The States Lose

The precedent-smashing U.S. Supreme Court this week smashed another--this time one that had stood for 75 years. It ruled that the $5,800,000,000 fire-insurance business, which had been supervised by the states, comes under interstate commerce. As such, insurance will immediately become subject to federal supervision under the antitrust laws. The Court brushed aside pleas of 35 state governors that federal regulation would destroy the "sovereignty of the states."

This was a resounding victory for Attorney General Francis Biddle, and a whacking defeat for not only the governors, but the States' rights bloc in Congress. In a futile race with the Supreme Court, the States-righters had popped bills into both Houses of Congress, aimed to whisk the insurance business out from under the antitrust acts (TIME, Nov. 29). Their contention: insurance regulation is a concern of the states, not the federal government, and has been so held by the Supreme Court for 75 years.

The issue arose back in 1942 when the South Eastern Underwriters Association (196 stock companies representing 80% of the fire insurance written in the U.S.) was indicted on antitrust charges. When the indictment was dismissed by an Atlanta court, Attorney General Biddle appealed.

Justice Hugo Black wrote the majority opinion in the 6-to-1 decision (Justices Roberts and Reed not participating). He ruled: "Perhaps no modern commercial enterprise directly affects so many persons ... as does the insurance business. . . . No commercial enterprise of any kind which conducts its activities across state lines has been held to be wholly beyond the regulatory powers of Congress under the commerce clause."

What will happen to the state insurance commissions which now collect $100,000,000 annually in fees from insurance companies? In his lone dissent, Justice Stone gave a gloomy answer: Said he: "The practical effect ... is to withdraw from the states, in large measure, the regulation of insurance and to confer it on the national government--which has ... no scheme of regulation." This will loose "a flood of litigation and legislation, state and national."

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