Department of Treasury v. Fabe, 508 U.S. 491 (1993)

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certiorari to the united states court of appeals for the sixth circuit

No. 91-1513. Argued December 8, 1992—Decided June 11, 1993

In proceedings under Ohio law to liquidate an insolvent insurance company, the United States asserted that its claims as obligee on various of the company's surety bonds were entitled to first priority under 31 U. S. C. 3713(a)(1)(A)(iii). Respondent Fabe, the liquidator appointed by the state court, brought a declaratory judgment action in the Federal District Court to establish that priority in such proceedings is governed by an Ohio statute that ranks governmental claims behind (1) administrative expenses, (2) specified wage claims, (3) policyholders' claims, and (4) general creditors' claims. Fabe argued that the federal priority statute does not pre-empt the Ohio law because the latter falls within 2(b) of the McCarran-Ferguson Act, which provides, inter alia: "No Act of Congress shall be construed to . . . supersede any law enacted by any state for the purpose of regulating the business of insurance . . . ." The court granted summary judgment for the United States on the ground that the state statute does not involve the "business of insurance" under the tripartite standard articulated in Union Labor Life Ins. Co. v. Pireno, 458 U. S. 119, 129. The Court of Appeals disagreed and, in reversing, held that the Ohio scheme regulates the "business of insurance" because it protects the interests of the insured.

Held: The Ohio priority statute escapes federal pre-emption to the extent that it protects policyholders, but it is not a law enacted for the purpose of regulating the business of insurance to the extent that it is designed to further the interests of creditors other than policyholders. Pp. 499-510. (a) The McCarran-Ferguson Act's primary purpose was to restore to the States broad authority to tax and regulate the insurance industry in response to United States v. South-Eastern Underwriters Assn., 322 U. S. 533. Pp. 499-500. (b) The Ohio statute, to the extent that it regulates policyholders, is a law enacted "for the purpose of regulating the business of insurance." Because that phrase refers to statutes aimed at protecting or regulating, directly or indirectly, the relationship between the insurance company and its policyholders, SEC v. National Securities, Inc., 393 U. S. 453, 460, the federal priority statute must yield to the conflicting Ohio stat-


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