On August 12, 2008, the U.S. Court of Appeals for the Eighth Circuit affirmed a district court ruling that the McCarran-Ferguson Act barred claims under federal civil rights laws that the rates charged by homeowners' insurers in Missouri had a "disparate impact" on minority policyholders. This ruling was the Eighth Circuit's fourth opinion in this and predecessor cases affirming judgments in favor of the homeowners' insurer defendants in this litigation. Saunders, et al. v. Farmers Insurance Exchange, et al., No. 07-1894. Wiley Rein attorney Cynthia T. Andreason represented Farmers in the litigation.
At stake was the resolution of a conflict between the concepts of "unfair discrimination" under Missouri insurance law and "discrimination" under the Federal Fair Housing and Civil Rights Acts. Insurers are required, under the laws of Missouri and virtually all states, to charge rates that are "not inadequate, excessive or unfairly discriminatory. It is "unfairly discriminatory" to charge insureds who present similar risks different rates, or to charge the same rates to insureds who present different risks. The federal laws relied on by the plaintiffs in Saunders, on the other hand, prohibit "fair" as well as unfair discrimination against specified protected minorities.
The court affirmed the ruling of the District Court applying the analytical framework the Supreme Court enunciated in Humana Inc. v. Forsyth, 525 U.S. 299 (1999). It held that the plaintiffs' discriminatory pricing claims were barred by the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015, because those claims "impaired" Missouri's comprehensive and specific legislative regime governing insurance rates in the state. In Missouri, the court noted, the Department of Insurance is exclusively charged with enforcing all insurance laws, including those concerning insurance pricing. Missouri law provides no private right of action for persons alleged to be aggrieved by insurance rates. Rather, their sole remedy is an administrative complaint to the Department of Insurance. The court further held that Missouri's insurance rating regime would be impaired even if the federal and state laws at issue were the same, because the simple application of federal law would effectively transfer administration of Missouri's insurance rating regime to federal courts, contravening Missouri's clear requirement that the Department of Insurance be the sole administrator of Missouri's rating laws.