In July, the Sixth Circuit Court of Appeals issued its long awaited decision in Katz v. Fidelity National Title Insurance Company, a class action proceeding in which the plaintiffs alleged that a collection of title insurers had unlawfully conspired to set unreasonably high title insurance premiums. In ruling for the defendants and affirming the dismissal of plaintiffs’ claims, the court joins a host of other courts around the country that have found similar allegations defective as a matter of law. Unlike in those other cases, however, in which the courts found that plaintiffs’ claims failed based upon the Filed Rate Doctrine (most prominently the Third Circuit’s recent decisions in In re New Jersey Title Insurance Antitrust Litigation and McCray v. Fidelity National Title Insurance), in Katz the Sixth Circuit held that the claims failed based upon the McCarran-Ferguson Act.

Specifically, the plaintiffs in Katz alleged that title insurance rates that had been filed and approved by the Ohio Department of Insurance were still subject to challenge because it was “impossible for the Department of Insurance to review, regulate or supervise the reasonableness of the rates collectively set by defendants,” given that they were “principally based on undisclosed costs.” At the trial court level, the court held that plaintiffs’ claims failed under both the Filed Rate Doctrine and the McCarran-Ferguson Act. Plaintiffs appealed.

Unlike the Third Circuit, which chose to focus on the Filed Rate Doctrine issue, the Sixth Circuit focused on whether the McCarran-Ferguson Act provided a complete defense to plaintiffs’ claims. After acknowledging the three prong test for McCarran’s applicability – (1) is the conduct at issue “the business of insurance;” (2) is the conduct “regulated by state law;” and (3) is the conduct not an act of “boycott, coercion or intimidation” – the Sixth Circuit waded into the parties’ arguments.

Plaintiffs’ principal contention on appeal was that McCarran did not apply to the alleged conduct because the “business of insurance” requirement of the Act was not satisfied. Specifically, they maintained that title insurance policies typically result in “at most, 3.4% premium loss,” and argued, therefore, that title insurance involved an insufficient amount of real “risk spreading” to constitute insurance. The court, however, rejected plaintiffs’ argument, holding that it is not the amount of risk spreading that is important, but whether any risk spreading occurs in the context of the challenged conduct. Because plaintiffs conceded that title insurance contains at least some amount of risk spreading, the business of insurance requirement had been met. With plaintiffs unable to mount much of an argument on the second and third prongs of McCarran, the court held that plaintiffs’ federal antitrust claims were barred.

Turning next to plaintiffs’ claims under state law, the Sixth Circuit first noted that McCarran only provides an exemption from the federal antitrust laws, and does not bar state antitrust claims. Those claims, however, were also barred, the court held, because “the Ohio Insurance Code acts as an exception to the Valentine Act (Ohio’s antitrust law)” and “Section 3935.06 of the Insurance Code permits appellees’ allegedly collusive behavior.” Accordingly, the court affirmed the district court’s dismissal of these claims as well, concluding that “The McCarran-Ferguson Act and Title XXXIX of the Ohio Revised Code are complete bars to appellants’ federal and state antitrust claims,” and that “in light of this holding, we need not consider whether the filed rate doctrine applies in this case.”