In a decision the National Risk Retention Association says will help clear any future hurdles faced by risk retention groups in other states, the Ninth Circuit Court of Appeals affirmed a District Court ruling that the under federal law the State of Nevada cannot deny a risk retention group the right to do business in the state.
NRRA said the Ninth Circuit’s decision is “an unqualified opinion upholding the preemption provisions of the Liability Risk Retention Act of 1986 (LRRA).”
In July 2010, the Alliance of Non-Profits for Insurance Risk Retention Group (ANI) was ordered by Nevada’s insurance commissioner to cease writing auto liability insurance in the state because it was not an admitted insurer. According to the department, 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.
ANI took the state to court, and won a favorable decision in 2011 by the U.S. District Court to permit an RRG to continue operations in Nevada. Judge James Mahan ruled that the federal Liability Risk Retention Act preempts Nevada statutes and regulations prohibiting ANI from issuing first dollar auto liability insurance policies in the state. ANI has been issuing affordable commercial auto liability policies to non-profit organizations in Nevada since 2001.
It was that decision which was affirmed by the Ninth Circuit Court last week.
“They lost on the issue they were trying to contest,” said Robert Myers, with Atlanta, Ga.-based Morris, Manning and Martin LLP, who served as the general counsel to NRRA. “They put up some straw men that said you can’t do this, that and the other thing and the court slapped them down and said that’s just wrong.”
Nevada Insurance Commissioner Scott J. Kipper issued a statement that seems to indicate the matter is won and done.
“We are pleased to finally have resolution in this case,” Kipper said in the statement. “Now we can continue to focus on maintaining Nevada’s reputation as one of the best U.S. domiciles for risk retention groups.”
The matter is unlikely to go to the Supreme Court as there are no differing opinions on the matter offered up by other circuit courts, said Myers, who said ruling will help when the issue comes up in other states by serving as a guideline and a cautionary tale.
It also drives home the notion that “the federal law preempts the state law,” he said.
ANI, which operates in more than 30 states, often serves charities, and provide policies for services that do things like “driving invalids to church,” Myers said, adding, “It’s the wrong kind of plaintiff to pick on.”
However, the three-judge Circuit Court denied award of attorneys’ fees to ANI on grounds that the LRRA’s “preemption provision did not unambiguously confer a right to be free from state law” under the U.S. Constitution.
NRRA is the national trade association that represents the interests of Risk Retention Groups. There are more than 250 RRGs active today writing some $2.5 billion gross premiums.