U.S. 9th Circuit: Countersignature Laws Illegal

A federal appeals court panel has for the first time ruled that laws requiring out-of-state agents writing business to get a countersignature from an in-state agent are unconstitutional.

The decision by the San Francisco-based 9th U.S. Circuit Court of Appeals follows victories in lower federal district courts banning countersignature laws in Florida, South Dakota, Nevada, Puerto Rico and the Virgin Islands.

The decision yesterday was made in a Nevada case.

Battles over countersignature laws date back to June 11, 2002, when the Council of Insurance Agents and Brokers, based in Washington, D.C., filed federal suits against the insurance commissioners in both Florida and Nevada alleging that countersignature laws were an unconstitutional barrier to interstate commerce.

"Although the state can still seek a review of the decision with the 9th Circuit Court of Appeals or the U.S. Supreme Court during the next 90 days, the countersignature fight now is nearly over," said Ken Crerar, CIAB president.

The Nevada Insurance Department and the state Attorney General's Office, which is representing the Insurance Department, did not immediately respond to requests for comment.

The first countersignature court victory for the CIAB came in Florida on Oct. 3, 2003, and was followed by similar victories in South Dakota, Nevada, Puerto Rico and the Virgin Islands. After the Florida ruling, the West Virginia legislature repealed that state's countersignature law to avoid a court battle with the CIAB.

The original Nevada decision holding the countersignature law unconstitutional came down in 2004, and the Virgin Islands case was decided on June 23, 2006, in a ruling from the bench by U.S. District Court Judge Curtis Gomez.

Until the time that the Nevada and Virgin Islands rulings are final, however, agents and brokers need to abide by the countersignature laws, the CIAB said.

In its decision, the court panel said that "unlike what the Nevada insurance commissioner contends," there is "no support for a conclusion that licensed nonresident agents and brokers are a 'peculiar source of evil' to either Nevada's consumers or its tax collection efforts; therefore, Nevada does not have a substantial reason to discriminate against them."

The panel added, "However, even assuming that licensed nonresident agents and brokers were a 'peculiar source of evil,'" the provision "also fails to survive the second step of our inquiry because it is not closely related to either consumer protection or tax collection."

The case is captioned, Council of Insurance Agents & Brokers and Rebecca Restrepo, vs. Alice Molasky-Arman, No. 04-17271.