Puerto Rico's Signature Law Struck Down

The Council of Insurance Agents & Brokers, which brought the suit, claimed victory for the fourth time in its efforts to overturn countersignature laws in the few states and U.S. territories that still have them.

"These countersignature laws are egregious and stubborn vestiges of protectionism that have no place in the 21st Century," said Ken A. Crerar, president of CIAB. "Every victory in a case such as this is an important step toward modernizing the insurance regulatory marketplace to meet the challenges of an international economy."

Judge Juarbe-Jimenez found the arguments by the insurance department for retaining the countersignature law "unconvincing."

The department argued that non-resident agents needed the services of a resident agent to communicate with policyholders due to geographical proximity and to ensure communications are in Spanish.

The combination of modern communication and pervasiveness of English spoken in the Commonwealth undercut that argument, the court found. In addition, non-resident agents were being harmed by the regulations because they were not allowed to solicit business and any business they did place had to be through a resident agent.

Speaking on behalf of the insurance department, Leila Alvarado-Gonzalez, general counsel, director of legal unit, said the department plans to request reconsideration of the ruling before deciding if it will seek appeal.

She said it is not clear if Judge Fuste's decision affects other aspects of the insurance code, and if so, how it should be interpreted. She added that while the department will uphold the judge's decision, it will be looking to the Commonwealth's legislature to make the final reforms.

"We stand by the responsibility we have to make sure people who do business here are duly authorized to do so," said Ms. Alvarado-Gonzalez.

If there is an appeal, she added, it will be sought on the merits of the unique geographic location of Puerto Rico, language, and the question of whether the CIAB has standing before the court to bring suit.

The insurance department has 30 days to appeal the ruling.

The CIAB has obtained favorable judgments in Florida and Nevada, where the courts have struck down the countersignature regulations there. In West Virginia, the state legislature rescinded the state's countersignature law.

The Nevada Department of Insurance is appealing the decision there.