16 May 2018Analysis

Georgia Court rules in favour of RRG, prevents state circumventing federal regulation

The captive insurance industry has welcomed a recent ruling by The Georgia Supreme Court in favour of a risk retention group (RRG) has prevented the state's insurance authorities from circumventing federal regulations.

The long-awaited decision in Reis et al v. OOIDA, RRG was issued on May 7, has now unanimously ruled that the Liability Risk Retention Act (LRRA) pre-empts state insurance laws that regulate the business of foreign RRGs in that state. The statute in question allows “direct action” litigation against any insurers of motor carriers under Georgia state law.

In this particular case, plaintiffs in a car were involved in a collision with a 2001 freightliner driven by defendant Andre Robinson and owned by defendant James Powell, doing business as Zion Train Express, and insured by OOIDA.

OOIDA is a liability RRG not chartered or domiciled in Georgia and created pursuant to the LRRA. It is registered in Georgia as a foreign RRG. OOIDA moved for summary judgement asserting that the direction action statutes do not contemplate suits against RRGs - and if they did, then they would be pre-empted by the LRRA.

The Georgia Supreme Court concluded that there was federal pre-emption of Georgia's direct action statutes, and the OOIDA is not subject to suit under them.

Chief Justice P Harris Hines summarised that “while this type of regulating [Georgia’s direct action statutes] may be permissible with respect to traditional insurance carriers, it is not allowed in the case of a foreign risk retention group by the express act of Congress in the LRRA."

Anne Marie Towle, JLTIM captive practice leader, commented: “This has been an ongoing debate prompted by some states trying to impose their own insurance regulations on foreign RRGs when the courts have ruled time and again that the LRRA governs them. At JLTIM, we are pleased the Georgia court’s decision reinforced the LRRA, and we applaud the National Risk Retention Association for once again providing important legal and historical input to the court."

This decision was also welcomed by the National Risk Retention Association (NRRA), which says it has been “instrumental” in this decision. NRRA was able to submit its Amicus Curiae (‘friend of the court’) brief on behalf of OOIDA, during a very narrow three-week window between the transfer and the March 5th date for oral argument.

NRRA provided a legal analysis covering the historical key judicial rulings on the many cases in which it assisted in obtaining decisions upholding LRRA pre-emption involving various state insurance laws.  “Imposing Georgia’s Direct Action Statutes on foreign RRGs like OOIDA would improperly regulate their business operations,” it argued, and “the harmful economic impact on OOIDA, as well as on the 109 other foreign RRGs doing business in Georgia, would undermine the intent of the LRRA by threatening the existence of affordable liability insurance coverage.”

Click here to take part in our reader survey and help us keep on improving our website and magazines.