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1955 Ins. L.J. 137 (1955)
The Insurance Industry and the Antitrust Laws: A Decade of Experience

handle is hein.journals/inslj17 and id is 139 raw text is: March 1955, Number 386 The Insurance Industry and the Antitrust Laws: A Decade of Experience By IRWIN M. STELZER A YEAR AGO the author presented to the readers of this JouRxAL a prelimi- nary summary of his investigations into the effects of the South-Eastern Underwriters case on the insurance industry? Availability of later information and the initial interest aroused have prompted an extension and elaboration of those remarks, The case of U. S. v. South-Eastern Under- writers Association et at? grew out of the efforts of Mr, Roy McKittrick, Attorney General of the State of Missouri, to end a number of drawn-out suits in that state. In 1922 the Superintendent of Insurance of the State of Missouri had ordered a reduc- tion in fire insurance rates. Under the law, the insurance companies could continue to collect the full premium, but the disputed portion had to be deposited with custodians designated by the courts pending the out- come of litigation. The impounded sums soon amounted to well over $10 million?' The struggle over these funds led to almost 200 lawsuits in the federal and state courts, which dragged on (in 1946 part of the liti- gation was still pending) until one Charles R, Street, an executive of a large fire in- surance company, decided to induce Boss T. J. Pendergast to negotiate a settlement. In return for $440,000, $62,500 of which went to R. Emmet O'Malley, the Super- intendent of Insurance, Pendergast per- The South-Eastern Underwriters case has led to the elimination of several undesirable practices and the regulation of others by the states, the author concludes suaded O'Malley to recommend to the court a settlement favorable to the insurance companies. The federal court, not knowing of the conspiracy, approved the settlement. Street raised the $440,000 in an interesting manner. Unsuspecting insurance companies paid him $100,000 to cover legal expenses. The balance was raised as follows: The settlement ordered that 20 per cent of the impounded funds be turned over to the policyholders, and 50 per cent be returned to the companies. The remaining 30 per cent was to be turned over to Street and one Folonie (a Chicago attorney), as trus- tees, to pay all litigation costs, the surplus to be turned over to the insurance com- panies. After costs, 11 per cent was so returned, Without the knowledge of Folonie, Street, claiming a need for more expense money, persuaded the 139 companies in- volved in the suits to remit $340,000 to him, which he then gave to Pendergast. Later tax investigations brought the con- spiracy to light. Pendergast and O'Malley 'See Econaomic Consequences of a Successful Antitrust Prosecution, 1954 Insurance Low Journal W590 (February). z5 Fire and Casualty Cases 194. 322 U. S, 533 (1944), Antitrust Laws ' State of New York Insurance Department. Eighty-seventh Preliminary Report of the Super- ateudent of Insurance to the 1946 Legislature for the Calender Year 1945, pp. 12-13

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