New Jersey Life Producer Law Practice Test

Which principle established that insurance is not a transaction of commerce?

1. Gibbons v. Ogden

2. McCarran-Ferguson Act

3. Paul v. Virginia

4. Wickard v. Filburn

The correct answer is: Paul v. Virginia

The principle established in the case of Paul v. Virginia is that insurance does not constitute a transaction of commerce. This significant ruling highlighted the distinction between insurance and other commercial transactions, affirming that states have the authority to regulate insurance as a local business activity rather than as interstate commerce. The decision reinforced the idea that insurance, which involves risk management and the transfer of risk, differs fundamentally from goods or services that are exchanged in traditional commerce. The case underscored the regulatory powers of the states over insurance practices, setting a precedent that influenced how insurance was treated under federal law. This decision was crucial in shaping the legal framework surrounding insurance regulation in the U.S., distinguishing it from other areas of commerce that fall under federal jurisdiction. The implications of Paul v. Virginia are still relevant today in discussions surrounding the regulation of insurance companies and their activities within various states.