NRRA Files Amicus Brief in Restoration RRG Appeal

On March 6, 2017, the National Risk Retention Association (NRRA) filed yet another amicus curiae brief in support of Restoration Risk Retention Group, Inc., in its appeal before the 7th circuit court of appeals in Chicago in the case of Restoration Risk Retention Group v. Ross. Restoration is challenging a prior action by the Wisconsin Department of Safety and Professional Services (DSPS) for discrimination against risk retention groups (RRGs). 

Restoration RRG is the insurer of Servpro Franchise Professionals. Servpro provides building remediation services for property losses and has been registered to conduct business in Wisconsin since 2006. However, a 2015 decision by the Trade Credentialing Unit of the Wisconsin DSPS denied a contractor’s license to a Servpro franchisee based upon Wisconsin Statute §101.654(2)(a). The denial can be interpreted as potentially prohibiting all non-Wisconsin-chartered RRGs from insuring dwelling contractors, with implications for other types of businesses as well. This statute had been on the books in Wisconsin for almost 20 years with no prior enforcement activity. 

As argued in its amicus curiae (“friend of the court”) brief, the NRRA commissioned The Risk Retention Reporter (the Reporter) to perform a study to determine whether there is a pattern of systemic discrimination against RRGs in Wisconsin. The study was based on National Association of Insurance Commissioners filings and data compiled by the Reporter. The amicus curiae brief provides empirical evidence that Wisconsin actually is an outlier, with only 58 RRGs registered. This is less than any state except Alaska, which has less than 13 percent of the population of Wisconsin. Wisconsin also has a lower amount of RRG premium per resident than any other state, including Alaska. Statistics also were presented comparing Wisconsin to the other two states in the 7th circuit, as well as surrounding states, to underscore its conclusion that there is an adverse environment for RRGs operating in Wisconsin and that certain sectors, including property development, appear to be particularly impacted by Wisconsin policies.

Restoration RRG claims that Wisconsin Statute §101.654(2)(a), which is designed to preserve “financial responsibility,” is expressly preempted by the Federal Liability Risk Retention Act (LRRA) because it can be used to discriminate against RRGs as a class. In a motion for summary adjudication, the federal district (trial) court ruled that the decision set forth in Ophthalmic Mut. Ins. Co. v. Musser, 143 F.3d 1062 (7th Cir. Wis.1998), had to prevail because it was the “law of the Circuit.” This decision was made despite multiple prior decisions in other circuits concluding otherwise, led by National Warranty Ins. Co. RRG v. Greenfield, 214 F.3d 1073 (9th Cir. Or. 2000), a seminal case on the same discrimination issue in Oregon (9th circuit), but which are not considered “binding” in Wisconsin, as Wisconsin is located in the 7th Circuit. The district court acknowledged that the Ophthalmic decision, however, had not actually adjudicated the “discrimination” issue. Restoration RRG’s exhaustive appellate arguments also challenged Wisconsin DSPS’s interpretation of §101.654(2)(a) on the basis that it is inconsistent with the plain language in the statute itself, which is being used to require contractors to be insured by “licensed and admitted” carriers in Wisconsin. The briefing also delivers an extensive review of the congressional purpose and cases that have, in its view, correctly interpreted the LRRA’s express preemption of discriminatory activity by the states. 

The 19-year old Ophthamlic decision has been specifically criticized by the 9th circuit in Greenfield, as well as in other cases from the 2nd circuit and 4th circuit. Ophthalmic was also based on a now unrelated former Wisconsin statute affecting only “medical professional liability” carriers, which was revised in 2015 by Wisconsin Statute § 655.23(3)(am), expressly permitting RRGs to insure healthcare providers for medical professional liability.

The reporting of this case is being monitored.