Nevada Countersignature Law Officially Null and Void

protectionist requirement that served only the self interests of small protectionist agents.

The battle to defeat countersignature laws is finally over, now that the July 9, 2008, deadline has passed for Nevada to file a petition of appeal with the U.S. Supreme Court on a previous federal court ruling holding the state’s countersignature law unconstitutional.

In April 2008, the U.S. 9th Circuit Court of Appeals invalidated Nevada’s insurance producer countersignature law, finding it unconstitutional under the Privileges and Immunities Clause of the U.S. Constitution because it “discriminates against citizens of other states where there is no substantial reason for the discrimination beyond the mere fact that they are citizens of other States ”

The countersignature statute required an out-of-state insurance agent/broker to obtain the signature of a Nevada resident agent to put the policy in effect. The nonresident agent also was required to pay the Nevada resident agent 5 percent of the premium.

Although the Court of Appeals declared the law unconstitutional in April 2008 and the state has been unable to enforce the countersignature requirement on nonresident agents since that time, because the state had 90 days to seek a review of the decision.

But as the deadline finally passed, The Council of Insurance Agents & Brokers called July 9, 2008, “the true Independence Day.”

“The last holdout state clinging to the countersignature requirement, Nevada, fell into The Council’s win column today,” the association said in a statement on July 9.

“Countersignature laws awarded resident agents a percentage of the commission for business places by out-of-state brokers even though there was no work involved, just their signature on a form,” said Ken A. Crerar, CIAB president. “This is the end of an absurd protectionist requirement that served only the self interests of small protectionist agents and not their clients.”

Peggy Dehl, public information officer for the Nevada Division of Insurance, stated that the law was determined to be unconstitutional because nonresidents were not receiving the same privileges as resident agents. The insurer could only submit a policy through an appointed and licensed producer, and the policy had to be countersigned by a licensed producer.

Yet although the DOI did not appeal the court ruling, Dehl admitted there has been some confusion as to the exact decision. Now, as long as an insurer is appointed and licensed, the policy can be signed by either a resident or a nonresident agent, she explained. Yet Dehl said DOI was trying to clarify the decision to determine whether the unconstitutionality ruling pertains to specific provisions of the countersignature statute or to all of the statute’s provisions.

“We are seeking clarification as to whether the provisions on the countersignature are unconstitutional or the whole statute itself is unconstitutional,” Dehl said.

When asked when the last day a resident agent could charge the 5 percent signature fee, Dehl replied, “The courts remanded the statute down to the district court on May 8 by Judge Mayhan in order for it to be spread among the courts”.

Wes Bissett, senior council for government affairs for the Independent Insurance Agents & Brokers of America (the Big “I”) said his association was advising its members to “await final guidance.” “Countersignature laws are totally eliminated; that was long overdue. This is significant – we don’t anticipate much market disruption,” he said.

Nevada and Florida were the first states CIAB sued to eliminate countersignature requirements in 2002. U.S. District Judge Robert Hinkle threw out the Florida statute in 2003, and The Council then filed suit against all the remaining states and territories with similar statutes – West Virginia, South Dakota, the U.S. Virgin Islands and Puerto Rico – seeking a similar result.

“Although our members spent millions to eradicate these statutes, they stand to realize millions more that will flow to their agencies’ bottom lines now that they are finally free of countersignature commission-sharing,” CIAB’s Crerar said.

Topics USA Agencies