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

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

In an amicus brief, NRRA sought an injunction against enforcement of an NDI order that would require the Alliance of Non Profits for Insurance Risk Retention Group (ANI-RRG) to obtain a fronting arrangement with an insurance company that holds a Nevada Certificate of Authority in order to do business in the state.

ANI-RRG writes auto liability insurance for non-profit associations.

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

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

NRRA said it supported ANI-RRG in its response to Nevada’s position that the RRG not be allowed to write commercial auto liability coverage in the state.

“Limiting the provision of statutory minimum liability coverage to ‘authorized insurers,’ as defined by the Nevada Insurance Code, categorically excludes all RRGs from providing such coverage. The plain language of the LRRA, the case law interpreting the LRRA, and the LRRA’s legislative history support the conclusion that such discrimination against RRGs is prohibited,” NRRA asserted in the amicus brief.

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

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

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

Under the federal act, “if a state is to challenge an RRG, it cannot do so by way of a state administrative order but must do so by proceeding in a state or federal court,” the brief stated.