Council of Insurance Agents & Brokers v. Molasky-Arman
Filed April 10, 2008, Ninth Circuit Court of Appeals,
Cite as 04-17271

Unconstitutionality of Nevada Countersignature Law Affirmed, Case Remanded

The issue stemmed from a complaint filed by Rebecca Restrepo, a licensed nonresident agent who live in California and the Council of Insurance Agents & Brokers, a trade association, against the Nevada Insurance Commissioner, for alleged violation of the privilege and immunities and protection clauses of the Constitution.

The plaintiff asserted that the Nevada Revised Statute, specifically section 680 A 300, was unconstitutional.

Nevada Revised Statute section 680A.300 (the “countersignature statute”) provided that “no authorized insurer may make, write place or renew any insurance policy on persons, property or risks in Nevada ‘except through its duly appointed and licensed agents resident in [Nevada], any one of whom shall countersign the policy.” The statute also required that the countersigning agent be paid a commission of at least 5 percent of any resulting premium.

After hearing, the district court granted summary judgment to the Council and Restrepo and agreed that section 680A.300 violated the privilege, immunities, and equal protection clauses. In ruling, the court enjoined enforcement of section 680A.300 but stayed the injunction pending appeal.

In response, the insurance commissioner (defendant) appealed and argued on the following points:

• that the plaintiffs lacked standing


• that Restrepo’s claims were moot


• that the decision was substantively incorrect

In review, the Ninth Circuit court of appeals affirmed the judgment and remanded. The court agreed with the trial court decision and held that Nevada’s “counter-signature” statute violated the privileges and immunities clause by discriminating against nonresident insurance agents and brokers for no substantial reason beyond non-residency.

In ruling, the court first determined that Restrepo had standing to challenge the constitutionality of section 680A.300 (Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992).

The court reasoned that section 680A.300 precluded Restrepo from doing business on equal terms with resident agents. As a result, she suffered a concrete and actual injury, therefore satisfying standing’s injury in fact requirement.

Concerning the causation and redressability requirements, the court held that a favorable decision invalidating the statute would redress that injury.

Consequently, the court declared that since Restrepo had standing, there was no need to conduct a separate hearing to determine whether the Council had standing. The court stated that in general rule in suits with multiple plaintiffs, if one has standing, the court need not decide the standing of others (Leonard v. Clark, 12 F.3d 885 (9th Cir. 1993).

Further, the court also rejected the Commissioner’s contention that Restrepo’s claims were moot because her employer had acquired a Nevada-based insurance agency, hence providing her with in-house countersignature services.

Section 680A.300 still precluded Restrepo from participating in Nevada’s insurance market on equal terms with resident agents, as she still needed the countersignature of a resident agent regardless of whether that agent was in-house. The section’s effects remained legally significant and Restrepo’s claims were not moot.

Still further, the court explained that the residency classification offends the privileges and immunities clause of Article IV requires a two-step inquiry based on the following reasons:

• the activity in question is “sufficiently basic to the livelihood of the nation” as to fall within the purview of the clause


• the challenged restriction deprives nonresidents of a protected privilege and the court will invalidate the restriction only if is not closely related to the advancement of a substantial state interest.

In denying the Commissioner’s justifications, the appeals court held that the section was over-inclusive, and was related neither to protecting Nevada consumers from unqualified and unlicensed agents, nor to assuring that service would be reputable and qualified.

Finally, the court declared that section 680A.300 had nothing to do with unlicensed persons and there was no indication that the Commissioner could not obtain any information to collect its premium tax from licensed nonresident agents and brokers directly.

The Ninth Circuit court of appeals therefore affirmed a judgment of the district court, which held that Nevada’s “counter-signature” statute violated the privileges and immunities clause of the Constitution.