The National Risk Retention Association has filed an amicus (friend of the court) brief protesting the Nevada Department of Insurance’s efforts stop a risk retention group from issuing automobile liability first dollar coverage.
In July 2010, the DOI issued a case and desist order against the Alliance of Non Profits for Insurance Risk Retention Group (ANI) to stop providing automobile liability coverage for the minimum financial responsibility limits (also known as first dollar auto coverage) required by state law. According to the DOI, ANI could write excess liability coverage, but said only a company with a fronting arrangement with an authorized insurer that holds a Nevada certificate of authority is allowed to provide first dollar or mandated motor vehicle financial responsibility insurance coverage in the state.
First dollar policies require financial responsibility minimums of $15,000 per person, $30,000 per accident for bodily injury, and $10,000 for property damage.
ANI, which is domiciled in Vermont, argued that it had written first dollar auto liability policies from October 2001 to April 2010. Additionally, the RRG had paid Nevada premium taxes annually on auto liability coverage. But as an RRG, it only holds a certificate of registration with the state.
However, Nevada Insurance Commissioner Brett Barratt said his department wasn’t aware ANI was writing first dollar coverage, but discovered it when the state Department of Motor Vehicles switched to a new computer system and asked for a list of authorized insurers. “Foreign RRGs don’t have certificate of authority; they have a certificate of registration, he said. “So we didn’t provide a list of those that have certificates of registration — only certificates of authority.” The Department then asked RRGs like ANI writing first dollar coverage to cease.
One difference between those that have a certificate of authority versus a certificate of registration is an admitted carrier in Nevada that has certificate of authority is a member of the Nevada Insurance Guarantee Association, so if goes insolvent, the state will pay claims. RRGs do not have that financial backing guarantee, Barratt explained.
ANI and the NRRA believe that under the Liability Risk Retention Act of 1986, RRGs are authorized to do business nationally when authorized in a single state, according to Mechlin Moore, communications director for NRRA.
“Some states put up burdensome registration requirements that make it difficult for RRGS to operate, which is in violation of the congressional (LRRA) Act,” Moore said. “The Act doesn’t provide for an enforcement mechanism, so the only recourse for RRGs is to go to federal court to seek an injunction against a state’s action.”
In its amicus brief, NRRA said, “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.”
Yet in its argument, the DOI said while the LRRA “generally preempts states from regulating RRGs in the area of general liability insurance … the LRRA exempts from preemption a state’s authority to regulate RRGs isn the area of a state’s motor vehicle financial responsibility insurance requirements.”
“We disagree with portions of the DOI’s action, and belive its action is contrary and in conflict with federal law,” Moore said. “We don’t think the DOI has a leg to stand on and believe the chance for a favorable ruling is very good. Similar decisions have been upheld in other cases.”
While the DOI issued ANI a cease and desist order, the U.S. District Court stayed the enforcement of the order pending the court’s ruling on the injunction.