The opinion of the court was delivered by: SYLVIA H. RAMBO
Before the court are four motions to dismiss submitted by (1) THE IIE DEFENDANTS: defendants Transco Syndicate No. 1, Ltd. ("Transco"), Illinois Insurance Exchange ("IIE"), ("Transco"), and Gary D. Hackley; (2) DEFENDANT NORDIC SPECIAL RISK AGENCY ("Nordic"); (3) THE ALR DEFENDANTS: defendants ALR Risk Managers, Inc. ("ALR"), Thomas A. Laffey, Thomas J. Lundon, Corroon & Black, Sven J. Grotrian, and Sidney R. Blackman; and (4) THE IMC DEFENDANTS: defendants IMC, Inc. ("IMC") and Thomas P. Reusse. Each is ripe for disposition.
In an initial examination, the court determined that the briefing on one specific issue, the McCarran-Ferguson Act, was insufficient. Hence the court ordered submission of supplementary briefs on the issue; they have since been submitted.
The dispute among the parties concerns an excess insurance liability policy purchased by plaintiff Wexco for itself and its subsidiaries. Art examination of the complaint reveals these underlying allegations:
Defendant ALR is a New Jersey corporation which acted as a local insurance agency for plaintiff Wexco in the procurement of excess liability insurance for Wexco and its wholly-owned subsidiaries for the policy year March 1988-March 1989. ALR submitted a proposal and then issued an insurance binder for such coverage through a policy to be ultimately issued by defendant insurer IIE.
The excess liability policy was obtained by ALR through defendant broker IMC and was purportedly issued by IIE and under-written by defendant Transco, with a liability limit of $ 3.5 million. ALR invoiced Plaintiffs $ 200,000 for the policy, which included a $ 10,000 commission to and its agents. At various times during the policy year, Plaintiffs decided that they wished to increase their excess policy limit (to $ 5.5 million) and that they wished to add an additional subsidiary to the policy. They contacted ALR which accomplished the requests through IMC and invoiced Plaintiffs accordingly. Plaintiffs paid the charges.
On September 14, 1990, plaintiff Wexco was sent a letter from IMC's counsel recounting IMC's recent discovery that one of its employees had created fictitious insurance policies and pocketed the premiums. One of those policies was the excess insurance policy purchased by Plaintiffs.
According to the letter sent to the Insurance Commissioner, the only excess coverage truly established with the ultimate insurer IIE for Wexco and its subsidiaries was a policy with a limit of $ 1,000,000, effective March, 1988 through March, 1989; the associated premium was $ 127,198.
On the other hand, the IIE excess policy as described by the documents in the possession of Wexco had ultimate limits of $ 5,500,000, with a premium cost of $ 292,620.
According to Plaintiffs, they have paid $ 164,024.76 in extra premium costs for non-existent coverage. Their complaint asserts common law claims of contract reformation, fraud, negligence, breach of fiduciary duty, and broker malpractice, as well as claims under two federal statutes, the Lanham Act and the Racketeer Influenced and Corrupt Organization Act ("RICO"), against all Defendants. However, the Lanham Act counts were voluntarily dismissed on November 13, 1992.
I. Motions to Dismiss Under Federal Rule of Civil Procedure 12(b)(6)
In examining a Rule 12(b)(6) motion, the court must decide whether, even if the plaintiff could prove all her allegations, she would be unable to prevail. Mortensen v. First Fed. Sav. & Loan Ass'n, 549 F.2d 884, 891 (3d Cir. 1977). The moving party has the burden of showing this. Johnsrud v. Carter, 620 F.2d 29, 33 (3d Cir. 1980); Mortensen, 549 F.2d at 891. When facing a 12(b)(6) motion, the plaintiff is afforded certain protections. The material allegations of her complaint are taken as true and construed in the light most favorable to her. Pennsylvania House, Inc. v. Barrett, 760 F. Supp. 439, 449 (M.D. Pa. 1991). However, "conclusory allegations of law, unsupported conclusions and unwarranted inferences need not be accepted as true." Id. at 449-50 (citing Conley v. Gibson, 355 U.S. 41, 45-46, 2 L. Ed. 2d 80, 78 S. Ct. 99 (1957)). When the court addresses a 12(b)(6) motion, it may dismiss the plaintiff's complaint "only if it appears to a certainty that no relief could be granted under any set of facts which could be proved." D.P. Enters, Inc. v. Bucks County Community College, 725 F.2d 943, 944 (3d Cir. 1984).
II. RICO and The McCarran-Ferguson Act
All Defendants have argued that, as a matter of law, Plaintiffs' RICO claim is precluded by the McCarran-Ferguson Act ("McCarran-Ferguson"), 15 U.S.C. § 1011, et seq. As will be discussed below, the determination whether a RICO claim is precluded by McCarran-Ferguson is a fact-specific one.
A. The Motive Behind Passage of McCarran-Ferguson, and the Act's Relevant Language
McCarran-Ferguson was enacted by Congress in response to the United States Supreme Court's decision in United States v. South-Eastern Underwriters Ass'n, 322 U.S. 533, 88 L. Ed. 1440, 64 S. Ct. 1162 (1944). Prior to South-Eastern Underwriters, an insurance policy was not considered a transaction in commerce. See Paul v. Virginia, 75 U.S. 168, 183, 19 L. Ed. 357 (1869). Rather, regulation of insurance transactions was considered to be within the purview of the individual states. However, in South-Eastern Underwriters, the Supreme Court held that insurance transactions were encompassed by the Commerce Clause of the federal Constitution and thus susceptible to federal regulation. Securities & Exchange Comm'n v. National Securities, Inc., 393 U.S. 453, 458, 21 L. Ed. 2d 668, 89 S. Ct. 564 (1969) (recounting effect of South-Eastern Underwriters).