Puerto Rico Appeals Window on Countersignature Law Expires

The Commonwealth of Puerto Rico failed to file a timely appeal of a ruling by the U.S. Court of Appeals for the First Circuit, meaning an earlier federal court decision striking down Puerto Rico’s controversial countersignature law as unconstitutional is now final.

The Commonwealth had until June 30 to file an appeal of the three-judge federal panel’s decision, which said the Island’s attempt to keep the controversial law in place was “flimsy.” Failing to appeal means the original decision, issued in March 2005, now is in effect, and non-resident commercial insurance brokers no longer need the countersignature of a Puerto Rico resident agent to write business on the Island.

In addition to requiring the countersignature of a resident insurance agent on all policies, the invalid Puerto Rico countersignature law also had prohibited non-resident licensee solicitation of Puerto Rico-based business and inspection of risks located in the Commonwealth. The ban on business solicitation and inspection of risks meant that licensed non-resident brokers could place business only for non-Puerto Rico-based businesses.

Puerto Rico joins Florida, South Dakota and West Virginia as jurisdictions that no longer require the payment of a fee and countersignature of resident agents for out-of-state insurance brokers. The Council won favorable decisions by federal courts in Florida and South Dakota, and West Virginia’s legislature rescinded the statute rather than defend it in court.

Federal court judges in both Nevada and the Virgin Islands also have ruled in favor of The Council in countersignature challenges in those jurisdictions, but the decisions are not yet final because the appeals process is still under way. The Nevada decision came down in 2004, while the Virgin Islands case was decided on June 23, 2006, in a ruling from the bench by U.S. District Court Judge Curtis Gomez.

“Because of Council action, commercial insurance agents and brokers are now free of most of these unnecessary burdens that drained their bottom lines,” said Council President Ken A. Crerar. “We moved on this front because it significantly impacts the business of our members. Our lawsuits have saved Council members millions of dollars in annual expenses.”

U.S. District Judge José Antonio Fusté originally struck down Puerto Rico’s countersignature statue in March of 2005, but Puerto Rico’s insurance commissioner, Dorelisse Juarbe Jiménez, appealed the judge’s ruling.

In her appeal, Commissioner Jiménez did not seek to defend the law’s constitutionality; rather she sought to throw out the case, arguing The Council did not have standing to file the suit originally, nor had it adequately demonstrated injury to its members. The three-judge federal panel rejected those arguments.

“In the end, this appeal involves the commissioner’s attempt to preserve in place an unconstitutional statutory scheme on the flimsy basis that the wrong plaintiff sued, when in fact, the plaintiff has asserted all of the elements needed for standing, and the Commissioner has never contested the accuracy of these assertions,” the court said.

Source: CIAB