WASHINGTON - A Supreme Court ruling yesterday that a key banking law was not repealed in 1918 means that commercial banks will continue to be able to sell insurance in small towns.
The ruling is a victory for the Office of the Comptroller of the Currency and the national banks it regulates, both of which have relled on the law to get banks into the insurance business.
Legal analysts said the court's ruling was important as much for what the justices did not do as for what they did. "It's significant in that if the court had come out the other way, it would have been a bombshell" unsettling an understanding of banking law that goes back more than 70 years, said Geoffrey P. Miller, Kirkland and Ellis professor of law at the University of Chicago.
Edward S. Adams, associate law professor at the University of Minnesota, said that the court's ruling appears to signal that the justices are inclined to "err on the side of what's best for business."
The comptroller's office had no immediate reaction to the ruling, a spokesman said yesterday.
But the court's unanimous decision, delivered by Justice David H. Souter, leaves open the question of whether small-town banks can sell insurance nationally.
That issue will now have to be analyzed by the U.S. Court of Appeals for the District of Columbia Circuit, which earlier had ruled that Section 92 of the National Bank Act had been repealed by Congress.
Section 92 authorizes banks "located and doing business" in towns with populations of 5,000 or less to act as agent for "any fire, life or other insurance company." It was passed by Congress in 1916 as part of amendments to the Federal Reserve Act.
Section 92 appeared in the United States Code - a compilation of federal laws - through 1951. But beginning in 1952, the code omitted Section 92 with a notation indicating that Congress had repealed it in 1918.
Nevertheless, Congress and the comptroller's office have continued to act as though Section 92 remains in force. Congress, for example, amended Section 92 in the Garn-St Germain Act of 1982.
In 1992, the provision's continued viability was called into question when the appeals court for the District of Columbia circuit decided that the placement of quotation marks in the law indicated that Section 92 had been repealed.
The appeals court's ruling came in a case brought by the Independent Insurance Agents of America Inc., which was challenging a decision by the comptroller's office to allow the United States National Bank of Oregon to sell insurance through a subsidiary in Banks, Ore.
The appeals court concluded that quotation marks in the 1916 law had the effect of placing Section 92 within section 5202 of the revised federal statutes, and that a 1918 law subsequently repealed most of section 5202, including the bank insurance provision.
In yesterday's opinion, Justice Souter acknowledged that "a reader following the path of punctuation" of the 1916 law would logically conclude that Section 92 had been placed in section 5202 of the revised statutes. Moreover, he said, "A statute's plain meaning must be enforced, of course, and the meaning of a statute will typically heed the commands of its punctuation."
But Souter, asserting that interpretation of laws "is a holistic endeavor, "said that a comprehensive review of the 1916 and 1918 laws indicated that the disputed punctuation "in the 1916 act was a simple scrivener's error, a mistake made by someone unfamiliar with the law's object and design.
"Courts, we have said, should disregard the punctuation, or repunctuate, if need be, to render the true meaning of the statute," he said. "The true meaning of the 1916 act is clear beyond question, and so we repunctuate. ... Section 92 remains in force."