NU Online News Service, Nov. 22, 10:25 a.m. – A three-judge panel in Virginia has become the first federal court to uphold the right of the Office of the Comptroller of the Currency to preempt state law governing the sale of insurance in banks.
On Nov. 19, the U.S. Court of Appeals for the Fourth Circuit, Richmond, Va., ruled 2-1 that the OCC could preempt part of a West Virginia law limiting bank sales of insurance.
It dismissed a petition from West Virginia Insurance Commissioner Jane L. Cline to strike down the OCC’s preemption of part of a state law that forbids banks from selling insurance to a loan customer until after the loan is approved and stops banks from sharing customer information with their insurance affiliates.
The ruling also lifted a state requirement that banks isolate insurance sales from other bank functions.
The OCC cited provisions of the Gramm-Leach-Bliley Act of 1999 that authorized it to preempt state statutes it believes substantially limit national banks’ ability to sell insurance.
The National Association of Insurance Commissioners, the Independent Insurance Agents and Brokers of America and the National Association of Professional Insurance Agents supported West Virginia in the case.
On the other side, the American Bankers Association in Washington and its affiliate, the American Bankers Insurance Association and the West Virginia Bankers Association supported the OCC.
The court’s ruling may not be the last word on the issue, however.