The US Second Circuit Court of Appeals has ruled that the federal Liability Risk Retention Act (LRRA) categorically preempts a New York State statute that allows a direct action lawsuit against a risk retention group.
“The federal Liability Risk Retention Act of 1986 contains sweeping preemption language that sharply limits the authority of states to regulate, directly or indirectly, the operation of risk retention groups chartered in another state,” Circuit Court judge Gerard Lynch wrote in his opinion upholding the District Court judgment.
Allied Professionals Insurance Company (APIC) attorney, Rick Cigel, said: “It was the position of APIC that under the Liability Risk Retention Act, a state such as New York cannot apply such a statute to a risk retention group that is not domiciled in New York. APIC is domiciled in Arizona but has over 4,000 insureds in New York.”
The National Risk Retention Association (NRRA) had filed an Amicus Brief in support of APIC before the District Court.
Sanford Elsass, Chairman of NRRA, hailed the Circuit Court decision, stating: “This decision is a huge win for the industry. It can be used in other cases involving existing state laws, proposed legislation, and regulatory violations.”
“This ruling is an unqualified affirmation of the preemption provisions of the LRRA that allow risk retention groups to do business nationally with only limited regulation by states other than the state in which they are licensed.”
