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Member, Beacon International Group, Ltd.
TRENTON, N.J.—Legislation awaiting action by New Jersey Gov. Chris Christie would effectively block taxicab companies operating in the state from using risk retention groups to purchase liability insurance.
The bill, A.B. 1471, which cleared the state Senate last week on a 36-0 vote and was sent to the governor, would require taxi operators to purchase primary coverage from an admitted company that also is a member of the New Jersey Property Liability Insurance Guaranty Assn.
Under the federal law that created RRGs, the special multiple-owner captive insurance companies cannot be members of state guaranty associations, effectively ruling them out as coverage source for New Jersey cab operators.
At least one RRG provides coverage of New Jersey taxi operators, said Gregg Sgambati, president of the New Jersey Captive Insurance Assn. in Mahwah, N.J.
In a letter sent last week to Gov. Christie, Robert H. Myers Jr., general counsel of the Herndon, Va.-based National Risk Retention Assn., wrote that the New Jersey measure “would discriminate against risk retention groups in a manner prohibited by federal law.”
Mr. Myers, who also is a partner with law firm Morris, Manning & Martin L.L.P. in Washington, wrote that “federal law limits nondomiciliary regulation of RRGs to only requiring registration in nondomicile states.” Nondomiciliary states also can seek injunctions to stop RRGs in hazardous financial shape from operating.
More than a decade ago, the 9th U.S. Circuit Court of Appeals ruled that an Oregon law requiring auto dealers to purchase certain coverages from insurers that were members of the state’s guaranty association was pre-empted by the Liability Risk Retention Act.
While federal law gave Oregon the authority to, for example, prevent a financially unsound RRG from writing coverage, “it may not categorically exclude coverage from all RRGs.” the court concluded.