The Council of Insurance Agents & Brokers declared another victory in its effort to eliminate insurance producer countersignature laws throughout the U.S. and its territories after South Dakota dropped its appeal of a federal court ruling, but the celebration has earned the disdain of the state's independent agent association.
Yesterday, the CIAB said South Dakota officials would not pursue their appeal of U.S. District Judge Charles B. Kornmann's ruling that the state's countersignature law, requiring nonresident agents to have a local agent sign off on policies, violated the Privileges and Immunities Clause of the U.S. Constitution (Article IV, Section 2) and served no reasonable benefit to the state's policyholders.
According to the CIAB, the state failed to file an appeal in the required amount of time, therefore finalizing Judge Kornmann's ruling on Nov. 29, 2005.
"This is a great victory for The Council," said Ken A. Crerar, president of the CIAB, in a statement. "Commercial insurance agents and brokers are now freed from the unreasonable countersignature requirements in South Dakota and don't need to abide by that outdated law any longer."
With this decision in the U.S. District Court, District of South Dakota, Central Division, the CIAB said it has successfully challenged every remaining countersignature statute in the U.S. since it won its first lawsuit in Florida in 2003.
Two other successful countersignature challenges by the association in Nevada and Puerto Rico are under appeal. The only remaining case awaiting trial is in the Virgin Islands.
In his ruling, Judge Kornmann said there was no practical or legitimate reason for the existence of the laws. They created a financial and administrative burden on nonresident agents without showing a benefit for policyholders.
The judge found that advances in technology no longer required an agent to be domiciled within the same city as a policyholder.
"The notion that a nonresident agent is less capable of providing assistance on a policy outside of that agent's state of residence does not constitute a sufficient reason for the difference in treatment and the discrimination practiced," Judge Kornmann wrote.
If the state were truly concerned about ensuring that nonresident agents were as knowledgeable as resident agents about South Dakota's insurance laws, the state should heighten the licensing requirements, which would be a less burdensome way to accomplish this goal, the judge wrote. Policyholders and nonresident agents could also voluntarily have a resident agent check a policy for completeness, without the administrative burdens and expense, if some concern remained, the judge said.
Larry Ahrendt, executive vice president of the South Dakota Independent Insurance Agents expressed unhappiness with what he felt was exploitation of the issue by the CIAB, especially the assertion that the state's independent agents fought to keep the law in place.
He was also upset with CIAB's making issue of Gov. M. Michael Rounds' testimony in the case as an independent agent defending the countersignature laws.
"Shame on them for holding the governor up [to ridicule]," said Mr. Ahrendt. "Shame on them for a tongue and cheek ridicule of an insurance professional who felt very strongly about the obligations that were a part of the countersignature. And shame on them for coming to a state where they have no representation and no interest whatsoever. Shame on them."
A call to the South Dakota Department of Insurance was not immediately returned.
© Arc, 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.