WASHINGTON - Banks have made another big stride in their push to sell annuities in Florida.
On Wednesday, a state appeals court ruled that Florida-chartered banks may engage in any activity open to national banks.
The ruling clears the way for Florida-chartered banks to follow in the footsteps of the national banks, including units of Barnett Banks Inc. and First Union Corp., that operate in the state. These banks recently began selling annuities in the wake of a Jan. 18 ruling by the U.S. Supreme Court.
That ruling, popularly known as the Valic decision, authorized national banks to sell annuities, a popular tax-advantaged investment product.
Citing that decision, the District Court of Appeal for the First District determined on Wednesday that it could not block state banks from entering the annuities business, because a Florida "wild card statute" gives state banks powers comparable to those of national banks. A lawyer for the insurance department said it is not likely to appeal the ruling.
"Florida is one more state that is ... recognizing national banks are going to sell annuities and we ought to give our state banks parity," said Robert Taylor, a partner at Day, Berry & Howard, Hartford, Conn.
Although Florida has a long record of opposing bank entry into insurance activities, including annuity sales, it has softened its stance this year.
"But for the Valic decision, Florida would still be circling the wagons," said Virginia Townes, a lawyer with Akerman, Senterfitt & Eidson in Orlando who represents the Florida Bankers Association.
The Valic decision in January coincided with the election of a new insurance commissioner, who has been considerably more willing than his predecessor to let banks into the insurance business.
The new commissioner, C. William Nelson, put the finishing touches on proposed guidelines for bank annuity sales on Tuesday.
Ms. Towne said the Florida Bankers are still studying the proposal, but noted the rules could pose a problem for small banks because they would have to set up a separate corporation for annuity sales.
David J. Busch, a Florida Department of Insurance litigator, said he expects banks will challenge the regulations, and said the legal fight over the rules could last two years.
The case decided Wednesday was filed in 1993 by the former insurance commissioner, Tom Gallagher. It pitted the state insurance department against GNA Corp., a Seattle-based unit of General Electric Co. that specializes in annuity sales through banks.
The state appeals court rejected Mr. Gallagher's argument that Florida law does not permit state-chartered banks to sell annuities.
Separately, Deposit Guaranty National Bank in Jackson sued the Mississippi insurance commissioner on Tuesday, asserting its right to sell annuities.
And the matter of states' authority to control bank insurance activities is far from settled. Two circuit courts of appeal have rendered conflicting opinions this year on whether state insurance commissioners can refuse to license banks as insurance agents.
Melanie Fein, a law partner with Arnold & Porter in Washington, said the Supreme Court will have to step in and decide how much power state insurance regulators have.
"All of this is going to end in the Supreme Court - probably this upcoming term," Ms. Fein said.
