NAII Joins Agent Groups' OCC Suit

The legal action was sparked in December 2001 when the federal banking authority issued an opinion letter stating that under federal law national banks are not governed by portions of a West Virginia consumer protection statute regulating insurance sales and solicitations.

Patricia A. Borowski, PIA's senior vice president of government affairs, said today that her group was "delighted" that NAII had joined the suit. The NAII decision, she said, "adds a powerful ally" in the fight to protect state regulation of insurance.

NAII said it will team with the two agent groups by filing an amicus brief arguing that the federal agency overstepped the scope of its statutory authority in issuing its opinion, and failed to apply the appropriate standard for determining whether a state insurance law is preempted.

The case is being heard in the U.S. District Court of the District of Columbia.

"Banking and insurance laws that offer consumer protection and establish a fair, level playing field in the insurance marketplace are in jeopardy in nearly 20 states as a result of the OCC opinion letter," said Mike Koziol, NAII senior director and counsel.

Both agent associations and the NAII charge that the OCC opinion "distorts and misinterprets" the "significant interference" standard developed by the Supreme Court in its Barnett Bank decision, and reaffirmed directly in public policy by the Gramm-Leach-Bliley Act.

The three groups argue that the OCC letter could result in exempting banks from any state regulation whatsoever that imposes additional costs on their insurance agency activities unless that regulation specifically is protected by a GLB safe harbor provision.

According to the three complaining groups, the appropriate forum for banks to resolve a conflict is a direct challenge to state law, not by having the OCC usurp state law.

"The NAII is challenging the OCC and fighting the attack on state authority because we believe individual states should be the regulators of the insurance business," Mr. Koziol said. "If a bank regulator gets away with issuing a preempting opinion about whether a state law exceeds permissible scope, state regulation of insurance may be diminished."

An OCC response to the lawsuit is expected by Monday, Feb. 18.

The suit argues that OCC erred in its conclusion for three of the provisions in the West Virginia statute:

? Personal separation requirements, which dictates that insurance sales personnel must not engage in banking activities except in small banks.

? A timing-of-solicitation requirement, which mandates that a bank may not solicit the purchase of insurance related to a loan from a customer while their loan application is pending.

? A physical separation requirement, which requires insurance sales or solicitations to take place in a separate and distinct area from deposit and lending areas of a bank, except in small banks.

Ted Besesparis, PIA's vice president of communications, said both the National Council of State Legislators and the National Conference of Insurance Legislators have expressed support for the lawsuit in the form of resolutions.

The NAII represents more than 690 member companies writing $98 billion of premium annually.