A March 18 OCC bulletin preempting Massachusetts state law found that provisions in the statute "frustrate the ability of national banks to solicit and cross-market products. (See NU's "Hot News" Web site for a related story.)

The West Virginia suit was filed by the Independent Insurance Agents of America and the National Association of Professional Insurance Agents, both based in Alexandria, Va. (See NU, Nov. 19, 2001.)

The amicus brief, which must be filed by April 3, will address the issue of preemption standards and not specific provisions in the law, according to Nat Shapo, NAIC secretary-treasurer and Illinois insurance commissioner.

The discussion was held during a meeting of the NAIC's Functional Regulation Working Group. Mr. Shapo noted that the differing interpretation is just "a cordial professional disagreement."

Mr. Shapo said that the OCC opinion of federal preemption standards quotes extensively from a U.S. Senate report that misconstrues the Supreme Court Barnett Bank decision.

One of the issues, according to Mr. Shapo, is that the Senate report minimizes the significance of Barnett by implying that it is just another legal case that addresses the issue of preempting state laws that interfere with a national bank's privileges. In fact, according to Mr. Shapo, Barnett is a "seminal case."

The courts have used Barnett as a standard and Congress has used the phrase in the Barnett decision, "prevent or significantly interfere" with a bank's ability to sell insurance when it crafted the Gramm-Leach-Bliley Act of 1999, he added.

The report "twists the common understanding of the codification and legal understanding of the issue," Mr. Shapo said.

In a review of the OCC opinion, Mr. Shapo stated that he believes the OCC's preemption standard is "too low and does not conform with the controlling law."

The letter, he continued, narrowly preserves state laws that have "only a small effect on national banks' exercise of power," and that "broadly preempts state laws that condition or confine the exercise by a national bank of its express or incidental powers."

Mr. Shapo added that the "broadly preemptive" language is inconsistent with the language "significantly interfere" in the Barnett case.

In the analysis, he added that the opinion letter's conclusion that GLB brings in any language in Barnett related to preemption is, in fact, subject to another interpretation: Congress meant only to address the standard of "prevent or significantly interfere."

(Jim Connolly is a senior editor with NU's Life & Health/Financial Services edition.)