Reinsurance Focus

The Third Circuit has revived a RICO suit against First Unum Life Insurance Co., finding that a lower court erred when it held that such a claim would interfere with state regulation of insurers. The plaintiff, Richard Weiss, brought suit under RICO against his insurer, First Unum, alleging that First Unum discontinued payment of his disability benefits as part of First Unum’s racketeering scheme involving an intentional and illegal policy of rejecting expensive payouts to disabled insured. The District Court dismissed his claim, believing that the allowance of such a RICO claim would interfere with New Jersey’s statutory regulation of insurers, and thus run afoul of the McCarran-Ferguson Act.

The Third Circuit reversed finding that the District Court’s reading of McCarren Ferguson was too narrow. The McCarran-Ferguson precludes applying a federal law only when doing so would “invalidate, impair, or supersede” state insurance law. After reviewing the totality of New Jersey's insurance regulatory scheme, including New Jersey’s Insurance Trade Practices Act and Consumer Fraud Act, the Third Circuit concluded that the District Court had erred in holding that RICO would impair it. Specifically, the Court stated “[t]here is nothing in the regulatory scheme that indicates that allowing other remedies as part of its regulation of insurance would frustrate or interfere with New Jersey's insurance regime…To the contrary, the legislation permits additional remedies … and the New Jersey courts have felt free to fashion them.” This case is one of a series which considers the issue of whether a federal statute that adds remedies not available under state law, which are not necessarily inconsistent with state law, violate McCarran-Ferguson. The counter-argument is that by affording a remedy that the state deliberately withheld, the federal statute is indeed inconsistent with state law. Weiss v. First Unum Life Ins. Co., Case No. 05-5428 (3d Cir. April 3, 2007).