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PIA's Auerbach Says Main Street Agents Being Unfairly Penalized By Mega-Broker Settlement Agreements

Seattle, Wash., July 23, 2007 - Legislation via settlement agreement is a bad way to make public policy, has none of the checks...
July 23, 2007

Tells State Insurance Legislators Their Authority is Being Usurped by Some State Attorneys General

Seattle, Wash., July 23, 2007  - Legislation via settlement agreement is a bad way to make public policy, has none of the checks and balances of legislatures and undermines state sovereignty. That message was delivered during a panel July 21 at the summer meeting of the National Conference of Insurance Legislators (NCOIL) in Seattle by PIA Vice President/Treasurer Kenneth R. Auerbach, Esq.

Auerbach made the remarks during a panel entitled Attorneys General and Insurance Policymaking: Courting State Regulation? Auerbach was the only independent insurance agency principal to participate in the NCOIL panel.

"State Attorneys General are not state legislators, and they need to stop acting as if they were," he added. Auerbach addressed these issues both during the panel and in extended remarks filed with NCOIL in advance of the discussion.

"PIA supports state officials' use of the settlement process to resolve enforcement matters, and appreciates the value gained in extending some settlements into a coordinated multi-states vehicle," Auerbach noted, "However, using the legal settlement process to create new laws or alter current established laws is unwise, unfair, undemocratic and unconstitutional." 

"The ability of agents to earn contingent compensation has come under attack by a handful of overzealous state Attorneys General and insurance commissioners using the multi-state settlement vehicle," said Auerbach. "They are attempting to use settlements with a handful of mega-brokers and carriers to dictate the method of compensation for all independent agents and their carriers nationwide.  Retail independent agencies were not engaged in the kinds of alleged abuses that were investigated, but they're being dragged into the settlement compliance procedures of those who were under investigation for possible wrongdoing."

Auerbach added that as a result of some settlements, agents are in some cases being forced to use disclosure forms or processes that are both factually and legally inaccurate as well as confusing to consumers. These defects in the forms potentially expose agents in noncompliance with existing with state law. "Each state legislature has taken the time to carefully deliberate and enact laws governing insurance transactions," he said. "How can a requirement imposed on all insurance jurisdictions by a legal settlement hope to comport to all these various established procedures? As we are finding out, it cannot."

The broader issue is one that involves the separation of powers. Auerbach addressed these issues during the panel discussion and in extended remarks filed with NCOIL in advance of the discussion. 

Among the points Auerbach raised:

  • The authority to determine insurance statutory law and thus to direct regulatory policy is exclusively within the domain of legislatures. Any changes or additions to current law are important considerations to be made by state legislatures in open meetings, not in settlement negotiations that take place behind closed doors.
  • No state Attorney General has authority to override existing insurance regulations or regulatory determinations of any kind. No individual state DOI or AG has authority to make regulatory determinations on behalf of other states simply by directing that a settlement implement a state order countrywide; or by merely being a participant in settlement discussions in one federal court case involving several states.
  • State Attorneys General have never had, nor should they have, extraterritorial power to enforce their state's laws on other jurisdictions without the full signed, written consent of the other jurisdictions and only if that person has both the scope and authority to do so for their jurisdiction.  AGs do not have public policymaking authority in their own state, much less any other state.  The 10th Amendment to the U.S. Constitution not only guarantees state sovereignty with respect to the federal government, it also provides states with protection from other states' attempts to impose their policies beyond their borders.
  • Using the settlement process to formulate and implement new public policy, as opposed to enforcing already established law, is a dangerous precedent that cannot be allowed to go unchecked.

"Main Street agents are being unfairly penalized as the result of alleged abuses by a few individuals who worked for a few big firms in another sector of our industry," Auerbach said. "Today, it is independent agents who are being unfairly victimized by the attempt to use legal settlements to alter insurance laws. But if this process is allowed to go forward unchecked, then who will be next?"  

Founded in 1931, PIA is a national trade association that represents member insurance agents and their employees who sell and service all kinds of insurance, but specialize in coverage of automobiles, homes and businesses. PIA members are Local Agents Serving Main Street America(SM). PIA's web address is

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