Countersignature Law
A state requirement that insurance policies be signed by a resident licensed agent in the state where the risk is located.
What It Is
Countersignature laws require that insurance policies covering risks in a particular state be signed (countersigned) by a licensed resident agent of that state. This requirement dates back to an era when states wanted to ensure local accountability and tax revenue from insurance transactions.
While many states have repealed their countersignature laws, several still maintain them. Brokerages operating across state lines must know which states require countersignatures to avoid compliance issues.
Why It Matters for Brokers
Violating countersignature requirements can void policies and create E&O liability. Agencies placing business in countersignature states must either hold resident licenses or partner with a local countersigning agent. Countersignature arrangements typically involve sharing commission with the resident agent, affecting deal economics.
Real-World Example
A New York broker places a commercial property policy for a risk located in Virginia, which requires countersignature. The broker must arrange for a Virginia-resident licensed agent to countersign the policy, sharing a portion of the commission.
Common Mistakes
- 1Not knowing which states require countersignature before placing business
- 2Failing to arrange countersignature before policy effective date
- 3Not having documented countersignature agreements with partner agents
How brokerageaudit.com Handles This
BrokerageAudit flags countersignature requirements automatically when processing policies for multi-state risks.