A Florida appeals court may have paved the way for insurance sales by banks in a state notoriously unfriendly to the idea.

The District Court of Appeal for the First District laid the groundwork in an Aug. 23 decision that granted state-chartered banks the right to sell annuities.

Although the decision wasn't a complete victory - the court upheld rules that prevent insurance agents from affiliating with banks - lawyers said it was a positive step, because the Florida court based its decision on a state law that gives state-chartered banks the same rights as national banks.

Most states use the same concept. Legislators, fearful that national banks will compete better than state banks, pass what are called "wild card" statutes. Though each law is different, they all rely on the same idea: Once the courts rule that national banks can sell a product in the state, state regulators cannot block state banks from also doing so.

The Florida court, asserting that the state's wild card statute had been triggered for annuity sales, cited the U.S. Supreme Court's ruling of early this year in Valic. In that case, the justices gave national banks the right to sell annuities.

But the Florida court said the wild card statute had not been activated for insurance sales, because the federal courts have not conclusively given national banks the authority to sell insurance.

That could change if the Supreme Court sides with the industry in one of three pending appeals. Those appeals, which involve Barnett Banks Inc., Owensboro National Bank, and First Advantage, all question whether states can ban insurance sales by national banks.

If the Supreme Court let national banks sell insurance, the Florida court could be expected to grant the same power to state banks. To do otherwise would violate the new precedent.

Unfortunately for bankers, a Supreme Court decision is at least six months away. The justices would first have to accept one of the three cases, as they are widely expected to do in the first week of October. They would then have to give the litigants a chance to file briefs and schedule oral argument. Finally, the justices would have to write an opinion.

In the meantime, Florida banks must live with the insurance section of the state court's ruling. That could be hard, said Tom Cardwell, outside counsel to the Florida Bankers Association.

The Florida court upheld a series of insurance restrictions that the state adopted in 1992. Those rules codified a 1991 law preventing banks from affiliating with insurers. In particular, it prohibits banks from leasing lobby space to insurance agencies or from providing back-office services to agents for a fee.

The rules "were designed and intended to be very restrictive," said Mr. Cardwell, a partner at Akerman, Senterfitt & Eidson in Orlando. "They were designed to cut off any significant relationship between a financial institution and an insurance agency."

The Florida Bankers Association had argued that the insurance commissioner's rules were too restrictive, going well beyond the law.

"The statute should have been interpreted in such as way as to permit banks to contract with agencies as long as the agents themselves are not direct employees of the bank," Mr. Cardwell said.

Instead, the Florida court held that the Legislature delegated to the insurance commissioner the authority to make either a restrictive or an expansive interpretation of the law. As long as the insurance commission wants restrictive rules, it gets to keep them.

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