Washington National Insurance Company

Text (OCR of the scan at left; may contain errors)

IN THE MATTER OF WASHINGTON NATIONAL INSURANCE COMPANY ORDER. ETC" IN REGARD TO THE ALLEGED VIOLATION OF THE FEDERAL TRADE COMMISSION ACT Docket 6393. Complai. , July 1955- rdel' , Sept. , 1958 Order dismissing for lack of jurisdiction, pursuant to the opinion of the U. Supreme Court in the NCI,t-ional Cas'Halty Co'Ynpany and The Ame?'ican Hosp.ital and Life h~s'u?' ance Company cases (357 U. S. 560), complaint charging a stock life insurance company in Evanston, Ill., with false advertising concerning the terms and conditions, and failure to reveal limitations of the coverage, of its accident and sickness insurance policies. Mr. John W. BToo1cfield, J1' and M1' . Willian/, R. MaHanna for the Commission.

M?. S. P. Hutchinson of Chicago, 111. , and Davies, Richberg, Tydings, Landa Duff, by kit. James T. 111 elch of Washington , for respondent.

INITIAL DECISION BY LOREN H. LAUGHLIN HEARING EXAMINER This proceeding is one brought under the Federal Trade Commission Act as affected and amended by the McCarran-Ferguson Act, 15 D. C., SSlOll-1015 inclusive, the complaint charging the respondent corporation, in substance, with having transmitted in interstate con1merce certain alleged false, misleading and deceptive advertising concerning its individual health-and-accident insurance policies. Group hospitalization or life insurance is not involved. The con1plaint is dismissed herein for lack of jurisdiction by the Commission over the subject-matter thereof, pursuant to the recent decision of the Supreme Court of the United States relating to that subject.

The Supreme Court, in one pet cU/ria?n opinion issued on June , 1958, decided two cases, entitled Federa~ TTade Commission v. National Casualty CO?npany (No. 435) and Federa~ TTade Cmnm-ission v. The Am,e?'ican Hospital and Life Insu1'ance Cmnpany (No. 436), 357 U.S. 560 (1958). The Supreme Court accepted jurisdiction of these cases on writs of certiorari from the Courts of Appeals for the Sixth and Fifth Circuits, respectively, to review their "interpretation of an important federal statute. It affirmed the judgment of each of such Circuits in setting aside the Commission s cease-and-desist orders against the said respond- Decision 55 F.

ent insurers. In the course of its opinion, the Supreme Court rejected all contentions of the Federal Trade Commission purporting to sustain its jurisdiction, and, in affirming the said judgments of said courts of appeals, held that the Commission is prohibited by the McCan"an-Ferguson Act from regulating the practices complained of by it within those States having statutes authorizing the regulation of such practices. With particular pertinence to the case at 2ar, the Supreme Court, covering in the one case a casualty-insurance company and in the other a life-insurance company, held: Respondents, the National Casualty Company in No. 435 and the American Hospital and Life Insurance Company in No. 436, engage in the sale of health and accident insurance. National is licensed to sell policies in all States, as well as the District of Columbia and Hawaii, while American is licensed in fourteen States. Solicitation of business for National is carried on by independent agents who operate on commission. The company s advertising material is prepared by it and shipped in bulk to these agents, who distribute the material locally and assume the expense of such dissemination. Only an insubstantial amount of any advertising goes directly by mail from the company to the public, and there is no use of radio, television, or other means of mass communication by the company. American does not materially differ from National in method of operation.

* ", * There is no question but that the States possess ample means to regulate this advertising within their respective boundaries. * * * Each State in question has enacted prohibitory legislation which proscribes unfair insurance advertising and authorizes enforcement through a scheme of administrative supervision.

In footnote 6 of its opinion, the Supreme Court said: At the time the complaints were filed thirty-six States had enacted the Model Unfair Trade Practices Bill for Insurance." Eight others had statutes essentially the same in effect as the "Model Bill" The opinion of the Supreme Court is sweeping and general in its language. It does not attempt to cite the numerous statutes of the several States which constitute the entire regulatory plan of each of such States. And to do so herein is wholly unnecessary; suffice it to say that official notice is taken that all States by statute, provide for the licensing and regulation of all types of insurance agents; that all the States now have legislative acts providing more or less specifically for the regulation of lifeinsurance companies' business of health-and-accident insurance, including the advertising thereof; and that, with respect to the business of casualty-insurance companies, nearly all of the States have specific regulatory statutes, but in each of the remaining few, the general regulatory powers of the Insurance Department \VASHINGTON NATIONAL INSURANCE COMPANY 477 475 Order are sufficiently broad, when coupled with the criminal and other statutes of the State, to provide a system of regulation of any unfair advertising by such companies and their agents, which the Supreme Court apparently deems adequate to regulate such business in such States. It holds, in effect, that under the Mc- Carran-Ferguson Act each State is given latitude to enact such laws and provide such regulatory processes as each State deems proper within its own jurisdiction, and that the degree of actual law enforcement, if any, in the several States is wholly immaterial. In the instant proceeding, the complaint was issued on July , 1955. Respondent subsequently joined issue, and, among other pleas adequately raised the issue of the Commission s jurisdiction over the subject-matter. The record is fairly voluminous but, in view of the conclusion reached herein, only a few undisputed facts need be stated. While at the conclusion of the proceeding each of the parties submitted extensive and detailed proposed findings of fact as well as conclusions of la,v, and a proposed order, some of which proposed findings and conclusions are quite proper, for brevity all such proposals have been rejected. The respondent is a stock life-insurance company duly organized, existing and doing business under the la,vs of the State of Illinois, with its office and principal place of business in Evanston, Ill. The company is duly licensed and doing business under said licenses in the District of Columbia and all of the States of the United States except New York and the newly admitted State of Alaska. Its business is done in each j urisdiction through its agents v,rho are duly licensed therein. During the period of time covered by this proceeding, the respondent life-insurance company never sent any health-and-accident insurance advertising by mail directly from its home office to the public generally, nor did it use for that purpose radio, television or other mass media of communication.

This proceeding, therefore, falls squarely within the principles enunciated by the Supreme Court in its said decisions. Accordingly, It is ordered That the complaint herein be, and the same hereby , dismissed for lack of jurisdiction.

FINAL ORDER initial decision The date on which the hearing examiner would have become the decision of the Commission havili.g been Order 55 F. T.

extended by order issued September 9, 1958, until further order of the Commission; and The Commission having now determined that said initial decision is adequate and appropriate in all respects: It is o1'dered That the initial decision of the hearing examiner duly providing for dismissal of this proceeding for lack of jurisdiction be, and it hereby is, adopted as the decision of the Commission.

AMERICAN CASUALTY COMPANY 479 Decision