NU Online News Service, Dec. 22, 10:50 a.m. EST
Four industry associations are speaking up for a risk retention group, requesting that the federal Ninth Circuit Court of Appeals uphold a decision by the Nevada District Court in July 2011 to allow the RRG to continue operating, despite the state's efforts to shut it down.
The National Risk Retention Association, Nevada Captive Insurance Association, Vermont Captive Insurance Association and Captive Insurance Companies Association jointly filed an amicus brief Dec. 14 calling upon the court to find that the federal Liability Risk Retention Act of 1986 (LRRA) preempts a cease and desist order by Nevada's regulatory authority denying the Alliance of Nonprofits for Insurance RRG (ANI) the right to issue first-dollar auto-liability insurance without being licensed in the state.
ANI, which has been issuing commercial auto liability policies to non-profit organizations inNevadasince 2001, is rated "A-Excellent" by A.M. Best.
In September 2010, the Nevada Division of Insurance ordered ANI to stop writing insurance in the state because it was not an "authorized insurer" under state law. The lower court, however, affirmed ANI's right to do business and ordered the state to recognize RRGs as "authorized insurers" under the authority granted by the federal law.
Robert H. Myers Jr., NRRA general counsel who filed the brief on behalf of the four associations, explains to NU Online News Service that for the period of time when the order was in place, nonprofit organizations that are members of ANI RRG—and already buying their auto liability from the RRG—had to buy it elsewhere.
"The damage has been undone," he says, "but if the order is reversed, it goes back to the way it was before."
The amicus brief states, "Since the enactment of the LRRA, a growing number of non-chartering state regulators have attempted to contravene the legislation's plain language and Congressional intent by imposing procedures and requirements beyond their authorized regulatory powers. Such impositions, which violate federal law, have become more egregious and costly to RRGs over time and threaten to undermine the fundamental purpose of the LRRA—to provide affordable, commercial liability insurance to municipalities, schools, professionals, directors and officers and non-profit organizations."
The Vermont Department of Banking, Insurance, Securities and Health Care Administration, the nation's largest captive insurance regulator, also filed a brief asking the Circuit Court to affirm the decision in favor of ANI.
United Educators Insurance concludes in its brief: "For all of the foregoing reasons, we urge this Court to uphold the ruling of the District Court. The issue in this case does not involve some technical qualification relating to the offering of first-dollar automobile insurance inNevada.
"It is whether risk retention groups can operate inNevadaand states with similar laws at all, and more broadly whether a state regulator may thwart the intent of Congress by imposing on non-domiciliary risk retention groups provisions of state law that are clearly preempted by the LRRA."
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