The US Court of Appeals for the Ninth Circuit has affirmed a district court ruling that under federal law Nevada cannot deny a risk retention group (RRG) the right to do business in the state.
Joesph Deems, executive director of the National Risk Retention Association (NRRA), hailed the decision as “a victory for risk retention groups”.
Deems said: “As in other cases where states have attempted to impose requirements on RRGs that violate federal law exempting them from most regulation outside their home state, the Ninth Circuit issued an unqualified opinion upholding the preemption provisions of the Liability Risk Retention Act of 1986 (LRRA).”
In 2010, the Alliance of Non-Profits for Insurance Risk Retention Group (ANI) was ordered by the Nevada commissioner of insurance to cease writing auto liability insurance in the state because it was not an ‘authorised insurer’ under state law.
The issue went to district court, with ANI winning a summary judgment that the LRRA preempts state regulation over RRGs.
On 8 April, the US Court of Appeals affirmed the district court decision.
In their decision, the judges said: “The LRRA broadly preempts ‘any state law, rule, regulation or order to the extent that such law, rule, regulation or order would … make unlawful; or regulate, directly or indirectly the operation of a risk retention group’.”
The court also denied the award of attorneys fees to ANI on the grounds that the LRRA’s “preemption provision did not unambiguously confer a right to be free from state law” under the US constitution.
Deems said: “While NRRA, and no doubt others, are disappointed with the court's decision to deny attorneys’ fees, it is important to note that attorneys’ fees have been granted in the other cases, including Greenfield v National Warranty, an earlier decision by this very court.”
In a statement, Scott Kipper, Nevada’s commissioner of insurance, said: “We are pleased to finally have a resolution in this case. Now we can continue to focus on maintaining Nevada’s reputation as one of the best US domiciles for RRGs.”
Commenting on the decision, Thomas Jones, partner at McDermott Will & Emery, said: "Once again, a federal court of appeals has confirmed that a state regulator's singling out an RRG in a discriminatory manner violates the Federal Liability Risk Retention Act. One can only hope that this is the last of judicial contests of this nature.”
