Sandwich Chef of Texas v. Reliance Nat. Indemnity Ins. Co.
Sandwich Chef of Texas, Inc. (d/b/a Wall Street Deli), as plaintiff, filed a class action against numerous insurance carriers, including Reliance National Indemnity Insurance Company, alleging that they defrauded employers by charging excessive workers' compensation premiums between May 1988 and January 1990. The plaintiff claims that the defendants utilized the National Council on Compensation Insurance, Inc. (NCCI) as a racketeering enterprise to commit mail and wire fraud. This was allegedly done by improperly factoring 'residual market charges' (RMLs) into premiums, which were purportedly unfiled and unapproved. The defendants moved for a Supplemental Motion for Summary Judgment, arguing that the plaintiff's claims failed to allege indictable acts of racketeering, lacked a basis for proving injury 'by reason of' alleged misrepresentations due to a 'presumption of knowledge' of filed rates, and were precluded by the McCarran-Ferguson Act. The United States District Court, S.D. Texas, Houston Division, denied the defendants' motion for summary judgment, finding that overbilling can constitute RICO mail fraud, that claims to enforce filed rates are not barred by the 'presumption of knowledge,' and that the McCarran-Ferguson Act did not preclude RICO's application as it complemented state regulations. The court also allowed the plaintiff's 'fraud-on-the-regulator' theory and conspiracy claims to proceed.