Court favors RRG in first-dollar auto coverage dispute with Nevada
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A federal appeals court has upheld a lower court's summary judgment favoring a Vermont-domiciled risk retention group that sued Nevada over regulators' efforts to bar the RRG from writing first-dollar automobile liability coverage in the state.
The Monday ruling by the 9th U.S. Circuit Court of Appeals in San Francisco largely favored the Alliance of Nonprofits for Insurance, Risk Retention Group, finding that U.S. District Court Judge James C. Mahan ruled correctly in 2011 that the federal Liability Risk Retention Act pre-empted Nevada's efforts to limit the RRG's activities. Nevada subsequently appealed that ruling.
In seeking to block the RRG from writing first-dollar auto coverage in the state, Nevada officials had contended that the RRG's members could write the coverage without participating in the state's guaranty fund only if they were self-insureds or if the RRG redomesticated to Nevada.
However, RRGs are prohibited from participating in guaranty funds under the federal Liability Risk Retention Act.
“We agree with the district court that the LRRA pre-empts the commissioner's order,” the three-judge appeals court panel ruled unanimously. “Accordingly, we affirm the district court's grant of summary judgment to ANI on its pre-emption claim.”
However, the appeals court did vacate the district court's award of attorneys fees for the risk retention group.
“To determine whether ANI is entitled to an award of attorneys' fees, we must first determine whether the LRRA's pre-emption provision confers an enforceable right to be free from state law,” the court said in its opinion, later adding, “Fundamentally, Congress enacted the LRRA to increase the supply of commercial liability insurance nationwide — not to confer rights on individual RRGs.”
