SOURCE: National Risk Retention Association

National Risk Retention Association

February 03, 2011 14:07 ET

NRRA Joins Action to Prevent Nevada Insurance Department From Restricting RRG Operation

WASHINGTON, DC--(Marketwire - February 3, 2011) - The National Risk Retention Association this week requested a federal court order to prevent the Nevada Insurance Department (NDI) from enforcing a cease and desist order that would restrict the right of a Vermont-chartered Risk Retention Group to operate in Nevada under the Liability Risk Retention Act of 1986 (LRRA) that authorized RRGs to do business nationally when authorized in a single state.

In an Amicus Brief, NRRA sought an injunction against enforcement of a Nevada Insurance Department order that would require the Alliance of Non Profits for Insurance Risk Retention Group (ANI-RRG) that writes auto liability insurance for non-profit associations to obtain a fronting arrangement with an insurance company that holds a Nevada Certificate of Authority in order to do business in the State.

"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," NRRA asserted in the Amicus Brief.

The brief was submitted by Robert H. Myers, Jr., NRRA General Counsel. "Under the LRRA, RRGs are regulated by a single chartering or 'domiciliary' state and with certain limited exceptions, are exempt from regulation by other states," Myers wrote. He pointed out that federal courts in other jurisdictions have upheld the right of RRGs to operate in non-domiciliary states under the LRRA and cited an Eleventh Circuit Court of Appeals ruling that, "the authority of a non-domiciliary state to license and regulate risk retention groups is largely preempted."

In its brief, NRRA argued that NDI did not have the authority to issue the cease and desist order against ANI. Under the federal act, "if a state is to challenge an RRG, it cannot do so by way of a state administrative order but must do so by proceeding in a state or federal court," the brief stated.

NRRA is the voice of the Risk Retention Group industry. There are 257 RRGs in operation today that write some $2.7 billion of liability insurance. The Association is calling on Congress to create a federal mechanism to enforce the LRRA in the wake of numerous actions by state authorities that currently require costly, lengthy federal litigation to resolve.

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