# Untitled Texas Attorney General Opinion > Texas Attorney General Reports · July 2, 1970 URL: https://www.frixlaw.com/law-library/cases/4133922 ## Case - **Court:** Texas Attorney General Reports - **Decided:** July 2, 1970 - **Precedential status:** Published - **Opinion:** Opinion - **Judges:** Crawford Martin - **Cited by:** 0 later opinions in the Frix Law Library ## Citator (automated) - No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases. - Full citator and citing cases: https://www.frixlaw.com/law-library/cases/4133922 ## Opinion text December 11, 1970 Honorable Oscar H. Mausy Opinion No. M- 746 Chairman, Senate Committee to Study the Texas Tort Re: Whether certain insurance Claims Act companies have violated Texas Senate Antitrust laws of the state Austin, Texas or Federal government in the sale of insurance to certain political subdivi- sions under the Texas Torts Claims Act, under Dear Senator Mausy: the facts submitted? You have requested our opinion as to, "Whether certain insurance companies have violated either the State or Federal Antitrust laws in the sale of insurance to certain political subdivisions under the Texas Torts Claims Act, under the facts submitted?" The facts submitted to this office in connection with this request are as follows: A survey by your committee of certain counties, cities, school districts, water districts, junior and senior colleges and State agencies in Texas, dated October 7, 1970 resulted in 699 of such governmental subdivisions replying to the survey, reporting a total purchase of $2,756,449.00 worth of bodily injury liability insurance coverage. One hundred sixty seven of these 699 counties, cities and school districts reported the purchase of $92,328.00 worth of property damage liability insurance coverage and the survey indicates that these 167 entities, at some time during the last year, in order to secure the needed bodily injury lia- bility coverage, had been required by some 57 different named insurance companies and agencies, to purchase this property damage liability insurance which is alleged to be unnecessary -3631- Honorable Oscar II.Mausy, Page 2 (M-746) and worthless since the Texas Torts Claims Act excludes prop- erty damage liability for all Texas governmental units while making such units liable only for bodily injury caused by the negligence of a governmental employee. The 167 entities were composed of 25 cities, 25 counties, 115~school districts, one water district and one junior college. Each of these 167 entities was located and marked on a map and there is no localized pattern or partic- ular area of the State more affected than other areas, but they were widely dispersed geographically throughout the State. There were 473 of the political bodies which answered this survey who bought bodily injury liability insurance with- out being required to buy property damage liability coverage. These entities were also located and marked on a map and this group is also widely dispersed geographically throughout the State with at least 40 of these political entities physically located in the same place as one or more of the 167 entities reporting that they were required to buy the property damage liability insurance in order to secure bodily injury liability insurance. None of the remaining 127 entities of the 167 group is located farther than 50 miles from a political sub- division reporting the purchase of bodily injury liability coverage alone. Out of the 57 named insurance companies or agents who were reported to require property damage liability coverage of the 167 reporting entities, at least 46 of these companies or agents were reported in this same survey to have sold bod- ily injury liability insurance alone to one or more other re- porting political entities. The remaining 11 named insurance sellers by their names appear to be four local agencies making only one reported sale and seven insurance companies, none of which were reported on this survey to have sold insurance to more than two of the reporting entities. We are advised by the Deputy Assistant Administrator of the State Board of Insurance that no evidence of any com- bination, conspiracy or agreement among the insurance compan- ies named in this survey has come to that agency's attention, and that on September 22, 1970, the State Board of Insurance gave notice to the public generally and to all insurance com- panies, corporations, exchanges, mutuals, reciprocals, associ- ations, Lloyd6 or other insurers writing automobile insurance in Texas and their agents and representatives, as follows: -3632- Honorable Oscar H. Mauzy, Page 3 (M- 746) "The Senate~Cbmmittee To Study the Texas Tort Claims Act has furnished the State Board of Insurance a file of governmental units that allegedly have been required to purchase property damage liability insur-' ante as a prerequisite to securing the bod- ily injury liability insurance desired by the Texas Tort Claims Act. "Since the Texas Tort Claims Act did not waive governmental immunity for damage to property, the Board has held that a com- pany's action requiring the insured to accept property damage liability insur- ance (which is of no specific benefit to the insured) is a violation of the insurance rating laws of T.exasgenerally and is specifically a violation of Auto- mobile Series 428, dated August 12, 1969. "The State Board of Insurance hereby di- rects each insurer to refund the total property damage liability insurance pre- mium or premiums written for a governmen- tal unit.that purchased liability insur- ance for protection from the hazards created by the Texas Tort Claims Act, provided that the particular governmen- tal unit concerned requests the premium return." The Insurance Board has not been advised of any governmental unit requesting the referred to premium return that has been refused by the insurer. The Antitrust laws of Texas codified at Section 15.01 et. seq., Business and Commerce Code prohibits "monopolies" as narrowly defined in Section 15.01, "trusts" as defined in Section 15.02 and "conspiracies to restrain trade" as de- fined in Section 15.03. The monopoly prohibition is a com- bination or consolidation of two or more corporations and no facts in this case indicate such activity. A combination, essential to the formation of a prohibited "trust" or pro- hibited "conspiracy in restraint of trade", cannot exist -363x- . Honorable Oscar H. Mausy, Page 4 (M-746) unless'two or more persons or business entities combine in some fashion,and before such combination being independent and capable of acting in competition with one another. State v. Fairbanks-Morse & Co., 246 SW 26 647, (Tex. Civ. App.m, ref. n.r.e.1. The facts submitted do not reflect any such prohibited combination. The application of the Federal Antitrust Laws to the facts submitted must be viewed in reference to the Insurance Antitrust Moratorium Act (McCarran-Ferguson Insurance Regula- tion Act) 15 U.S.C.A., Sets. 1011-1015 (1945). Section 1012 provides that: "NO Act'of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, or which imposes a fee or tax upon such busi- ness , unless such Act specifically relates to the business of insurance: Provided, that after June 30, 1948 the Act of July 2, 1890, as amended, known as the Sherman Act, and the Act of October 15, 1914, as amended, known as the ClaytonAct, and the Act of September 26, 1914, known as the Federal Trade ColnmissionAct, as amended, shall be applicable to the business of insurance to the extent that such business is not regulated by State law." but this provision is qualified in Sec. 3(b) of the same Act, 15 U.S.C.A. Sec. 1013, by declaring: *'Nothingcontained in this Act shall render the said Sherman Act inapplicable to any agreement to boycott, coerce, or intimi- date, or act of boycott, coercion, or intimidation." Since the facts presented here show no "agreements" between the insurers, we must look at the "acts" of the insurance companies, i.e. requiring the purchase of property damage liability insurance by certain political subdivisions before they would sell bodily injury liability insurance to such entity. If the Ilacts"of the insurance companies do not amount to "boycott, coercion or intimidation" and the State has regulations covering the activity concerned (as we assume that they do as contended in the State Board of Insurance -3634- Honorable Oscar H. nausy, Page 5 (M-746) Notice dated September 22; 1970; as set out above), then no cause oftaction under the Federal Antitrust Acts would lie and any aggrieved party must look to his state statutes and regulations for his remedy. Parker v. Brown, 317 U.S. 341, (1940-1943 Trade Cases): The Travelers Insurance Co. v. Blue Cross of Western Pennsylvania, 298 F. Supp. 1109 (1969 Trade Cases) . Assuming arguendo that the independent acts of the insurance companies constituted a "boycott, coercion or intimidation" and that the Sherman Act is applicable to the fact situation posed, we can immediately eliminate the possibility of a violation of Section 1 of the Sherman Act, 15 U.S.C.A. Sec. 1, because there is no combination, agree- ment or conspiracy ,in restraint of trade alleged or shown, which is a necessary element of a Section 1 violation. House of Materials, Inc. v. Simplicity Pattern Co., 298 F. 2d 867 72nd Cir., 1962) . A monopoly violation of Sec. 2 of the Sherman Act, 15 U.S.C.A. Sec. 2, presupposes monopoly power in a particular market defined as the power to control prices or exclude com- petition. Hiland Dairy, Inc. v. Kroger Co., 402 F. 26 968 (8th Cir. 13 69)sion . of the number of insurance sellers and the obvious inability of any one of them alone to exercise any monopoly power, no violation of this antitrust prohibition is alleged or shown herein. Finally, if an assumption is made that the acts of the insurance companies and agents in "tying" the property damage liability insurance to the sale of bodily injury lia- bility insurance is not regulated by State law, then we have two other possible Federal Antitrust laws to examine as to their applicability to these facts. The first of these is price discrimination between different purchasers of "commodities“ of like grade and quality as prohibited by the Robinson- Patman Act15 U.S.C.A. Sec. 13(a). This has reference to "products" as distinguished from "services!',Baum v. Investors Diversified Services, Inc. 409 F. 2d 872, (C. A. , Ill 1969), and therefore insurance sales are not encompass;d in this federal antitrust law. The second and final possible federal antitrust law to be reviewed is the Clayton Antitrust Act, 15 U.S.C;~A.Sec. 14, which typically applies to "tying arrangements11,but it only applies to the sale or lease of, II . . . goods, wares, merchandise, machinery, supplies or other commodities" and such things as the lending of money -3635- . . Honorable Oscar Ii.Mausy, Page 6 (M-746) and the sale of services has been held not to be included in the covered class and it appears clear that insurance is not covered therein. U.S.-v. Investors Diversified Services, Inc., 102'F;'Supp. 645 (D. C.; Minn., 1952). It is, therefore, our opinion, based on the facts submitted, that there has been no violation of the Antitrust laws of the state or federal government, and our opinion is limited to that consideration. S U M M’A R Y Based on the facts submitted,~there is no violation of the Antitrust laws of the state or federal government in the sale of insurance to certain political subdivisions of the State of Texas under the Texas Tort Claims Act. Prepared by Wayne R. Rodgers Assistant Attorney General APPROVED: OPINION ~. COMMITTEE"' ,. Kerns Taylor, Chairman W. E. Allen, Co-Chairman Robert OWen Pat Bailey Gordon Cass Ralph Rash WEADE F. GRIFFIN Staff Legal Assistant ALFRED WALKER Executive Assistant NOIA WHITE First Assistant -3636- --- Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/4133922. Public record. Not legal advice.