Washington - National banks have won what could be the final round in a seven-year legal battle against the insurance industry, securing the right to sell insurance nationwide from small towns.

"This court case may well have the impact of blowing the insurance sales area wide open," said Edward Yingling, executive director of government relations at the American Bankers Association.

The U.S. Court of Appeals for the District of Columbia decided Friday that no law bars the Office of the Comptroller of the Currency from allowing national banks in towns with fewer than 5,000 people to market insurance nationwide.

No High Court Action Seen

The Independent Insurance Agents of America, the industry trade group that sued the comptroller in 1986, is expected to appeal the case to the Supreme Court. But lawyers - who usually shy away from predicting the court's actions - expressed confidence Friday that the high court would refuse the appeal.

Asked if he thought the Supreme Court would take the case, Robert Griffin, the director of litigation for the Comptroller's office, said: "I would be very shocked."

Most lawyers said the Supreme Court would not take the case because the appeals court's decision relied on a widely accepted principal that courts defer to regulators when there is no law on the books for the judges to interpret.

The bank at the center of the case is U.S. National Bank of Oregon, Portland. Jeff Grubb is president of U.S. Bank Insurance Agency, the affiliate that has been selling insurance since 1986 from Banks, Ore., a town of 500 people about 20 miles from Portland.

"It's been a good, profitable business," Mr. Grubb said. "We plan to continue, in fact expand, our marketing of insurance products."

Banks that have been waiting for the legal questions to be settled will get into the business now, industry experts said.

"I don't think too many banks will wait too long; there is no reason to," said David Roderer, a partner with Winston & Strawn , a Washington law firm. "I would not hold back on any business plans."

State Banks Also Win

The decision also is a boon to state banks in 21 states that allow their state banks to exercise the same powers as national banks.

The banking industry's legal quest for insurance powers goes far beyond this case; there are a number of court cases on bank insurance powers going on around the country.

But banking lawyers said Friday that those cases are overshadowed by the Oregon case because it establishes the legal authority of banks to sell insurance from small towns.

"It really eclipses all these other cases on bank insurance powers," said Richard M. Whiting, general counsel at the Association of Reserve City Bankers. "If this case stands, there's statutory authority to sell the product no matter what."

Insurers to Lobby Lawmakers

Paul Equale, senior vice president of government affairs at the Independent Insurance Agents, is not giving up the fight. He said Friday that the agents will ask Congress to clamp down on insurance sales by banks.

He said the agents will lobby lawmakers to pass restrictions on banks allowing them to sell insurance only in their small towns rather than from the small towns to other locations.

"People who know us know we have no qualms about going back to the legislature when necessary," Mr. Equale said. "We have never been known as shrinking violets either in going to Congress or the courts."

|It Is Up to Congress'

Even though the agents lost the case, the court opinion does give them some ammunition.

In a 10-page opinion, Judge James L. Buckley concluded that without any law to rely on, the court had to defer to the Comptroller's office. Mr. Buckley wrote: When "time and technology open up a loophole, it is up to Congress to decide whether it should be plugged, and how."

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