The Implications of Humana Inc. v. Forsyth for the Insurance Industry

The regulation of the insurance industry is an area historically reserved to the states. In 1945, concerned by a Supreme Court ruling that applied the Sherman Antitrust Act to the business of insurance, Congress enacted a law designed to prevent federal law from undermining the states’ regulatory efforts. That law, the McCarran-Ferguson Act, provides in part that a federal law of general application shall not be “construed to invalidate, impair, or supersede any state law regulating the business of insurance.” The issue in Humana Inc. v. Forsyth was whether applying the federal Racketeer Influenced and Corrupt Organizations Act (“RICO”) to an alleged insurance fraud would “invalidate, impair, or supersede” Nevada statutory and common law prohibiting insurance fraud, thereby violating McCarran-Ferguson. The Court held that it would not. The ruling paves the way for application of RICO -- and potentially many other federal laws -- to all aspects of the business of insurance.

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