Insurance
In his book Couch on Insurance, author George J. Couch defines insurance as a contract by which one party, for a consideration, which is usually paid in money either in one sum or at different times during the continuance of the risk, promises to make a certain payment of money upon the destruction or injury of something in which the other party has an interest. In fire insurance and in marine insurance the thing insured is property; in life or accident insurance it is the life or health of the person (Russ and Segalla 2002, 1, 6).
As a going concern, insurance has been defined by Kulp and Hall as “a formal social device for the substitution of certainty for uncertainty through the pooling of risks” (1968). In this vein, insurance may be conducted as either a public or private venture. Risk may be pooled, spread, and ultimately borne, either through full transference or through various kinds of cooperative ventures by which it may be shared among the risk parties themselves.
Insurance is of special note in discussions of federalism by virtue of the unique regulatory regime under which it is conducted in the United States. The regulation of most aspects of the insurance business as an aspect of commerce is carried on by the states under a very general “reverse preemption” against federal jurisdiction that is provided in the McCarran-Ferguson Act (P.L. 15, U.S.C., 1945). Jurisdictional and operational definitions of insurance therefore bear directly upon the scope and exercise of state regulatory authority.
At the level of state regulation, and therefore also in the context of establishing the scope and applicability of the reverse preemption under the McCarran-Ferguson Act, discussions of what constitutes insurance—and in a transactional sense, what constitutes the “conduct” or business of insurance—are given weight and meaning. Do, for example, the sales of auto club memberships or extended product or service warranties constitute the business of insurance? What about the terms of collision damage waivers in auto rental agreements? Regulators and state and federal courts have held variously on these and other peripheral issues over the years.
Of a less peripheral nature is the matter of regulating health insurance and managed care. There remains much continued conflict and uncertainty over the scope and meaning of the preemption clause under the federal Employee Retirement Income Security Act of 1974 (ERISA). The preemption clause is vague, and this holds major implications for state health and insurance policy makers. ERISA’s preemption clause has been interpreted by courts in a piecemeal fashion and on a case-by-case basis with much inconsistency regarding the authority of the states to regulate health insurance plans.
| BIBLIOGRAPHY:
A. Kulp and John W. Hall, Casualty Insurance, 4th ed. (New York: Ronald Press Company, 1968); and Lee R. Russ and Thomas F. Segalla, eds. Couch on Insurance, 3rd ed. (St. Paul, MN: Thomson/West, 2002). |
Benn Prybutok
SEE ALSO: McCarran-Ferguson Act