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A federal appeals court has returned a complex statutory question over the issue of the regulatory approval a Wisconsin risk retention group needs to operate back to a U.S. District Court.
Shareholder-insureds of Burlington, Vermont-based Restoration Risk Retention Group Inc., which are businesses that clean and restore buildings after disasters, had been authorized to do business in the state by registering with the Wisconsin insurance commissioner since 2006, according to Friday’s ruling by the 7th U.S. Circuit Court of Appeals in Chicago in Restoration Risk Retention Group Inc. v. Laura Gutierrez, Secretary, Wisconsin Department of Professional Services et al.
This arrangement worked, according to the ruling, because the state’s trade credentialing unit held that insurers authorized to do business in the state included risk retention groups that registered with the commissioner and that qualified for federal regulation under the Liability Risk Retention Act, according to the ruling.
But in 2015, the trade credentialing unit changed its position and said insurers must have a “certificate of authority” from the insurance commissioner.
Restoration Risk filed litigation in U.S. District Court in Madison, Wisconsin, over the issue of whether risk retention groups must have this certificate. The District Court ruled in the state’s favor, but then Wisconsin amended its statute to say members of the risk retention group had the option of obtaining insurance either, as was required previously, from an insurer authorized to do business in Wisconsin or from “an insurer eligible to provide insurance as a surplus lines insurer in one or more states,” said the ruling.
The state then contended an appeal of the District Court’s ruling was moot, but Restoration Risk disagreed. “According to Restoration Risk, under the federal statutory scheme, it need not prove that it can operate in one or more states as a surplus lines insurer in order to do business in Wisconsin,” said the ruling.
“Restoration Risk appears to be concerned that even under the amended statute, (the trade credentialing unit) might still impose requirements that are pre-empted” by the Liability Risk Retention Act.
A three-judge appeals court panel unanimously said the issue is up to the District Court to decide. “The import of the statutory amendment to this litigation is a matter that ought to be determined in the first instance by the district court,” said the ruling, in vacating the District Court’s ruling and remanding back to the court for further consideration.
Norcal Mutual Insurance Co. on Wednesday said it has completed its acquisition of PPM Services, the holding company for Preferred Physicians Medical Risk Retention Group Inc., following shareholder and regulatory approval.