Nevada’s Countersignature Statute Thrown Out

A federal judge for the District of Nevada ruled Nevada’s statute that precludes out-of-state insurance brokers from conducting business in the state without the countersignature of a resident agent is unconstitutional.

The decision by U.S. District Judge James C. Mahan is the latest in a string of legal victories for The Council of Insurance Agents and Brokers relating to state countersignature laws. In the past year, The Council has succeeded in striking down statutes in three states where it filed federal lawsuits and is awaiting judgments in the remaining three jurisdictions with countersignature laws on the books.

In a ruling from the bench, Judge Mahan agreed with The Council that the Nevada countersignature statute was “not related to competence.” He said the Nevada statute “presumes that someone who is a nonresident is not competent,” which the Judge said was “untrue.”

In addition, Judge Mahan said there was “no rational basis” for the additional requirement in Nevada law that its resident agents receive 5 percent of the commission from the business that is placed as a result of their countersignature.

Judge Mahan’s ruling is not final until he issues a written judgment, which is expected relatively soon, said Scott Sinder, The Council’s general counsel. Once the ruling is filed, the state has 30 days to appeal to the 9th U.S. Circuit Court of Appeals.

The judge in Nevada held that both Rebecca Restrepo, who runs the Sacramento, Calif., office of ABD Insurance & Financial Services, and The Council had standing to bring the case. The Judge said Restrepo was directly injured by the requirement, and The Council has standing because of its role as a representative of insurance brokers.

Both Restrepo and Council President Ken A. Crerar gave depositions in connection with the lawsuit.

The Council represents the nation’s largest commercial insurance brokers who write 80 percent of the commercial property/casualty business and administer billions of dollars of benefits accounts annually.

The Nevada Independent Insurance Agents opposed The Council’s lawsuit and had filed a friend-of-the-court brief and other motions supporting the countersignature requirements and split commissions.

“This is a great victory for Council members who have found these barriers to business both costly and burdensome. Countersignature laws are egregious and stubborn vestiges of protectionism that have no place in the 21st century,” said Crerar.

Last September, in the first ruling on the countersignature lawsuits, U.S. District Judge Robert L. Hinkle ruled that Florida’s countersignature law was unconstitutional and granted a summary judgment in that case. In response to a similar lawsuit filed in West Virginia, the West Virginia legislature earlier this year voted to repeal that state’s countersignature requirements.

“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,” Crerar said.