CIAB Wins Countersignature Lawsuit in Puerto Rico

April 1, 2005

The Council of Insurance Agents & Brokers, the trade association that represents the nation’s largest commercial P/C and benefits brokers, announced the successful outcome of its lawsuit in Puerto Rico to strike down the territory’s countersignature law.

U.S. District Judge Jose Antonio Fuste decision negates the statute that had prohibited non-resident insurance brokers from doing business on the Island without the countersignature of a resident agent. Puerto Rican authorities now have 30 days to appeal the ruling.

The CIAB noted that this is the “fourth straight victory” in its campaign to do away with these restrictive prohibitions. It has “gone to federal court in the last six states and jurisdictions where countersignature laws remain on the books, arguing those statutes are unconstitutional,” the announcement noted. “Previously, countersignature laws in Florida and Nevada have been struck down, and the West Virginia Legislature rescinded that state’s countersignature requirement in response to The Council’s suit.”

The CIAB indicated that the Nevada decision had been appealed. “The Nevada Independent Insurance Agents is supporting the state’s appeal, while the Risk Insurance Management Society is backing The Council’s efforts to throw out the statute,” it said.

The CIAB originally filed its countersignature suit against Puerto Rico Insurance Commissioner Derelisse Juarbe-Jimenez in June of 2004, arguing that the countersignature requirement violated both the privilege and immunities and equal protection clauses of the U.S. Constitution.

Subsequently, the bulletin explained, “Puerto Rico responded by asking the federal court to dismiss the lawsuit in a summary judgment, contending The Council lacked standing to challenge the law. The Council filed a cross-motion also requesting a summary judgment.” Judge Fuste ruled that there was no question that The Council had standing to bring the lawsuit on behalf of its members and their employees, who the judge said have experienced “thousands of dollars in lost revenues” as a result of the countersignature requirements.

He said Puerto Rico’s arguments that the statute was needed to be sure “that the insurer, through its agent, be constantly accessible” to customers on the Island and attend to their needs “are unconvincing.”

“Defendant’s suggestion that the residency requirement is necessary to ensure agent proficiency in Spanish and that this is necessary to protect the insured interests likewise falls flat,” the judge ruled. “Although Spanish is widely spoken on the Island, both Spanish and English are the official languages of Puerto Rico.”

The CIAB’s bulletin stressed that the “judge said he was granting The Council’s request for summary judgment because Puerto Rico’s countersignature requirement clearly violated the Constitution’s privileges and immunities clause. Because of that determination, Judge Fuste said there was no need to consider whether the statute also violated the Constitution’s equal protection clause.”

The Council’s first countersignature victory came in September 2003 when U.S. District Judge Robert L. Hinkle granted a summary judgment striking down Florida’s law. Subsequently, The Council has brought legal action in every state and jurisdiction with the controversial counter-signature requirement on the books; only the South Dakota and the Virgin Islands lawsuits remain undecided.

“These counter-signature laws are egregious and stubborn vestiges of protectionism that have no place in the 21st Century,” stated CIAB President Ken A. Crerar. “Every victory in a case such as this is an important step toward modernizing the insurance regulatory marketplace to meet the challenges of an international economy.”

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