Court Throws Out Nevada’s Insurance Agent Countersignature Law

April 21, 2008

The U.S. 9th Circuit Court of Appeals has invalidated Nevada’s insurance producer countersignature law, in what could be the final nail in the coffin for these requirements on nonresident producers.

U.S. District Judge Melvin Brunetti, writing for the 9th Circuit Court, found that the Nevada law is 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.”

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 to put that policy into effect. In Nevada, a local, resident agent’s “stamp” costs the nonresident agent 5 percent of premium.

The ruling is another decisive win for The Council of Insurance Agents & Brokers, which has fought these laws that it calls “anachronistic protectionism” in several states and territories and won.

“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 CIAB President Ken A. Crerar. “This Nevada decision makes it clear there is no room for offensive, protectionist barriers to competition in this country.”

Nevada could be the last battleground in the CIAB’s efforts. 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 Crerar.

CIAB’s legal battle to end countersignature requirements dates back to June 11, 2002, when it filed federal court lawsuits 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 After the Florida ruling, the West Virginia legislature repealed that state’s countersignature law to avoid a court battle.

The only holdouts to final victory have been in Nevada, where a federal judge initially threw the countersignature 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 CIAB’s favor but a federal judge is still considering a technical change to the written ruling.

The original Nevada decision holding the countersignature law unconstitutional came down in 2004, and the Virgin Islands case was decided on June 23, 2006.

“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.”

According to Crerar, the legal fight has been worth the effort. He said his group’s large commercial lines agencies have already saved “millions of dollars” from the elimination of the countersignature laws. “Once the Nevada ruling is final, our members will enjoy even more savings because that statute was the most egregious of all,” he said.

Until the time that the Nevada and Virgin Islands rulings are final, agents and brokers need to abide by the countersignature laws, Crerar said.

To view the 9th Circuit opinion Council of Insurance Agents and Brokers and Rebecca Restrepo v. Alice A. Molasky-Arman, Nevada Commissioner of Insurance, visit

Topics USA Agencies Florida Nevada

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