ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, March 27, 1996 TAG: 9603270058
SECTION: BUSINESS PAGE: B7 EDITION: METRO
DATELINE: WASHINGTON
SOURCE: THE NEW YORK TIMES
National banks won an important Supreme Court victory Tuesday with a unanimous ruling that the banks may sell insurance from branch offices in small towns, despite state laws to the contrary.
The decision, a setback for the insurance industry, was the latest of several Supreme Court rulings to endorse the broad view of national banks' powers held by the office of the comptroller of the currency. In an important decision last year, the court upheld the comptroller's policy of permitting national banks to sell annuities.
The insurance industry is seeking help from Congress in reining in the banks' growing range of consumer financial products.
The direct impact of Tuesday's ruling is to pre-empt, with respect to nationally chartered banks, laws in 15 states that prohibit banks from selling insurance. The states affected include Florida, where the case originated. In nine other states the laws are less clear but could bar banks from selling insurance.
The court's decision, in an opinion by Justice Stephen Breyer, was based on Section 92 of the National Bank Act, which permits national banks located ``any place'' with a population of less than 5,000 to ``act as the agent for any fire, life, or other insurance company.''
The current version of the law dates from 1916, when a large number of small-town bank failures prompted Congress to look for a new source of income for small banks.
Section 92 was of little interest for much of its existence, until the comptroller of the currency gave it a new interpretation in 1986 as authorizing banks to use their small-town branches to sell insurance in a state in which the bank did business.
Since then, about 200 national banks have begun selling insurance; virtually all are likely to do so now, a lawyer for the American Bankers Association, Michael Crotty, said Tuesday.
Although the case concerned only the powers of national banks, its impact will likely be broader, because most states have laws intended to make sure that state-chartered banks are able to exercise the same powers as national banks.
Florida, Connecticut, Kentucky, Louisiana, Maine, Massachusetts, Nevada, New Hampshire, New Jersey, Pennsylvania, Rhode Island, Tennessee, Texas, Vermont and West Virginia have laws prohibiting banks from selling insurance.
Arkansas, Colorado, Georgia, Michigan, Mississippi, Nebraska, New Mexico, New York and Ohio have less explicit laws on their books that might prohibit insurance sales by banks.
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