McCarran Walter Act

McCarran-Ferguson Act

The McCarran-Ferguson Act, 15 U.S.C. 1011, is a United States federal law. The McCarran-Ferguson Act was passed by Congress in 1945 after the Supreme Court ruled in U.S. v. South-Eastern Underwriters that insurance could be regulated by the federal government via the Commerce Clause (the overturned case stated that the federal government had this power), or, in other words, that insurance was interstate commerce.


The McCarran-Ferguson Act does not itself regulate insurance, nor does it mandate that states regulate insurance. However, it does empower Congress to pass laws in the future that will have the effect of regulating the "business of insurance." However, federal acts that do not expressly purport to regulate the "business of insurance" will not preempt state laws or regulations that regulate the "business of insurance."

The Act also provides that federal anti-trust laws will not apply to the "business of insurance" as long as the state regulates in that area, but federal anti-trust laws will apply in cases of boycott, coercion, and intimidation.


United States vs. South-Eastern Underwriters Association (322 U. S. 533) in 1944, came before the Supreme Court on appeal from a district court located in North Georgia. The South-Eastern Underwriters Association controlled 90 percent of the market for fire and other insurance lines in six southern states and set rates at non-competitive levels. Furthermore, it used intimidation, boycotts and other coercive tactics to maintain its monopoly.

The question before the Court was whether or not insurance was a form of "interstate commerce" which could be regulated under the Commerce Clause of the United States Constitution and the Sherman Anti-Trust Act. The general opinion in law before this case, according to the Court, was that the business of insurance was not commerce, and the District Court concurred with the opinion. The Supreme Court concluded that:

"4. Any enactment by Congress either of partial or of comprehensive regulations of the insurance business would come to us with the most forceful presumption of constitutional validity. The fiction that insurance is not commerce could not be sustained against such a presumption, for resort to the facts would support the presumption in favor of the congressional action. The faction therefore must yield to congressional action and continues only at the sufferance of Congress.

5. Congress also may, without exerting its full regulatory powers over the subject, and without challenging the basis or supplanting the details of state regulation, enact prohibitions of any acts in pursuit of the insurance business which substantially affect or unduly burden or restrain interstate commerce."

In short, while not changing the opinion of prevailing law, the Court stated that the conclusion that insurance was not commerce under the law rested with Congress, and that the Court would follow the lead of Congress.

As a result, on March 9 1945, The McCarran-Ferguson Act was passed by Congress. It allows state law to regulate the business of insurance without federal government interference. Among others, it allows for:

  • the state regulation of insurance
  • allows states to establish mandatory licensing requirements
  • preserves certain state laws of insurance.

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