Login Register Subscribe
Current Issue

Risk Retention Act pre-empts New York insurance law: Appeals court


The Liability Risk Retention Act of 1986 pre-empts a New York law that would require an Arizona-domiciled risk retention group to pay an unsatisfied state court judgment, an appeals court ruled Friday.

The ruling came in a lawsuit brought by Renata Wadsworth, who sought treatment in 2005 from Dr. John Ziegler, an Ithaca, N.Y., chiropractor, according to the 2nd U.S. Circuit Court of Appeals ruling in Renata Wadsworth v. Allied Professionals Insurance Co., a Risk Retention Group Inc.

During four visits, Mr. Ziegler repeatedly touched Ms. Wadsworth in an “inappropriate, sexual manner without her consent,” according to the ruling. She reported his conduct to local authorities, who arrested the chiropractor. Mr. Ziegler later pleaded guilty to third-degree assault.

Ms. Wadsworth subsequently filed a civil suit against the chiropractor seeking damages for emotional injury and lost income stemming from the sexual assault. A state judge entered a $101,175 judgment in her favor, which Mr. Ziegler failed to satisfy.

Ms. Wadsworth then sued Allied Professionals, which is based in Orange, Calif., but domiciled in Arizona. The RRG covers more than 4,000 medical professionals in New York state, including acupuncturists, chiropractors and massage therapists, according to the ruling.

The RRG that insured the chiropractor succeeded in moving the case to federal court in Syracuse, N.Y., which ruled the RRG was not obligated to pay the judgment because the U.S. Liability Risk Retention Act of 1986 pre-empted New York insurance law.

In its unanimous ruling Friday, a three-judge appeals court panel agreed.


Section 3420 of New York's insurance law requires that a bankrupt policyholder's insurer pay damages covered by the policy it issued. However, New York insurance law “clearly distinguishes between the broad regulatory authority it exercises over those risk retention groups that seek to be chartered in New York, and the more limited regulations it is permitted to adopt with respect to nondomicillary risk retention groups,” the appeals court said.

The federal law's language and purpose “clearly announced Congress' explicit intention to pre-empt state laws regulating risk retention groups,” the appeals court ruled.

The federal law gives RRGs “the ability to operate on a nationwide basis, according to the requirements of the law of a single state, without being compelled to tailor their policies to the specific requirements of every state in which they do business,” the appeals court ruled. “Requiring compliance with various state regulations governing the content of insurance policies would, in the aggregate, thwart the efficient interstate operation of risk retention groups.”

A year ago in a separate RRG case, a federal appeals court held that the Risk Retention Act pre-empted Nevada's effort to bar a risk retention group from writing first-dollar automobile liability coverage in the state.