After the U.S. Supreme Court heard lengthy oral arguments on Obamacare this week, it’s hard for me to resist saying something about it on this blog. The issues before the Court, although they involve health insurance, for the most part have little to do with insurance law or anything that would impact insurance class actions. But a recent column by George F. Will in the Washington Post caught my eye. He highlights an amicus brief filed by the Institute for Justice, which argues that, as a matter of contract law, forcing individuals to enter into an insurance contract is contrary to the fundamental principle of mutual assent that has been a foundation of contract law for centuries. I remember that being the focus of what was probably the very first contracts law class I had with E. Allen Farnsworth, but this has not been an obvious point when people think and write about the Obamacare debate. The Institute’s brief explains how the law of contracts has held for ages that you cannot coerce someone to enter into a contract, which is why there are defenses of duress and fraud, for example. The Institute argues that, if Congress has the power to compel people to buy an insurance product, why wouldn’t Congress have the power to compel people to buy other products it deems necessary for purposes of interstate commerce? Where do you draw the line?
The Institute’s brief offers an interesting perspective on the issues before the Supreme Court. There are, of course, some ways in which people are more or less forced to buy insurance, but generally there are exceptions. For example, if you want to drive a car, which in many parts of our country is a necessity for the vast majority of people, typically you must buy auto insurance. But states generally allow you to provide evidence that you have the financial means to self-insure as an alternative, and if you choose to live somewhere that has a good public transportation system you can avoid having a car at all. And of course states have broader power than Congress does in any event.
There is no way of knowing whether the Court will address the Institute’s points at all, but if the Court were to take them up and analyze them, the decision might have broader impact on insurance law and some insurance class actions. There are some class actions brought against insurers, and regulatory actions taken, where the gravamen of the case or regulatory action more or less seeks to force the insurer to enter into contracts with insureds, or renew contracts that the insurer would prefer not to renew, or decline to cancel contracts that the insurer believes it has the right to cancel. As you delve into the details of whatever the specific issue may be in this kind of litigation or regulatory proceeding, don’t forget those basic, fundamental principles of contract law.