No. 02 CH 6332

Judge Patrick E. McGann

Calendar 6





No. 02 CH 06905





No. 02 CH 7745


This matter comes before the Court on the Defendants= Section 2-619 Motion to Dismiss, 735 ILCS 5/2-619.  The Defendants assert that the Plaintiffs= claims brought under Section 227(C)(3) of the Telephone Consumer Protection Act of 1991 (ATCPA@), 47 U.S.C. ‘ 227, are preempted by certain sections of the Illinois Insurance Code and the Illinois Administrative Code, pursuant to the McCarran-Ferguson Act, 15 U.S.C. 1011, (The McCarran-Ferguson Act).

A section 2-619 Motion raises defenses or defects that negate the plaintiff=s cause of action completely or refute crucial conclusions of law or conclusions of material fact that are unsupported by allegations of specific fact. Lawson v. City of Chicago, 278 Ill. App. 3rd 628 (1996).  All well-plead facts in the complaint, together with all reasonable inferences drawn therefrom, are deemed admitted for the purposes of the motion, and all pleadings and supporting documents are considered in the light most favorable to the non-moving party.  In re Chicago Flood Litigation, 176 Ill. 2d 179 (1997).

The facts alleged in the complaint filed against the Defendants are set out at length in the Court=s Corrected Memorandum and Opinion filed in this case on April 3, 2003.  They will be repeated herein only to give this decision context.  In essence, the Plaintiffs allege the Defendants sent unsolicited telephone facsimile messages announcing the commercial availability of insurance.

The State of Illinois has enacted an Insurance Code to regulate the Business of Insurance.  215 ILCS 5/1, et seq.  Section 149 of that Code prohibits any insurance company doing business in the State of Illinois from engaging in any activity that is misleading, fraudulent or defamatory.  215 ILCS 5/149.  This prohibition extends to the marketing of insurance products.  The Defendants contend that this regulation prohibits the application of the TCPA to marketing efforts by persons involved in the insurance business.

Historically, the federal government has ceded regulation of the insurance industry to the several states.  In 1944, the United States Supreme Court announced its decision in United States v. South-Eastern Underwriters Assn., 322 U.S. 533 (1944).  The South-Eastern Court held that any insurance company that conducted substantial business across state lines was engaged in interstate commerce and subject to antitrust laws.  Within a year of this decision, the Congress enacted the McCarran-Ferguson Act.  Through this legislation, Congress reaffirmed that the individual states had primary responsibility for insurance regulation.  Section 2(b) of the Act, the provision discussed in this Motion, provides:

No Act of Congress shall be construed to invalidate, impair or supercede any law enacted by any State for the purpose of regulating the business of insurance unless such Act specifically relates to the business of insurance.

In SEC v. National Securities, Inc., 393 U.S. 453 (1969), the Supreme Court emphasized that the focus of the McCarran-Ferguson Act is upon the relationship between the insurance company and its policyholders.  This focus includes the type of policy that could be issued, its reliability, interpretation, and enforcement.  National Securities, 393 U.S. at 460.  This statute has been interpreted as creating an inverse preemption of federal law.  United States v. Fabe, 508 U.S. 491, 507 (1993).

In order to determine whether the McCarran-Ferguson Act preempts the prosecution of a claim arising under the TCPA against a seller of insurance, the Court must engage in a three-part analysis of the questioned statute.  Autry v. Northwest Premium Services, Inc., 144 F. 3d 1037, 1042 (7th Cir. 1998).  First, a Court must determine whether the statute specifically relates to the business of insurance.  If it does, standard preemption rules apply.  Second, a court must determine whether the state statute was enacted for the purpose of regulating the business of insurance.  If the state statute was enacted for the purpose of regulating the business of insurance, the court must determine whether the statute invalidates, impairs or supercedes state law.  If the federal statute would have any one of these effects, the federal is preempted by state law.

There is no argument that Congress even suggested, let alone specified, that the TCPA was an effort to regulate the business of insurance.  It is as clear that Section 149 was enacted for the purpose of regulating the insurance business.  Thus, for TCPA to have application against the Defendants it must not invalidate, impair or supercede state law, specifically 215 ILCS 5/149.

There is no question that the relevant sections of the Illinois Insurance Code were enacted for the purpose of regulating the business of insurance, however, the TCPA does not invalidate the Illinois regulation on misleading, fraudulent or defamatory merchandising of insurance products.  The TCPA does not render the Illinois statute ineffective with no replacement rule or law. Humana, Inc. v. Forsyth, 525 U.S. 299, 307 (1999). Nor is the Illinois scheme superceded, as it remains an effective regulation upon the insurance industry. Id.  No new federal requirements replace those required by Illinois.

As noted, that statute regulates the manner in which any person involved in the business of insurance can merchandise their product or services in Illinois.  There is absolutely no restriction on the methods that can be employed to deliver this material or information.  The Defendants argue TCPA=s prohibition is an infringement on Illinois= authority to regulate the insurance industry.  This argument ignores the ban on sending unsolicited telephone facsimile messages found in the Criminal Code of 1961, as amended.  720 ILCS 5/26-3.  This applies to all merchandisers operating in this State, including those marketing insurance products.

The question presented is whether a federal statute that proscribes the same conduct, but provides materially different remedies, impairs state law under the McCarran-Ferguson Act.  This question is best answered by determining whether the federal law will frustrate any declared state policy or interfere with the state=s administrative regime.  Forsyth, 525 U.S. at 310.  In Forsyth, the Court found that there was no preemption of Nevada=s right to regulate insurance where private claims for violations of the Racketeer Influenced and Corrupt Organizations Act (ARICO@) were allowed.

Here, as in Forsyth, there were statutory penalties for similar conduct imposed by the Nevada statutes.  Unlike Illinois, which allows limited private claims for violations of the Insurance Code, Nevada allowed extensive common law and statutory claims for damaged insureds.  The TCPA, like the Illinois statute prohibiting unsolicited facsimile messages, is designed to reduce the financial impact of the transfer of cost and inconvenience to unwilling recipients of these messages.  Thus, the statutes work in tandem to protect this important governmental interest.

The authorities relied upon by the Defendants are inapposite.  Camarena v. Safeway Insurance Co., 2002 WL 472245 (N.D. Ill. 2002) dismissed a claim of discrimination brought under the Civil Rights Act.  The Court found that the private prosecution of this claim would frustrate the extensive administrative scheme developed by Illinois to discourage and punish such practices.  As noted, there is no similar policy established by the statute or Director of Insurance in the area of sending unsolicited telephone facsimile messages.  Doe v. Mutual of Omaha, 179 F 3d 557 (7th Cir. 1999), involved an attempt to use a federal statute to avoid caps on certain medical benefits allowed by the Illinois Insurance laws.

It is clear to this Court that the TCPA does not run afoul of the prohibitions found in the McCarran-Ferguson Act. Therefore, the Motion to Dismiss is DENIED.

Dated: __________________     ENTER: _________________________

Judge   1510