) Uniforce fails to state a claim under the Sherman Act. The district court granted summary judgment on each of Uniforce's claims. ²

CONTENTIONS

Uniforce contends that the McCarran-Ferguson Act's bar on antitrust claims involving the business of insurance does not apply in this case because the appellees' rate-making, classification and allocation of risk, and other activities involving the administration of workers compensation insurance concern the "business of insurers" and not the "business of insurance." In the alternative, Uniforce contends that its antitrust claims fall within the "boycott" exception to the McCarran- Appellees contend that the activities Uniforce complains of fall squarely within the meaning of "the business of insurance." Appellees also contend that Uniforce fails to allege facts sufficient to constitute a boycott within the meaning of the McCarran-Ferguson Act and therefore assert that the McCarran-Ferguson Act bars Uniforce's antitrust claims. Finally, even assuming that the McCarran-Ferguson Act does not bar Uniforce's claims, the appellees contend that their practices in the insurance industry could not violate the Sherman Act in this action because they do not compete in the temporary help industry.

                Ferguson Act's bar on antitrust claims.   Uniforce also contends that the district court erred in concluding that it failed to state a claim under the Sherman Act merely because appellees do not compete in the temporary help industry
                

ISSUES

We address two issues on appeal: 1) whether the McCarran-Ferguson Act bars antitrust claims involving rate-making practices in the insurance industry; and 2) whether a competitive relationship must exist between parties in order to assert a viable claim under the Sherman Act.

DISCUSSION

We review the district court's grant of summary judgment de novo and apply the same legal standards that bound the district court in rendering its decision. Canadyne-Georgia Corp. v. Continental Ins. Co., 999 F.2d 1547, 1554 (11th Cir.1993).

A. The McCarran-Ferguson Act

The McCarran-Ferguson Act exempts the business of insurance from antitrust laws if: 1) state law regulates such activity; and 2) the complained of activity does not constitute a "boycott." 15 U.S.C. §§ 1011, 1012, 1013(b) (1988). The McCarran-Ferguson Act provides in pertinent part:

Congress hereby declares that the continued regulation and taxation by the several States of the business of insurance is in the public interest, and that silence on the part of the Congress shall not be construed to impose any barrier to the regulation or taxation of such business by the several States.

15 U.S.C. § 1011 (1988). The McCarran-Ferguson Act further provides that "[n]o 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, unless such Act specifically relates to the business of insurance...." 15 U.S.C. § 1012(b) (1988).

Uniforce concedes that the McCarran-Ferguson Act exempts conduct involving the business of insurance in most instances, but argues that the McCarran-Ferguson Act does not apply to its antitrust claims because they involve the "business of insurers," and not the business of insurance. ³ Uniforce defines the business of insurers as "the manipulation of the cost of workers compensation insurance" through the classification and allocation of risk and the contracting of the insurers' duties under the "assigned risk" policy to servicing carriers. Employing this definition, Uniforce claims that the appellees' activities create and impose unreasonable premiums for "assigned risk" policies while depriving the temporary employment industry of access to the voluntary market.

Simply put, Uniforce's antitrust claims center on the appellees' rate-making activity. We therefore must determine whether appellees' rate-making activity falls within the business of insurance for purposes of the McCarran-Ferguson Act. Courts make three inquiries when determining whether the practice complained of constitutes the business of insurance first, whether the practice has the effect of transferring or spreading a policyholder's risk; second, whether the practice is an integral part of the policy relationship between the insurer and the insured; and third, whether the practice is limited to entities within the insurance industry.

Union Life Ins. Co. v. Pireno, 458 U.S. 119, 129, 102 S.Ct. 3002, 3004, 73 L.Ed.2d 647 (1982). In this case, we find that appellees' rate-making activity satisfies each of these criterion. First, in computing the premium for the "assigned risk" poli...