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Agent Groups Join Fight Against OCC

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NU Online News Service, June 27, 2:07 p.m. — Two insurance agent groups will join Massachusetts in an escalating legal battle with federal authorities over state regulation of bank insurance sales, a spokesman for one of the organizations said today.

Massachusetts is suing U.S. Comptroller of the Currency John D. Hawke over his agency’s move to preempt a state law governing insurance sales by banks.

“We’re going to file an amicus brief this coming Monday supporting the Massachusetts suit,” said Ted Besesparis, vice president of communications for the National Association of Professional Insurance Agents, Alexandria, Va.

Besesparis said the Independent Insurance Agents and Brokers of America, Alexandria, would also be joining as an amicus party.

The two groups already have their own lawsuit going against the comptroller over his move to exempt national banks in West Virginia from that state’s law regulating insurance sales and solicitations.

West Virginia state officials, unlike Massachusetts officials, have not challenged the comptroller’s action.

Massachusetts Gov. Jane Swift, a Republican, said when she announced her state’s suit June 13 that the action was “based on the right of Massachusetts and every other state to not have an unelected federal bureaucracy overturn provisions designed to protect consumers.”

The Massachusetts action is being brought by Attorney General Thomas Reilly in the 1st U.S. Circuit Court of Appeals on behalf of Julianne M. Bowler, the insurance commissioner, and Thomas J. Curry, the banking commissioner.

The suit over the West Virginia law has been brought by agent groups in the U.S. District Court of the District of Columbia. The National Association of Independent Insurers, Des Plaines, Ill. has joined that case with an amicus brief.

Massachusetts’ action stems from a March 18 ruling by the Office of the Comptroller of the Currency preempting three Massachusetts statutes regulating insurance sales by banks. That ruling had been requested by the Massachusetts Bank Insurance Association, a division of the Massachusetts Bankers Association, Boston.

The laws, passed in 1998, prohibit unlicensed bank personnel from referring customers to licensed agents unless a customer specifically asks about insurance; bans compensation for unlicensed employees for making such referrals; and prohibits banks from attempting to sell insurance to home-loan customers until after a mortgage is approved.

West Virginia’s law contains the same restrictions as well as other restrictions.

The OCC says the laws are preempted by the Gramm-Leach-Bliley Financial Services Modernization Act of 1999 because “they frustrate the authority of national banks to engage in insurance activities.”

The suit charges that the OCC exceeded its authority under Gramm-Leach-Bliley to preempt state laws and says the state statutes provide better consumer protections than federal rules.

“We look forward to seeing the arguments from Massachusetts and will make an appropriate response in the brief that we file” in response to the suit, said Kevin Mukri, an OCC spokesman.

According to court papers filed by Reilly, the Cape Cod Bank and Trust Company N.A., in April asked the state commissioner of insurance for permission to engage in insurance activities forbidden by the challenged laws. The commissioner has postponed a decision on that request pending outcome of the state’s suit against the OCC.

Kevin Kiley, executive vice president of the Massachusetts Bankers Association, said his group expects the OCC to prevail in the suit.

“The decision of the OCC was well reasoned and based on clear statutory provisions,” Kiley said. “No one wants to be involved in having to litigate, but we are optimistic we will be ultimately successful.”

Kiley said he expects the OCC to file its brief within 90 days and the court to issue a decision by this fall.