The Council Wins Industry Changing Countersignature Decision

Nevada Countersignature Victory Affirmed by U.S. Circuit Court

WASHINGTON, DC -- (MARKET WIRE) -- 04/10/08 -- The Council of Insurance Agents & Brokers won a major victory Thursday when the 9th Circuit Court of Appeals struck down Nevada's countersignature laws as unconstitutional barriers to competition, affirming an earlier ruling by a U.S. district court judge. Nevada is the last battleground in The Council's efforts to eliminate countersignature requirements in U.S. states and territories.

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, according to Council President Ken A. Crerar.

"We have challenged these countersignature laws across the country, and at every turn, we have run into resistance from local agent groups who are trying to protect themselves from competition and have used every tool they could to try to stop us," said Crerar. "This Nevada decision makes it clear there is no room for offensive, protectionist barriers to competition in this country."

A countersignature statute requires an agent/broker in one state who writes a policy in another state to pay a percentage of premium to a resident agent in order to put that policy into effect even if little or no work was required. The resident agent's "stamp" does not come cheaply: In Nevada, the payment requirement was 5 percent of premium regardless of the fee or commission earned by the agent who actually wrote the policy.

"We have saved our members millions of dollars with earlier rulings in Florida, South Dakota and Puerto Rico, as well as West Virginia where the legislature repealed the countersignature law rather than fight," Crerar said. "Once the Nevada ruling is final, our members will enjoy even more savings because that statute was the most egregious of all."

The countersignature battle has been going on for decades. Nevada was one of two suits filed initially by The Council in June 2002 to challenge the arcane countersignature laws then in effect in a number of states, Puerto Rico and the Virgin Islands. Since then, The Council has prevailed in every state and territory where it filed a challenge.

The only holdouts to final victory have been Nevada, where a federal judge initially threw the statute out as unconstitutional nearly four years ago but where the law has remained on the books while the state appealed, and the Virgin Islands, where the U.S. District Court has ruled in The Council's favor but a federal judge is still considering a technical change to the written ruling.

"We fight competitive battles with local protectionist groups on multiple fronts -- surplus lines regulations, agent/broker licensure and anti-rebating statutes, to name a few," Crerar said. "But the most naked expression of anachronistic protectionism has been the countersignature regime that once was pervasive across the country. Nevada was the most stubborn resister to change, giving a bonus 5 percent of premium to resident agents who added no value whatsoever to the transaction. This harms the consumer and serves only to protect agents who can't compete on their own."

The Council's long legal battle to end countersignature requirements dates back to June 11, 2002, when it filed federal court suits against the insurance commissioners in both Florida and Nevada alleging that countersignature laws were an unconstitutional barrier to interstate commerce.

The first victory 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 Council.

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 Council said.

Founded in 1913, The Council is the premier association for commercial insurance and employee benefits intermediaries. The Council represents the leading commercial brokers and agents in the United States and abroad. Council members annually place 80 percent of all commercial property/casualty premiums in the United States and administer billions of dollars in employee benefits accounts. www.ciab.com

Contact: Cheryl Arvidson Assistant Director, Strategic Communications 202-662-4426 cheryl.arvidson@ciab.com

Maura Nelson Vice President, Marketing & Communications 202-662-4432 maura.nelson@ciab.com

2008-04-10 17:24:49 0333522 MARKETWIRE