Jess Pinkerton

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Recently, in Barnett Bank of Marion County, N.A. v. Gallagher, the United States Court of Appeals for the Eleventh Circuit was presented with the question of whether Florida's prohibition against affiliations between banks and insurance agents was protected from preemption by the McCarran-Ferguson Act. The appellant, Barnett Marion, is a subsidiary of Barnett Banks, Inc., the largest bank holding company centered in Florida. Barnett Marion maintains its principal place of business in Ocala, Florida; however, it owns and operates a branch in Belleview, Florida, a locality where the population is less than five thousand. On October 18, 1993, Barnett Marion purchased Linda Clifford Insurance, Inc. from Linda K. Clifford in Belleview. That same day, Barnett Marion sought a declaration asking that they be allowed to market insurance to customers throughout the State of Florida from the branch office. Barnett requested the declaration due to two conflicting statutes. Florida maintains a statute which precludes bank subsidiaries from engaging in insurance activities. However, 12 U.S.C. § 92 permits national banks to act as insurance agents in towns having a population of fewer than five thousand people. Barnett contended that the federal statute preempted the state statute, and therefore they should be allowed to act as an insurance agent for any authorized insurance company in Florida. On October 22, 1993, the Florida Department of Insurance issued an Immediate Final Order mandating that Clifford and her agents discontinue all insurance activities other than selling credit disability and credit life insurance. In response, Barnett Marion filed motions seeking either a temporary restraining order or a preliminary injunction. The United States District Court for the Middle District of Florida denied both motions and the case went to trial. The district court looked to the McCarran-Ferguson Act, which was enacted in 1945 to ensure that states, and not the federal government, regulate the insurance industry. The statute creates a reverse preemption doctrine in the insurance arena whereby a state law which regulates the business of insurance is presumed to invalidate a federal law "unless the federal law specifically relates to the business of insurance." The district court held that the Florida anti-affiliate statute is a law regulating the business of insurance and that section 92 is not a law which specifically relates to the business of insurance, and therefore the state statute does not yield to the federal statute. The United States Court of Appeals for the Eleventh Circuit affirmed the district court's decision and declared that the district court had correctly interpreted and applied the conflicting statutes.

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