NU Online News Service, Feb. 4, 9:12 a.m.EST

The National Risk Retention Association this week requested afederal court order to prevent the Nevada Division of Insurance(NDI) from enforcing a cease-and-desist order preventing aVermont-chartered risk retention group from operating in thestate.

In an amicus brief, NRRA sought an injunction againstenforcement of an NDI order that would require the Alliance of NonProfits for Insurance Risk Retention Group (ANI-RRG) to obtain afronting arrangement with an insurance company that holds a NevadaCertificate of Authority in order to do business in the state.

ANI-RRG writes auto liability insurance for non-profitassociations.

The NRRA contended that ANI-RRG should be allowed to conductbusiness in Nevada under the Liability Risk Retention Act of 1986(LRRA), which authorized risk retention groups (RRGs) to dobusiness nationally when authorized in a single state.

In August 2010, NRRA said it sent a letter to Nevada officialsrequesting that the state stop discriminating against RRGs.

NRRA said it supported ANI-RRG in its response to Nevada'sposition that the RRG not be allowed to write commercial autoliability coverage in the state.

“Limiting the provision of statutory minimum liability coverageto ‘authorized insurers,’ as defined by the Nevada Insurance Code,categorically excludes all RRGs from providing such coverage. Theplain language of the LRRA, the case law interpreting the LRRA, andthe LRRA's legislative history support the conclusion that suchdiscrimination against RRGs is prohibited,” NRRA asserted in theamicus brief.

The brief was submitted by Robert H. Myers, Jr., NRRA generalcounsel. “Under the LRRA, RRGs are regulated by a single charteringor ‘domiciliary’ state and with certain limited exceptions, areexempt from regulation by other states,” Mr. Myers wrote.

He pointed out that federal courts in other jurisdictions haveupheld the right of RRGs to operate in non-domiciliary states underthe LRRA, and cited an Eleventh Circuit Court of Appeals rulingthat “the authority of a non-domiciliary state to license andregulate risk retention groups is largely preempted.”

In its brief, NRRA argued that the NDI did not have theauthority to issue the cease-and-desist order against ANI-RRG.

Under the federal act, “if a state is to challenge an RRG, itcannot do so by way of a state administrative order but must do soby proceeding in a state or federal court,” the brief stated.