WASHINGTON–A trade organization for risk retention groups has written Kansas insurance regulators telling them they lack the authority to require RRGs based outside Kansas to file anti-fraud plans with Kansas.
Robert Myers Jr., general counsel for the National Risk Retention Association, said the organization's Oct. 11 letter to Kansas officials was written in hopes of avoiding another battlefront in the RRGs' fight to keep states from imposing what they see as burdensome and inappropriate mandates.
Mr. Myers, a partner in the insurance group of Morris, Manning & Martin LLP, said many states have anti-fraud plans, but, generally, they recognize that under federal law RRGs are not subject to the same requirements insurance companies are required to comply with.
Under the format Congress set in 1986 for RRGs, businesses may band together to self-insure for liability.
The letter to Kansas regulators responded to an August memo they sent to RRGs doing business in Kansas but domiciled elsewhere, which demanded the filing of an anti-fraud plan.
Mr. Myers said he sent a letter to Kansas regulators later in August asserting that RRGs domiciled elsewhere are not required to file the anti-fraud plan.
But, in a September letter, Kansas authorities contended to Mr. Myers that the federal Liability Risk Retention Act does not pre-empt the authority of Kansas regulators to have RRGs submit an anti-fraud plan.
They argued in the letter that there are exceptions provided in the federal law, including requiring RRGs to comply with state laws "regarding deceptive, false, or fraudulent acts or practices."
In his latest letter, dated Oct. 11, Mr. Myers said to Kansas regulators, "Not only does Kansas not have the legal authority under the LRRA to require this filing, but the filing could be burdensome to RRGs due to potentially conflicting or duplicative requirements of other states."
Finally, Mr. Myers said, under the LRRA, the state of domicile of the RRG is the only state that has the authority to request such a filing.
"Such domiciliary states would be able to satisfy any reasonable request for an anti-fraud plan in response to a request by Kansas," Mr. Myers said in his letter.
As to concerns that other states might try to imitate Kansas, Mr. Myers said, "We are definitely keeping an eye on this. Numerous RRGs received this letter from Kansas regulators."
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