A trade group representing risk retention groups has warned the state of Washington that it is making an improper effort to change federal law and impose its own regulations on RRGs.

That message, delivered by Robert H. Myers Jr., general counsel for the National Risk Retention Association, is the latest in a series of run-ins between states and the RRGs that operate under the federal Liability Risk Retention Act.

Mr. Myers said, however, that the Washington State move is the first of its kind. At issue is Washington's demand that when RRGs holding charters in another state register to do business in Washington, they accept that the rules they operate under in their home charter state may not apply.

Mr. Myers said he had learned Washington has added language to its RRG notification application stating that "as a condition for applying for Washington registration, the applicant understands and accepts that the Office of the Insurance Commissioner and the State of Washington are not legally bound to accept all positions and rulings of the chartering state."

The application, said Mr. Myers, also states: "No risk retention group is registered [in Washington] until it has been notified by this office that it is registered."

This, he said, is an attempt to override the federal Liability Risk Retention Act of 1986, which basically says that "if you file, you're in business"--with no notification required.

Last month, Mr. Myers sent a letter to Marshall McGinnis, manager of company licensing with the State of Washington Office of the Insurance Commissioner, advising that the state's "condition" is "null and void and of no effect."

In the letter, he said the Liability Risk Retention Act of 1986 "clearly establishes that the only requirement for an RRG chartered in a state to do business in another state" is that it must have a "plan of operation or a feasibility study which includes the coverage, deductibles, coverage limits, rates and rating classification systems for each line of insurance the group intends to offer," as well as revisions of such a plan or study if the group intends to offer any additional lines of liability insurance.

His letter cited a previous case ruling he said established "that any supplemental information that RRGs may file, and that a state may ask for in its application, is done on a purely voluntary basis."

Mr. Myers, with the law firm of Morris, Manning & Martin LLP in Washington, D.C., added that other states he has notified typically ask for a fee, or for "more information than they are entitled to. Those states include Louisiana, North Carolina, Oklahoma and Florida."

"This is an elaboration on that theme, but it's a clever one," he said. "Because they are saying they will ask for things they are not entitled to ask for."

Mr. Myers said Washington has yet to respond to his letter.

The consequence to an RRG of not complying with a state application requirement, he said, is that it does not get added to the state department's list of RRGs. "Therefore, an agent looking to place business will go to that list and the group won't be there," he said.

Explaining why he wrote the letter, Mr. Myers said, "I thought it was a clear issue of how they were trying to impose additional duties that are not imposed by the federal law."

Special Reports /

Risk Retention Association Duels With Washington State

Related Stories

Recommended For You