Suits Challenge Countersignature Laws

Washington

The Council of Insurance Agents and Brokers has filed lawsuits against the states of Florida and Nevada, seeking to have their countersignature laws declared unconstitutional.

The lawsuits, which were filed in federal district courts in each state, charge that countersignature laws violate constitutional protections that prohibit states from discriminating against residents and businesses of other states.

Ken Crerar, president of the Washington-based Council, said that the decision to file the suits reflects frustration over agent licensing reform efforts dating back over 60 years. While states are starting to make progress, he said, countersignature laws represent the most egregious protection measures still on the books in some states.

He called countersignature requirements “pure profit” for agents who reside in the relevant states, because they receive a fee without having to do any work.

In Florida and Nevada, Mr. Crerar said, the cost to the system of countersignature laws amounts to millions of dollars a year–costs which he said are totally unnecessary.

Nicole Allen, director of government relations for the Council, said that in Florida, non-resident agents must pay up to 50 percent of commission to resident agents simply to get their signatures on policies. In Nevada, she said, the fee is 5 percent of premium or 25 percent of commission. Mr. Crerar added that in both states, the insurance departments rigorously enforce the countersignature laws, and have audited insurance agencies to assure the fees are paid.

Generally, he said, advocates of countersignature laws justify them in the name of consumer protection, but Mr. Crerar scoffed at that justification. In an interstate system, he said, agent licensing itself is the consumer protection.

Joel Wood, senior vice president of government affairs for the Council, said that while legislative efforts are underway to establish a system of reciprocity for agent and broker licensing, and hundreds if not thousands of changes in state laws are being made, it is frustrating that two states continue to have countersignature laws outstanding. Ms. Allen noted that in addition to Florida and Nevada, Alabama, South Dakota and West Virginia also have countersignature laws.

Mr. Crerar said the Council filed the suits against the Florida and Nevada laws because they are the two most egregious.

The lawsuits ask the respective federal courts to issue permanent injunctions enjoining the state insurance commissioners in Florida and Nevada from enforcing the countersignature laws.

The Alexandria, Va.-based National Association of Professional Insurance Agents said the lawsuit could have implications beyond countersignature laws.

“We anticipate that however this case plays out, it could have significant impact on other such state-by-state differences, especially since the basis of the complaint is not tied exclusively to provisions in the Gramm-Leach-Bliley Act, but rather based upon larger legal constitutional issues,” said Patricia A. Borowski, PIA's senior vice president of government affairs. “At its core, it challenges states to demonstrate true in-state consumer protection by such measures.”

Wes Bissett, vice president of state government affairs for the Independent Insurance Agents and Brokers of America in Alexandria, Va., said that IIABA has supported total abolition of countersignature laws for over 30 years. During the past five-to-10 years, he said, IIABA has spearheaded repeal efforts in some 15 states, often with little assistance from the Council because it has no state presence.

IIABA, Mr. Bissett said, is addressing countersignature laws in a different way. It is drafting a federal legislative proposal that would call for preemption of countersignature laws.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 17, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Suits Challenge Countersignature Laws

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