Opinion · Supreme Court of the United States

Humana Inc. v. Forsyth

Humana Inc. v. Forsyth, 525 U.S. 299 (1999)

Type
Opinion
Court
Supreme Court of the United States
Jurisdiction
Federal
Date
1999-01-20
Topic
general

How later courts describe this case

  • holding that federal RICO statute—which is itself grounded in the Commerce Clause—may be applied to insurers because it is not precluded by the McCarran-Ferguson Act
  • concluding that Racketeer Influenced and Corrupt Organizations Act’s (“RICO”) “private right of action and treble damages provisions appear to complement Nevada’s statutory and common-law claims for relief” against insurers and thus was not precluded by McCarran Ferguson
  • holding that the McCarran-Ferguson Act, which bars application of a federal law in the face of a state law enacted "for the purpose of regulating the business of insurance," did not preclude the concurrent assertion of the federal RICO statute and Nevada insurance law
  • stating that "an insurance company doing business across state lines engages in interstate commerce" (citing South-Eastern Underwriters )
  • noting that, under this provision, “when Congress enacts a law specifically relating to the business of insurance, that law ' controls”
  • holding McCarran-Ferguson Act precludes application of the FAA to arbitration clauses contained in insurance policies governed by South Carolina law
  • explaining that reverse preemption may apply if application of the federal law frustrates any declared state policy
  • noting that insurance companies have relied on RICO when they were the fraud victims

Citator

Humana Inc. v. Forsyth has been questioned or limited by later authorities: relies on overruled authority: 75 U.S. 168 (overruled by United States v. South-Eastern Underwriters Ass’n, 322 U.S. 533 (1944)). Read them before relying on it. 261 later decisions cite it.

Authority status
caution
Cited by
261 opinions

Headnotes

  1. Insurance Law — McCarran-Ferguson Act — Federal Preemption Under § 2(b) of the McCarran-Ferguson Act, a federal statute is precluded from application to state insurance law enacted for the purpose of regulating the business of insurance when the federal measure neither specifically relates to the business of insurance nor is consistent with the state law; here, because RICO is not a law specifically relating to the business of insurance, application of RICO turns on whether it would invalidate, impair, or supersede Nevada's insurance laws. 525 U.S. at 306-307
  2. Insurance Law — McCarran-Ferguson Act — Meaning of "Invalidate" and "Supersede" Application of a federal statute to conduct also proscribed by state insurance law does not "invalidate" state law, which ordinarily means to render it ineffective without providing a replacement rule, nor "supersede" it, which ordinarily means to displace it while providing a substitute rule, where insurers can comply with both regimes. 525 U.S. at 307-309
  3. Insurance Law — McCarran-Ferguson Act — Field Preemption Rejected The McCarran-Ferguson Act does not cede the field of insurance regulation to the States, saving only instances in which Congress expressly orders otherwise; had Congress intended field preemption, it could have provided that no federal statute not explicitly applicable shall be construed to apply to the business of insurance. 525 U.S. at 308-309
  4. Insurance Law — McCarran-Ferguson Act — Fee-and-Tax Provision Section 2(b)'s second prohibition, barring construction of federal statutes to invalidate, impair, or supersede state laws imposing a fee or tax on the business of insurance, belies any congressional intent to preclude federal regulation merely because it imposes liability additional to or greater than state law, since generally applicable federal fees and taxes do not impair state insurance taxes where nothing precludes insurers from paying both. 525 U.S. at 309-310
  5. Insurance Law — McCarran-Ferguson Act — Test for "Impairment" When federal law does not directly conflict with state regulation, and when application of the federal law would not frustrate any declared state policy or interfere with a State's administrative regime, the McCarran-Ferguson Act does not preclude its application; to "impair" a law means to weaken it, hinder its operation, or frustrate a goal of that law. 525 U.S. at 310-311
  6. Insurance Law — McCarran-Ferguson Act — Application to RICO A RICO suit by policy beneficiaries against an insurer for a concealed hospital-discount scheme does not impair state insurance law, and is therefore not precluded by the McCarran-Ferguson Act, where the State provides both statutory and common-law remedies against insurance fraud, the State's law does not exclude application of other state laws statutory or decisional, and RICO's private right of action and treble damages provision complements rather than frustrates those remedies. 525 U.S. at 311-314
HUMANA INC. v. FORSYTH,525 U.S. 299(1999)
119 S.Ct. 710
HUMANA INC. ET AL.v. FORSYTH ET AL.
CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE NINTH
CIRCUIT
No. 97-303.
Argued November 30, 1998
Decided January 20, 1999
Between 1985 and 1988, plaintiffs-respondents, beneficiaries of group health insurance policies issued by defendant-petitioner Humana Health Insurance of Nevada, Inc. (Humana Insurance), received medical care at a hospital owned by defendant-petitioner Humana Inc. Humana Insurance agreed to pay 80% of the beneficiaries' hospital charges over a designated deductible. The beneficiaries bore responsibility for payment of the remaining 20%. But pursuant to a concealed agreement, the complaint in this action alleged, the hospital gave Humana Insurance large discounts on the insurer's portion of the hospital's charges for care provided to the beneficiaries. As a result, Humana Insurance paid significantly less than 80% of the hospital's actual charges for the care that beneficiaries received, and the beneficiaries paid significantly more than 20%. The beneficiaries brought suit in Federal District Court, alleging that Humana Insurance and Humana Inc. had violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO) through a pattern of racketeering activity consisting of mail, wire, radio, and television fraud. The Humana defendants moved for summary judgment, citing § 2(b) of the McCarran-Ferguson Act, which provides: "No 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." RICO does not proscribe conduct that Nevada's laws governing insurance permit. But the federal and state remedial regimes differ. Both provide a private right of action. RICO authorizes treble damages; Nevada law permits recovery of compensatory and punitive damages. The District Court granted summary judgment for the Humana defendants. The Ninth Circuit reversed in relevant part. In itsMerchants Homedecision, handed down after the District Court rejected the beneficiaries' right to sue under RICO in this case, the Ninth Circuit adopted a "direct conflict" test for determining when a federal law "invalidate[s], impair[s], or supersede[s]" a state insurance law. As declared inMerchants Home, the McCarran-Ferguson Act does not preclude application of a federal statute prohibiting acts that are also prohibited under state insurance laws. Guided byMerchants Home, and assuming, inaccurately,Page 300that Nevada law provided for administrative remedies only, the Ninth Circuit held that the McCarran-Ferguson Act did not bar the policy beneficiaries' suit under RICO.Held:Because RICO advances the State's interest in combating insurance fraud, and does not frustrate any articulated Nevada policy or disturb the State's administrative regime, the McCarran-Ferguson Act does not block the respondent policy beneficiaries' recourse to RICO in this case. Pp. 306-314.
(a) The McCarran-Ferguson Act precludes application of a federal statute in face of state law "enacted . . . for the purpose of regulating the business of insurance," if the federal measure does not "specifically relat[e] to the business of insurance," and would "invalidate, impair, or supersede" the State's law. RICO is not a law that "specifically relates to the business of insurance." This case therefore turns on the question whether RICO's application to the employee beneficiaries' claims would "invalidate, impair, or supersede" Nevada's laws regulating insurance. Under the standard definitions, RICO's application in this action would neither "invalidate" —i.e., render ineffective without providing a replacement rule — nor "supersede" —i.e., displace while providing a substitute rule — Nevada's insurance laws. The key question, then, is whether RICO's application here would "impair" Nevada's law. The Court rejects the Humana petitioners' suggestion that the word "impair," in the McCarran-Ferguson Act context, signals Congress' intent to cede the field of insurance regulation to the States, saving only instances in which Congress expressly orders otherwise. If Congress had meant generally to preempt the field for the States, Congress could have said either that "no federal statute [that does not say so explicitly] shall be construed toapplyto the business of insurance" or that federal legislation generally, or RICO in particular, would be "applicable to the business of insurance [only]tothe extent thatsuch businessis not regulatedby state law." Moreover, § 2(b)'s second prohibition, barring construction of federal statutes to "invalidate, impair, or supersede" "any [state] law . . . which imposes a fee or tax upon [the business of insurance]," belies any congressional intent to preclude federal regulation merely because the regulation imposes liability additional to, or greater than, state law. Were this not so, federal law would "impair" state insurance laws imposing fees or taxes whenever federal law imposed additional fees or greater tax liability. Under the federal system of dual taxation, however, it is scarcely in doubt that generally applicable federal fees and taxes do not "invalidate, impair, or supersede" state insurance taxes and fees within the meaning of § 2(b) where nothing precludes insurers from paying both. On the other hand, thePage 301Court is not persuaded that Congress intended a green light for federal regulation whenever the federal law does not collide head on with state regulation. The dictionary defines "impair" as to weaken, make worse, lessen in power, diminish, relax, or otherwise affect in an injurious manner. The following formulation seems to capture that meaning and to construe, most sensibly, the text of § 2(b): When federal law does not directly conflict with state regulation, and when application of the federal law would not frustrate any declared state policy or interfere with a State's administrative regime, the McCarran-Ferguson Act does not preclude its application.Shawv.Delta Air Lines, Inc.,463 U.S. 85,101-103, supports the view that to "impair" a law is to hinder its operation or "frustrate [a] goal" of that law. The Court's standard also accords withSECv.National Securities, Inc.,393 U.S. 453,463, where, as here, federal law did not "directly conflict with state regulation," application of federal law did not "frustrate any declared state policy," nor did it "interfere with a State's administrative regime." Pp. 306-311.
(b) Applying the foregoing standard to the facts of this case, the Court concludes that suit under RICO by policy beneficiaries would not "impair" Nevada law and therefore is not precluded by the McCarran-Ferguson Act. Nevada provides both statutory and common-law remedies to check insurance fraud. The Nevada Unfair Insurance Practices Act is a comprehensive administrative scheme that prohibits various forms of insurance fraud and misrepresentation; gives Nevada's Insurance Commissioner the authority to issue charges if there is reason to believe the Act has been violated, to issue cease and desist orders, and to administer fees; and authorizes victims of insurance fraud to pursue private actions under Nevada law for violations of a number of unfair insurance practices, including misrepresentation of pertinent facts or insurance policy provisions relating to coverage. Moreover, the Act is not hermetically sealed; it does not exclude application of other state laws, statutory or decisional. Specifically, Nevada case law recognizes tort actions against insurers for breach of a common-law duty to negotiate with insureds in good faith and to deal with them fairly. Furthermore, aggrieved insureds may be awarded punitive damages if a jury finds clear and convincing evidence that the insurer is guilty of oppression, fraud, or malice, and those damages may exceed the treble damages available under RICO. In sum, there is no frustration of Nevada policy in the RICO litigation at issue. RICO's private right of action and treble damages provision appears to complement Nevada's statutory and common-law claims for relief. The Court notes both that Nevada filed no brief at any stage of this lawsuit urging that application of RICO would frustrate any state policy, or interfere with the State'sPage 302administrative regime, and that insurers, too, have relied on RICO when they were the fraud victims. Pp. 311-314.
114 F.3d 1467, affirmed.

GINSBURG, J., delivered the opinion for a unanimous Court.
James W. Colbert IIIargued the cause for petitioners. With him on the briefs wereRobert N. Eccles, Linda J. Smith, Neil K. Gilman, andDennisL. Kennedy.G. Robert Blakeyargued the cause for respondents. With him on the brief wasJ. Randall Jones.Deputy Solicitor General Wallaceargued the cause for the United States asamicus curiaeurging affirmance. With him on the brief wereSolicitor General Waxman, Assistant Attorney General Hunger, Jeffrey A.Lamken, Anthony J. Steinmeyer, andHoward S. Scher.fn*
JUSTICE GINSBURG delivered the opinion of the Court.
This case concerns regulation of the business of insurance by the States, as secured by the McCarran-Ferguson Act,59 Stat. 33, as amended,15 U.S.C. § 1011et seq., and the extent to which federal legislation, specifically, the Racketeer Influenced and Corrupt Organizations Act (RICO),18 U.S.C. § 1961et seq., is compatible with state regulation. The controversy before us stems from a scheme employed by petitioner Humana Health Insurance of Nevada, Inc. (Humana Insurance), a group health insurer, to gain discounts for hospital services which the insurer did not disclose and pass on to its policy beneficiaries. The scheme is alleged to violate both Nevada law and RICO. Under thePage 303McCarran-Ferguson Act, the federal legislation may be applied if it does not "invalidate, impair, or supersede" the State's regulation.15 U.S.C. § 1012(b).

The federal law at issue, RICO, does not proscribe conduct that the State's laws governing insurance permit. But the federal and state remedial regimes differ. Both provide a private right of action. RICO authorizes treble damages; Nevada law permits recovery of compensatory and punitive damages. We hold that RICO can be applied in this case in harmony with the State's regulation. When federal law is applied in aid or enhancement of state regulation, and does not frustrate any declared state policy or disturb the State's administrative regime, the McCarran-Ferguson Act does not bar the federal action.
I
Plaintiffs in the District Court, respondents in this Court, are beneficiaries of group health insurance policies issued by Humana Insurance. Between 1985 and 1988, plaintiffs-respondents received medical care from the Humana Hospital-Sunrise, an acute care facility owned by codefendant (now copetitioner) Humana Inc. Humana Insurance agreed to pay 80% of the policy beneficiaries' hospital charges over a designated deductible. The beneficiaries bore responsibility for payment of the remaining 20%. But pursuant to a concealed agreement, the complaint in this action alleged, the hospital gave Humana Insurance large discounts on the insurer's portion of the hospital's charges for care provided to the policy beneficiaries.1As a result,Page 304Humana Insurance paid significantly less than 80% of the hospital's actual charges for the care that policy beneficiaries received, and the beneficiaries paid significantly more than 20% of those charges.2

The employee beneficiaries brought suit in the United States District Court for the District of Nevada,3alleging that Humana Insurance and Humana Inc. violated RICO through a pattern of racketeering activity consisting of mail, wire, radio, and television fraud.4Defendants Humana Insurance and Humana Inc. moved for summary judgment, citing § 2(b) of the McCarran-Ferguson Act, which provides:
"No 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).


The District Court granted the motion. In that court's view, RICO's private remedies, including the federal statute's treble damages provision,18 U.S.C. § 1964(c), so exceeded Nevada's administrative penalties for insurance fraud, seeinfra, at 311-312, that applying RICO to the alleged conduct would have been "tantamount to allowing Congress to intercede in an area expressly left to the states underPage 305the McCarran-Ferguson Act,"827 F. Supp. 1498,1521-1522(Nev. 1993).5

The Ninth Circuit reversed in relevant part. See114 F.3d 1467,1482(1997). InMerchants Home Delivery Serv., Inc. v.Frank B. Hall Co.,50 F.3d 1486(1995), a decision handed down after the District Court rejected the policy beneficiaries' right to sue under RICO in this case, the Court of Appeals adopted a "direct conflict" test for determining when a federal law "invalidate[s], impair[s], or supersede[s]" a state law governing insurance. As declared inMerchants Home, the McCarran-Ferguson Act does not preclude "application of a federal statute prohibiting acts which are also prohibited under a state's insurance laws."Id., at 1492. Guided byMerchants Home, and assuming that Nevada law provided for administrative remedies only, the Ninth Circuit held that the McCarran-Ferguson Act did not bar suit under RICO by the Humana Insurance policy beneficiaries. See114 F.3d at 1480. Circuit courts have divided on the question presented: Does a federal law, which proscribes the same conduct as state law, but provides materially different remedies, "impair" state law under the McCarran-Ferguson Act?6We granted certiorari to address that question.524 U.S. 936(1998).Page 306
II
Prior to our decision inUnited Statesv.South-Eastern UnderwritersAssn.,322 U.S. 533(1944), we had consistently held that the business of insurance was not commerce. See,e.g., Paulv.Virginia, 8 Wall. 168, 183 (1869) ("Issuing a policy of insurance is not a transaction of commerce."); see alsoSouth-Eastern,322 U.S., at 544, n. 18 (collecting cases relying on thePaulgeneralization). The business of insurance, in consequence, was largely immune from federal regulation. SeeSt. PaulFire Marine Ins. Co. v.Barry,438 U.S. 531,539(1978) ("[T]he States enjoyed a virtually exclusive domain over the insurance industry."). InSouth-Eastern, we held for the first time that an insurance company doing business across state lines engages in interstate commerce. See322 U.S., at 553. In accord with that holding, we further decided that the Sherman Act applied to the business of insurance. Seeid., at 553-562.

Concerned that our decision might undermine state efforts to regulate insurance, Congress in 1945 enacted the McCarran-Ferguson Act. Section 1 of the Act provides that "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. In § 2(b) of the Act — the centerpiece of this case — Congress ensured that federal statutes not identified in the Act or not yet enacted would not automatically override state insurance regulation. Section 2(b) provides that when Congress enacts a law specifically relating to the business of insurance, that law controls. See § 1012(b). The subsection further provides that federal legislation general in character shall not be "construed to invalidate, impair, or supersede any lawPage 307enacted by any State for the purpose of regulating the business of insurance."Ibid.7

The McCarran-Ferguson Act thus precludes application of a federal statute in face of state law "enacted . . . for the purpose of regulating the business of insurance," if the federal measure does not "specifically relat[e] to the business of insurance," and would "invalidate, impair, or supersede" the State's law. SeeDepartment of Treasuryv.Fabe,508 U.S. 491,501(1993). RICO is not a law that "specifically relates to the business of insurance." This case therefore turns on the question: Would RICO's application to the employee beneficiaries' claims at issue "invalidate, impair, or supersede" Nevada's laws regulating insurance?

The term "invalidate" ordinarily means "to render ineffective, generally without providing a replacement rule or law." Brief for United States asAmicus Curiae17, n. 6 (citingCarterv.Virginia,321 U.S. 131,139(1944) (Black, J., concurring)). And the term "supersede" ordinarily means "to displace (and thus render ineffective) while providing a substitute rule." Brief for United States asAmicus Curiae17, n. 6 (citingIllinois Commerce Comm'nv.Thomson,318 U.S. 675,682(1943)). Under these standard definitions, RICO'sPage 308application to the policy beneficiaries' complaint would neither "invalidate" nor "supersede" Nevada law.

The key question, then, is whether RICO's application to the scheme in which the Humana defendants are alleged to have collaborated, to the detriment of the plaintiff policy beneficiaries, would "impair" Nevada's law. The answer would be "no" were we to read "impair," as the policy beneficiaries suggest, to be "interchangeabl[e]" with "invalidate" and "supersede." Brief for Respondents 14; see Brief for United States asAmicus Curiae17, n. 6 (describing the use of the three terms as an "instanc[e] of lawyerly iteration"). The answer would also be "no" if we understood "impair" to mean "the displacement of some portion of a statute or its preclusion in certain contexts."Id., at 14. This is so because insurers can comply with both RICO and Nevada's laws governing insurance. These laws do not directly conflict. The acts the policy beneficiaries identify as unlawful under RICO are also unlawful under Nevada law. Seeinfra, at 311-313.

On the other hand, the answer would be "yes" were we to agree with Humana Insurance and Humana Inc. that the word "impair," in the McCarran-Ferguson Act context, signals the federal legislators' intent "to withdraw Congress from the field [of insurance] absent an express congressional statement to the contrary." Brief for Petitioners 10. Under that reading, "impair" would convey "a very broad proscription against applying federal law where a state has regulated,or chosen not toregulate, in the insurance industry."Merchants Home,50 F.3d at 1491(emphasis in original). See also Reply Brief 4 (McCarran-Ferguson Act "precludes federal law that is at material variance with state insurance law — as to substantive prohibitions, procedures or remedies.").

We reject any suggestion that Congress intended to cede the field of insurance regulation to the States, saving only instances in which Congress expressly orders otherwise. IfPage 309Congress had meant generally to preempt the field for the States, Congress could have said, as the Ninth Circuit noted: "No federal statute [that does not say so explicitly] shall be construed toapplyto the business of insurance."Merchants Home,50 F.3d at 1492(emphasis in original) (internal quotation marks omitted); see Brief for United States asAmicus Curiae24 ("The Act does not declare that `No Act of Congress shall apply to the business of insurance unless such Act specifically relates thereto.'"). Alternatively, Congress could have provided, as it did with respect to the Sherman, Clayton, and Federal Trade Commission Acts, see15 U.S.C. § 1012(b), that federal legislation generally, or RICO in particular, would be "applicable to the business of insurance [only]to the extent thatsuch businessis not regulatedby State Law,"ibid. (emphasis added).

Moreover, § 2(b)'s second prohibition bears attention in this regard. That proscription, barring construction of federal statutes to "invalidate, impair, or supersede" "any [state] law . . . which imposes a fee or tax upon [the business of insurance]," belies any congressional intent to preclude federal regulation merely because the regulation imposes liability additional to, or greater than, state law. Were this not so, federal law would "impair" state insurance laws imposing fees or taxes whenever federal law imposed additional fees or greater tax liability. Under our federal system of dual taxation, however, it is scarcely in doubt that "generally applicable federal fees and taxes do not `invalidate, impair, or supersede' state insurance taxes and fees within the meaning of Section 2(b) where nothing precludes insurers from paying both." Brief for United States asAmicus Curiae26.

While we reject any sort of field preemption, we also reject the polar opposite of that view,i.e., that Congress intended a green light for federal regulation whenever the federal law does not collide head on with state regulation. The dictionary definition of "impair" is "[t]o weaken, to makePage 310worse, to lessen in power, diminish, or relax, or otherwise affect in an injurious manner." Black's Law Dictionary 752 (6th ed. 1990). The following formulation seems to us to capture that meaning and to construe, most sensibly, the text of § 2(b): When federal law does not directly conflict with state regulation, and when application of the federal law would not frustrate any declared state policy or interfere with a State's administrative regime, the McCarran-Ferguson Act does not preclude its application. See Brief for National Association of Insurance Commissioners asAmicus Curiae6-7.

Our decision inShawv.Delta Air Lines, Inc.,463 U.S. 85(1983), is similar in tenor. In that case, we considered whether a New York law forbidding discrimination in employee benefit plans on the basis of pregnancy was preempted by ERISA. State agencies and officials, appellants inShaw, argued that the State's law was not preempted; they relied on ERISA § 514(d), which provides that ERISA's preemption clause shall not be "construed to alter, amend, modify, invalidate, impair, or supersede any law of the United States."29 U.S.C. § 1144(d). The state agencies and officials maintained that preempting the state law would impair the administration of Title VII of the Civil Rights Act of 1964,78 Stat. 253,42 U.S.C. § 2000eet seq., as amended in 1978 by the Pregnancy Discrimination Act,92 Stat. 2076,42 U.S.C. § 2000e(k), for under the enforcement scheme Title VII accommodates, state remedies serve to promote compliance with federal antidiscrimination prescriptions. See463 U.S., at 101-102.

We held inShawthat the New York law was preempted only to the extent it prohibited practices lawful under Title VII. Seeid., at 103. To the extent the New York law prohibited practices also prohibited under federal law, we explained, the New York law was not preempted; the blanket preemption urged by the employer appellees inShaw, we pointed out, would "impair" Title VII by "frustrat[ing] thePage 311goal of encouraging joint state/federal enforcement of [that federal measure]."Id., at 102.Shawthus supports the view that to "impair" a law is to hinder its operation or "frustrate [a] goal" of that law.

Our standard accords withSECv.National Securities, Inc.,393 U.S. 453(1969). In that case, we upheld, in face of a McCarran-Ferguson Act challenge, the Securities and Exchange Commission's authority to unwind an insurance company merger that the Arizona Director of Insurance had approved. Our opinion pointed to the absence of any "direct conflict": "Arizona has not commanded something which the Federal Government seeks to prohibit. It has permitted respondents to consummate the merger; it did not order them to do so."Id., at 463. But that statement did not stand alone. We also observed that "any `impairment' in [that] case [was] a most indirect one."Ibid. And we concluded: "The paramount federal interest in protecting shareholders [was] perfectly compatible with the paramount state interest in protecting policyholders."Ibid. There, as here, federal law did not "directly conflict with state regulation," application of federal law did not "frustrate any declared state policy," nor did it "interfere with a State's administrative regime."Supra, at 310.

Applying the standard just announced to the facts of this case, we conclude that suit under RICO by policy beneficiaries would not "impair" Nevada law and therefore is not precluded by the McCarran-Ferguson Act. Nevada provides both statutory and common-law remedies to check insurance fraud. The Nevada Unfair Insurance Practices Act, Nev. Rev. Stat. §686A.010et seq. (1996), patterned substantially on the National Association of Insurance Commissioners' model Unfair Trade Practices Act,8is a comprehensive administrative scheme that prohibits various forms of insurancePage 312fraud and misrepresentation.9Under this legislation, Nevada's Insurance Commissioner has the authority to issue charges if there is reason to believe the Act has been violated, see § 686A.160, and may issue cease and desist orders and administer fees, see § 686A.183.

Victims of insurance fraud may also pursue private actions under Nevada law. The Unfair Insurance Practices Act authorizes a private right of action for violations of a number of unfair insurance practices, including "[m]isrepresenting to insureds or claimants pertinent facts or insurance policy provisions relating to any coverage," § 686A.310(1)(a). See § 686A.310(2) ("In addition to any rights or remedies available to the commissioner, an insurer is liable to its insured for any damages sustained by the insured as a result of the commission of any act set forth in subsection 1 as an unfair practice."). Moreover, the Act is not hermetically sealed; it does not exclude application of other state laws, statutory or decisional. Specifically, Nevada law provides that an insurer is under a common-law duty "to negotiate with its insureds in good faith and to deal with them fairly."Ainsworthv.Combined Ins. Co.of Am.,104 Nev. 587,592,763 P.2d 673,676(1988); seeUnited StatesFidelity Guaranty Co. v.Peterson,91 Nev. 617,620,540 P.2d 1070,1071(1975) (recognizing tort action against insurance company for breach of implied covenant of good faith and fair dealing).10Page 313

Furthermore, aggrieved insured parties may be awarded punitive damages if a jury finds clear and convincing evidence that the insurer is guilty of "oppression, fraud or malice." Nev. Rev. Stat. §42.005(1) (1995). Nevada's punitive damages statute places certain limits on those damages — three times the amount of compensatory damages if they are more than $100,000, and $300,000 if compensatories are less than $100,000. Sees § 42.005(1)(a), (b). But the same law adds that these limits do not apply to claims against "[a]n insurer who acts in bad faith regarding its obligations to provide insurance coverage." § 42.005(2)(b).11Accordingly, plaintiffs seeking relief under Nevada law may be eligible for damages exceeding the treble damages available under RICO.12

In sum, we see no frustration of state policy in the RICO litigation at issue here. RICO's private right of action and treble damages provision appears to complement Nevada's statutory and common-law claims for relief. In this regard, we note that Nevada filed no brief at any stage of this lawsuit urging that application of RICO to the alleged conduct would frustrate any state policy, or interfere with the State's administrative regime. Cf. NAACPv.American FamilyPage 314Mut. Ins. Co.,978 F.2d 287,297(CA7 1992) ("No official of Wisconsin has appeared in this litigation to say that a federal remedy under the Fair Housing Act would frustrate any state policy."). We further note that insurers, too, have relied on the statute when they were the fraud victims. See,e.g., Aetna Casualty Surety Co. v.P B Autobody,43 F.3d 1546,1551(CA1 1994); see also Brief for United Policyholders asAmicus Curiae19-21.
* * *
Because RICO advances the State's interest in combating insurance fraud, and does not frustrate any articulated Nevada policy, we hold that the McCarran-Ferguson Act does not block the respondent policy beneficiaries' recourse to RICO in this case. Accordingly, for the reasons stated in this opinion, the judgment of the Court of Appeals for the Ninth Circuit isAffirmed.Page 315
  1. James F. FitzpatrickandNancy L. Perkinsfiled a brief for the Alliance of American Insurers et al. as amici curiae urging reversal.

    Briefs ofamici curiaeurging affirmance were filed for the National Association of Insurance Commissioners byGregory B. Stites;for the National Fair Housing Alliance byStephen Mark Dane;for Trial Lawyers for Public Justice, P.C., bySarah Posner;for United Policyholders byEugene R. AndersonandJohn A. MacDonald;, P.C., and forBetty Cordialet al. byEllen G. RobinsonandPeter G. Gallanis.Franklin G. Burtfiled a brief for the Consumer Credit Insurance Association asamicus curiae. ↩
  2. These discounts were alleged to have ranged between 40% and 96%. See827 F. Supp. 1498,1503(Nev. 1993). For example, in a given case, Humana Insurance might have received a bill for only $550 on a $5,000 gross hospital charge. The beneficiary, however, would have received a bill for 20% of the undiscounted rate of $5,000, or $1,000. Humana Insurance would have paid only 35% of the total bill ($550 out of $1,550), while the beneficiary would have paid 65%. Under the 80%/20% arrangement, Humana Insurance should have paid $1,240 (80% of $1,550), while the beneficiary should have paid $310. Seeid., at 1508; Brief for United States asAmicus Curiae5-6. ↩
  3. State investigation of the scheme, launched by Nevada's Attorney General, terminated when Humana Insurance and Nevada's Insurance Commissioner entered into a consent decree under which the insurer paid a fine of $50,000. ↩
  4. The complaint separated plaintiffs into two classes, a "Co-Payor Class" comprising employee beneficiaries, and a "Premium Payor Class" comprising employers who purchased the policies. See114 F.3d 1467,1472(CA9 1997). Only the employees' claims have been placed at issue here. ↩
  5. The complaint also presented claims under the Employee Retirement Income Security Act of 1974 (ERISA),88 Stat. 829, as amended,29 U.S.C. § 1001et seq., and § 2 of the Sherman Act,26 Stat. 209, as amended,15 U.S.C. § 2. The disposition of those claims is not germane to the issue on which this Court's review was sought and granted. ↩
  6. Both the District Court and the Court of Appeals inaccurately projected Nevada law as allowing for administrative remedies only. Seeinfra, at 311-313. ↩
  7. CompareMerchants Home Delivery Serv., Inc. v.Frank B. HallCo.,50 F.3d 1486,1492(CA9 1995), andNAACPv.American Family Mut.Ins. Co.,978 F.2d 287,297(CA7 1992) ("[S]tate and federal rules that are substantively identical but differ in penalty do not conflict with or displace each other."), withDoev.Norwest Bank Minnesota, N.A.,107 F.3d 1297,1307(CA8 1997) ("[T]he intrusion of RICO's substantial damage provisions into a state's insurance regulatory program may so impair the state law as to bar application of RICO."), andKentyv.BankOne, Columbus, N.A.,92 F.3d 384,392(CA6 1996) ("The different liability under Ohio law for violations, as well as different standards of proof necessary to demonstrate misrepresentations, means that RICO does impair the ability of Ohio to regulate [unfair and deceptive acts]."). ↩
  8. Section 2(b) also provides that "after June 30, 1948, the Act of July 2, 1890, as amended, known as the Sherman Act, and the Act of October 15, 1914, as amended, known as the Clayton Act, and the Act of September 26, 1914, known as the Federal Trade Commission Act, as amended [15 U.S.C. § 41et seq.], shall be applicable to the business of insurance to the extent that such business is not regulated by State Law."15 U.S.C. § 1012(b). Section 4 of the Act provides that "[n]othing contained in this chapter shall be construed to affect in any manner the application to the business of insurance of the Act of July 5, 1935, as amended, known as the National Labor Relations Act [29 U.S.C. § 151et seq.], or the Act of June 25, 1938, as amended, known as the Fair Labor Standards Act of 1938 [29 U.S.C. § 201et seq.], or the Act of June 5, 1920, known as the Merchant Marine Act, 1920 [46 App. U.S.C. § 861et seq.]." § 1014. ↩
  9. See 4 National Association of Insurance Commissioners, Model Laws, Regulations and Guidelines 880-1 (1995). ↩
  10. See,e.g., Nev. Rev. Stat. §686A.030(1996) (misrepresentation and false advertising); § 686A.040 (publication of false information); § 686A.070 (falsification of records and financial statements); §§ 686A.281-686A.289 (fraudulent claims); § 686A.291 (insurance fraud). ↩
  11. The existence of private rights of action under state law dilutes the force of the assertion, made in anamicusbrief, that a decision affirming the Ninth Circuit's judgment would cause insurers to be reluctant to settle with state commissioners to avoid compromising defenses in RICO litigation. See Brief for Consumer Credit Insurance Association asAmicus Curiae5. Presumably, insurers would be equally reluctant to settle with state commissioners to avoid compromising defenses in state litigation. ↩
  12. See also Nev. Rev. Stat. §42.007(2) (1996) (limiting punitive damages liability by employers for wrongful acts of employees except in "an action brought against an insurer who acts in bad faith regarding its obligations to provide insurance coverage"). ↩
  13. At oral argument, counsel for petitioners Humana Insurance and Humana Inc. suggested that application of RICO would impair state law, even though that law provided for punitive damages, because under Nevada law, punitive damages may not be imposed when doing so would threaten the solvency of the defendant. Tr. of Oral Arg. 5-6. While Nevada law does appear to prohibit punitive damages that would render a defendant insolvent, seeNevada Cement Co. v.Lemler,89 Nev. 447,452,514 P.2d 1180,1183(1973) (noting that "[i]deally the punitive allowance should be in an amount that would promote the public interest without financially annihilating the defendant" and that "the wrongdoer may be punished, but not destroyed"), the record contains no evidence of insolvency here. See Tr. of Oral Arg. 21. ↩