United States District Court, District of Columbia
March 24, 1999
INDEPENDENT INSURANCE AGENTS OF AMERICA, INC., NATIONAL ASSOCIATION OF PROFESSIONAL INSURANCE AGENTS, INC., NATIONAL ASSOCIATION OF LIFE UNDERWRITERS, NATIONAL ASSOCIATION OF MUTUAL INSURANCE COMPANIES, CROP INSURANCE RESEARCH BUREAU, PLAINTIFFS
JOHN D. HAWKE, JR., IN HIS CAPACITY AS COMPTROLLER OF THE CURRENCY, AND THE OFFICE OF THE COMPTROLLER OF THE CURRENCY, AN AGENCY OF THE UNITED STATES, DEFENDANTS.
The opinion of the court was delivered by: June L. Green, District Judge.
Before the Court are two dispositive motions: Defendants'
Motion to Dismiss pursuant to Rule 12(b)(6) of the Federal Rules
of Civil Procedure, and Plaintiffs' corresponding Motion for
Summary Judgment pursuant to Rule 56. For the reasons that
follow, the Plaintiffs' motion is granted and the Defendants'
motion is denied.
This case was brought following the issuance of an interpretive
letter by the Office of the Comptroller of the Currency ("OCC")
(Letter of Julie L. Williams, 12/24/97 ("OCC Letter")). The OCC
Letter purported to resolve a question regarding whether, under
the National Bank Act ("NBA"), 12 U.S.C. § 1 et seq.,
National Banks are permitted to sell "crop insurance" to farmers
in connection with farming loans (without regard to the
population size of the locale). The Comptroller, finding that the
sale of such insurance was part of, or incidental to, the
business of banking, concluded that it was within the range of
permissible banking activities covered under 12 U.S.C. § 24
(Seventh). Id. Taking exception with this ruling, the Plaintiffs
filed suit here and these motions followed.
As an initial matter, the Court notes that the two motions
cover the exact legal issues, yet are brought pursuant to two
different Federal Rules of Civil Procedure: Rules 12(b)(6) (Def.
— Motion to Dismiss on the Pleadings) and 56 (P1. —
Motion for Summary Judgment). Insofar as the parties rely on
documentation outside of the Pleadings (and the same result would
be reached under either analysis), the Court finds that the
issues are more appropriately analyzed under the Rule 56
Summary Judgment Standard
A motion for summary judgment is appropriate when "the
pleadings, depositions, answers to interrogatories, and
admissions on file, together with the affidavits, if any, show
that there is no genuine issue as to any material fact and the
moving party is entitled to judgment as a matter of law."
Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett,
477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986), Here, the
essential facts are not in dispute and the Court therefore
focuses its analysis on the correct interpretation of the
relevant statutes and applicable legal principles.
The parties seek a ruling from this Court regarding whether
12 U.S.C. § 24 (Seventh) of the NBA may be interpreted to permit
national banks to sell "crop insurance" to farmers, or whether
such activity is impliedly prohibited by other sections of the
NBA. Essentially, this is an appeal of the Comptroller's
that section 24 allows national banks to engage in such activity.
The "Chevron" Analysis
It is well settled that an interpretive ruling by an agency,
charged with enforcing a law, is to be given controlling weight
if it is reasonable and not "arbitrary, capricious or manifestly
contrary to the statute." Chevron U.S.A., Inc. v. Natural
Resources Defense Council, Inc., 467 U.S. 837, 844, 104 S.Ct.
2778, 81 L.Ed.2d 694 (1984). Such deference is secondary,
however, to the threshold query of whether Congress has spoken
directly to the issue. If "`the intent of Congress is clear,
[t]hat is the end of the matter.'" Nations-Bank of N.C., N.A. v.
Variable Annuity Life Ins. Co., 513 U.S. 251, 115 S.Ct. 810, 130
L.Ed.2d 740 (1995) (quoting Chevron, 467 U.S. at 842, 104 S.Ct.
2778). The deferential portion of the analysis is triggered only
when the statute is "silent or ambiguous with respect to the
specific issue." Chevron at 843, 104 S.Ct. 2778. It is under this
framework that the Court undertakes to reconcile the issues at
The National Banking Act
At issue are two potentially conflicting statutes:
12 U.S.C. § 24 (Seventh) and 12 U.S.C. § 92. The
Plaintiffs argue that the statutes are not ambiguous and the
Comptroller's decision, therefore, is not entitled to deference.
The Court agrees.
Title 12 U.S.C. § 24 (Seventh) of the National Bank Act of
1864 states in relevant part:
[national banks shall have the power] to
exercise . . . all such incidental powers
as shall be necessary to carry on the
business of banking; by discounting
and negotiating promissory notes, drafts,
bills of exchange, and other evidences
of debt; by receiving deposits; by buying
and selling exchange, coin, and bullion;
by loaning money on personal security;
and by obtaining, issuing, and circulating
notes . . .
Although the sale of insurance is not listed in this section,
the Supreme Court has expressly held that the "business of
banking" is not limited to those powers enumerated in section
24 (Seventh) and the Comptroller has discretion to authorize such
additional activities as are reasonable. NationsBank v. Variable
Annuity Life Ins. Co., 513 U.S. 251, 258, n. 2, 115 S.Ct. 810,
130 L.Ed.2d 740 (1995) ("VALIC").
Notwithstanding, the Plaintiffs point to section 92 of the
National Bank Act, which addresses specifically insurance
activities by national banks. That section (enacted in 1916)
In addition to the powers now vested by
law in national banking associations organized
under the laws of the United States, any such
association located and doing business in any
place the population of which does not exceed
five thousand inhabitants . . . may, under
such rules and regulations as may be prescribed
by the Comptroller of the Currency, act as
the agent for any fire, life, or other insurance
company authorized by the authorities of the
State in which said bank is located to do
business in said State, by soliciting and
selling insurance and collecting premiums on
policies issued by such company; . . . .
12 U.S.C. § 92.
The Plaintiffs argue that section 92, by its very terms,
impliedly prohibits the sale of insurance by banks in places with
a population that exceeds 5,000 inhabitants. They cite general
principles of statutory construction as well as the doctrine
expressio unius est exclusio alterius in support.*fn1
Applied here, the expressio unius doctrine raises the following
question: if Congress had intended for 12 U.S.C. § 24 (Seventh) to
permit insurance sales by national banks generally as incident to
banking, why would it have expressly authorized such activity
elsewhere in the NBA under very strict conditions (population
cap). The logical answer, of course, is that Congress sought only
to allow national banks to sell insurance in those smaller
locales. Even without regard to the expressio unius principle,
basic statutory construction requires that statutes be read to
give each provision meaning. See Markham v. Cabell, 326 U.S. 404,
411, 66 S.Ct. 193, 90 L.Ed. 165 (1945) ("[T]he normal assumption
is that where Congress amends only one section of a law, leaving
another untouched, the two were designed to function as parts of
an integrated whole . . . [and each should be given] as full a play
as possible.") What meaning could be attributed to section 92, if
banks merely could point to section 24 (Seventh) and its
incidental activity provisions for authorization to sell
Both the Second and Fifth Circuits have ruled that section 92
impliedly prohibits the sale of insurance by national banks in
areas with populations greater than 5,000, regardless of the
incidental banking provisions of section 24 (Seventh). Saxon v.
Georgia Assoc. of Ind. Ins. Agents Inc., 399 F.2d 1010 (5th Cir.
1968) (prohibiting the sale of such broad forms of insurance as
automobile, home, casualty and liability); American Land Title
Ass'n v. Clarke, 968 F.2d 150 (2nd Cir. 1992) ("ALTA")
(prohibiting the sale of title insurance). In particular, the
Court finds guidance from the exhaustive analysis by the Second
Circuit in ALTA. There, the court not only followed the expressio
unius maxim, but as further support for its decision, determined
that congressional intent (from the legislative history of
section 92) required such a course. Relying on two documents (one
a 1916 letter from then Comptroller John Skelton Williams to the
Senate Banking Committee), the court concluded that "when
Congress enacted section 92, it did so in the belief that under
existing banking law (specifically 12 U.S.C. § 24 (Seventh))
national banks had no authority to engage in insurance agency
activities." ALTA at 156. This conclusion obviated the need for
further analysis under Chevron.
The Court agrees with the approach and the conclusions of the
Second Circuit.*fn2 The legislative history, such as it is,
suggests that section 92's enactment was intended to remedy what
Congress saw to be the limited powers of section 24 (Seventh).
Moreover, if Congress wanted to make the sale of insurance by
national banks universal, it had the opportunity to do so when it
enacted section 92. It did not, choosing instead to cap such
expanded privileges to places with inhabitants of 5,000 or under.
If Congress had believed that national banks could already sell
insurance pursuant to the incidental banking powers of section
24 (Seventh), the enactment of section 92 would have been
"superfluous." ALTA at 155.
Both the history of section 92, as well as basic statutory
interpretation, show that neither section 24 (Seventh) nor
section 92 is ambiguous. As a result, deference need not be given
to the Comptroller's decision and any further analysis under
Chevron is unnecessary. Accordingly, the Court concludes that the
Comptroller cannot authorize the sale of insurance generally
under the incidental banking provisions of section 24 (Seventh)
without regard to the population cap of section 92.
Judicial Exceptions to the NBA
Despite the holdings of the Fifth and Second Circuits, the
Defendants point to the D.C. Circuit and its holding in
Independent Bankers Assoc. of America v. Heimann, 613 F.2d 1164
(D.C.Cir. 1979) to show that the sale of insurance may be
authorized by the Comptroller.*fn3 That ruling, however, appears
limited to a certain type of insurance known as "credit life" and
does not purport to stand for the notion that section
24 (Seventh) can be used to authorize the sale of all insurance by
national banks everywhere. As the Court of Appeals stated:
Unlike other forms of insurance coverage,
however, credit life insurance is a
limited special type of coverage written
to protect loans. In no way does it
involve the operations of a general life
insurance business whether written in a
town of over or under 5,000 inhabitants.
Id. at 437, 613 F.2d 1164.
Insofar as holdings of the D.C. Circuit represent binding
authority on this Court, the question then becomes whether the
"credit life" exception in Heimann applies to these facts.
Further analysis of this exception, therefore, is necessary.
In Heimann, the Court of Appeals defined "credit life
insurance" as insurance that "encompasses health, accident or
life insurance coverage issued as protection for a loan." Id. 613
F.2d at 1168, n. 9; (citing 12 C.F, R. § 2.3(e) (1979)). It
is a "security device to protect the extension of consumer credit
by banks." Heimann at 1168.
The Defendants describe "crop insurance" as "credit-related"
insurance (comparable to the type permitted in Heimann). Mtn. to
Dis. at 9. In support, they state that the contemplated crop
insurance would only be offered to farm borrowers of the national
bank and would facilitate the bank's business by helping to
mitigate agricultural lending risks. Id. They argue that offering
such insurance is a logical outgrowth of the banking relationship
because the lender already has a relationship with the borrower
and, with the insurance, is better able to gauge the borrower's
ability to repay the loan. Id.
These are all sound reasons for why national banks and their
customers would benefit from the additional service of selling
"crop insurance." Even so, the Court cannot find that crop
insurance, as described by Defendants, is analogous to the type
of credit-related insurance the Heimann court excepted.
As Plaintiffs point out, "credit-related" insurance has certain
characteristics that are consistent with its purpose as a
security credit device. See Pl.Sum.J.Mtn. at 20- 21. They argue
not only that such insurance must be issued in connection with a
loan, but that it should be so closely connected that the
coverage should not exceed the amount of the loan, and it should
have the same origination and termination dates. Id. (citing Gary
Fagg, Credit Life and Disability Ins. (CLICO Management 1986)).
Most important, they state that the lender must be the
beneficiary of any such credit-related insurance policy.*fn4 Id.
All of these characteristics appear reasonable to the Court in
light of the overall purpose of credit-related insurance, which
primarily is to safeguard the lender rather than the borrower.
Here, the proposed crop insurance (with the farmer as the
beneficiary) would protect the farmer, not necessarily the
lender, in the event some disaster destroyed or damaged the
farmer's insured crop. With credit life insurance, the bank is
the beneficiary and
thereby is guaranteed repayment if the borrower defaults under
one of the coverage conditions of the policy. This then is the
critical difference between the type of insurance permitted in
Heimann and the type proposed here. As a result, the Court
cannot conclude that crop insurance is so similar to credit life
insurance that it fits within the limited exception stated by the
court in Heimann. If the Court of Appeals wishes to extend the
exception to "crop insurance," it may of course do so. It is
not, however, within this Court's purview to so presume.
For the reasons stated, the Court concludes that the
application of sections 24 (Seventh) and 92 of the NBA are not
ambiguous and, as interpreted, preclude the Comptroller from
authorizing the sale of crop insurance in locations without
regard to population limits. Moreover, there is no applicable
judicial exception that would permit the sale of such insurance.
The Defendants' motion to dismiss, therefore, is denied and the
Plaintiffs' motion for summary judgment is granted. An
appropriate Order accompanies this Memorandum.
Upon consideration of the Plaintiffs' Motion for Summary
Judgment, the Defendants' Motion to Dismiss, the oppositions and
replies thereto and for the reasons stated in the accompanying
Memorandum of law, it is by the Court this 23rd day of March
ORDERED that the Plaintiffs' Motion for Summary Judgment is
GRANTED; it is further
ORDERED that the Defendants' Motion to Dismiss pursuant to
Fed.R.Civ.P. 12(b)(6) is DENIED; and it is further
ORDERED that the Clerk end copies of this Memorandum and Order.