Agents, Banks Battle In W. Virginia
Four West Virginia statutes regulating bank insurance activities are preempted by the Gramm-Leach-Bliley Act, three banking associations contend.
In a brief filed with the 4th Circuit Court of Appeals, the groups say that the court should let stand a determination by the Office of the Comptroller of the Currency that the West Virginia statutes "prevent or significantly interfere" with federally granted bank insurance powers.
The brief was filed by the American Bankers Association, the American Bankers Insurance Association, and the West Virginia Bankers Association.
Insurance agents, however, say the statutes are valid and should be upheld. Scott Sinder, an attorney representing the Independent Insurance Agents & Brokers of America and the National Association of Professional Insurance Agents, both based in Alexandria, Va., said at a court hearing that one of the purposes of GLB was to allow banks to engage in insurance activities as long as they comply with state insurance laws.
"The only limitation on a states right to regulate insurance activities is that no state may prevent or significantly interfere with the ability to engage in insurance sales, solicitation or cross-marketing activities," Mr. Sinder said, adding that the West Virginia consumer protection laws do not violate that test.
The controversy relates to the following provisions of West Virginia law:
A requirement that financial institutions use separate employees for insurance sales.
A timing restriction that bars banks from soliciting loan customers for insurance until after the loan has been approved.
A restriction that bars bank affiliates from sharing information acquired in the course of a loan transaction or insurance solicitation.
A requirement that insurance activities be physically separate from deposit-taking and loan activities.
The OCC determined that the four requirements violate GLB and should be preempted. That determination was challenged by the West Virginia Insurance Department, which said that OCC lacks the authority to preempt West Virginia law–and that in any case, the laws do not "prevent or significantly interfere" with bank insurance activities.
The banking associations, however, said in their brief that the OCCs determination should stand.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, November 4, 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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