Speedy Decision Sought In OCC Suit
The legal battle between Massachusetts and federal authorities over state regulation of bank insurance sales might get a court resolution by next month, the attorney for an insurer group said.
Mike Koziol, senior director and counsel for the National Association of Independent Insurers in Des Plaines, Ill., explained that the case being brought against the U.S. comptroller of the currency by Massachusetts falls under expedited review provisions of the federal Gramm-Leach-Bliley Act.
Mr. Koziol, whose organization is involved in a separate but similar lawsuit challenging the OCCs actions in West Virginia, said the Massachusetts case qualifies for a rapid track "because the parties and interests are a state regulator and a federal regulator."
He said the case might get a decision by Aug. 15. However, a Massachusetts official said timelines could be changed.
Massachusetts Attorney General Thomas Reilly is bringing the Massachusetts action against U.S. Comptroller of the Currency John D. Hawke in the U.S. Court of Appeals for the First Circuit in Boston, on behalf of Insurance Commissioner Julianne M. Bowler and Banking Commissioner Thomas J. Curry.
Thomas A. Barnico, a Massachusetts assistant attorney general on the case, said oral arguments have been set for Aug. 2 before a three-judge panel. The OCC response to the suit is due July 11, with a state reply by July 15.
Mr. Barnico said that although it is possible for a decision by Aug. 15, because the law requires an opinion within 60 days of the filing of a suit, he didn't know whether the court would request an extension. "The court hasnt asked us yet," he said. "Since this is the first petition filed under this law, it's unclear how that would work."
The Massachusetts suit stems from a March 18 ruling by the Office of the Comptroller of the Currency preempting three Massachusetts statutes regulating insurance sales by banks. That ruling had been requested by the Massachusetts Bank Insurance Association, a division of the Massachusetts Bankers Association in Boston.
The laws, passed in 1998, prohibit unlicensed bank personnel from referring customers to licensed agents unless a customer specifically asks about insurance; bans compensation for unlicensed employees for making such referrals; and prohibits banks from attempting to sell insurance to home-loan customers until after a mortgage is approved.
Mr. Koziol said he believed there is a good chance that the court will rule "that the OCC has exceeded its authority."
He noted that the GLB language concerning regulation of bank insurance sales bars state laws that "prevent or significantly interfere" with them. In Mr. Koziols view, the OCC is misconstruing the law to preempt regulation that is not significant interference, but "interference lite," or a little bit of interference.
He said that the NAII is hoping for a decision soon as well from the U.S. Court of Appeals in Washington, D.C., which is hearing the dispute involving West Virginia bank-insurance regulations. That action was not brought by the state, and so does not qualify for the GLB section 303 (a) fast track, Mr. Koziol explained.
The West Virginia suit was brought by two agent groups, with the NAII filing a friend-of-the-court brief.
The Independent Insurance Agents and Brokers of America and the National Association of Professional Insurance Agents, which filed the West Virginia suit challenging the OCC, said last week they are joining the Massachusetts action by filing a friend-of-the-court brief.
Massachusetts Governor Jane Swift, in announcing her states suit, said the action was "based on the right of Massachusetts and every other state to not have an unelected federal bureaucracy overturn provisions designed to protect consumers."
The OCC says the laws are preempted by GLB because "they frustrate the authority of national banks to engage in insurance activities."
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, July 8, 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.
© Touchpoint Markets, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.