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NAIC To File Brief In W.Va. OCC Case

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Reno, Nev.

The National Association of Insurance Commissioners will file an amicus brief in a West Virginia case that challenges the right of the Office of the Comptroller of the Currency to preempt state laws affecting the ability of a bank to sell insurance.

The decision to file the brief was made at the NAIC’s spring meeting here following the release of an OCC bulletin on March 18 that preempts a Massachusetts law.

The OCC found that provisions in the Massachusetts law “frustrate the ability of national banks to solicit and cross-market products.” (See NU, March 25.)

The West Virginia suit was filed by the Independent Insurance Agents of America and the National Association of Professional Insurance Agents, both in Alexandria, Va. (See NU, Nov. 19, 2001.)

The amicus brief, which must be filed by April 3, will address the issue of preemption standards and not specific provisions in the law, according to Nat Shapo, NAIC Secretary-Treasurer and Illinois insurance commissioner. He notes that the differing interpretation is just “a cordial professional disagreement.”

Shapo says the OCC opinion of federal preemption standards quotes extensively from a Senate report that misconstrues the Supreme Court’s Barnett decision.

One of the issues, according to Shapo, is that the Senate report minimizes the significance of the Barnett case by implying it is just another legal case that addresses the issue of preempting state laws that interfere with a national banks privileges.

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In fact, Shapo says, Barnett is a “seminal case.”

The courts have used Barnett as a standard and Congress used the phrase from the Barnett decision–”prevent or significantly interfere”–when it crafted the Gramm-Leach-Bliley Act.

The report “twists the common understanding of the codification and legal understanding of the issue,” he says.

Reviewing the OCC opinion, Shapo says he believes its preemption standard is “too low and does not conform with the controlling law.”

The opinion, he continues, narrowly preserves state laws that have “only a small effect on national banks’ exercise of power” and “broadly preempts state laws that condition or confine the exercise by a national bank of its express or incidental powers.”

Shapo adds that the “broadly preemptive” language is inconsistent with the “significantly interfere” language in the Barnett case.

In an analysis, he adds that the opinions conclusion that GLB brings in any language in Barnett related to preemption is, in fact, subject to another interpretation: Congress meant only to address the standard of “prevent or significantly interfere.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, April 1, 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.