Chapter 48.92 RCW

LIABILITY RISK RETENTION

Sections

48.92.010Purpose.
48.92.020Definitions.
48.92.030Requirements for chartering.
48.92.040Required actsProhibited practices.
48.92.050Insolvency guaranty fund, participation prohibitedJoint underwriting associations, participation required.
48.92.060Countersigning not required.
48.92.070Purchasing groupsExempt from certain laws.
48.92.080Purchasing groupsNotice and registration.
48.92.090Purchasing groupsDealing with foreign insurersDeductible or self-insured retentionAggregate limits.
48.92.095Premium taxesImpositionObligationsMember's liability.
48.92.100Authority of commissioner.
48.92.110Penalties.
48.92.120Soliciting, negotiating, or procuring liability insuranceLicense required.
48.92.130Federal injunctions.
48.92.140Rules.


Purpose.

The purpose of this chapter is to regulate the formation and operation of risk retention groups and purchasing groups in this state formed pursuant to the provisions of the federal Liability Risk Retention Act of 1986.

NOTES:

SeverabilityImplementation1993 c 462: See RCW 48.31B.901 and 48.31B.902.



Definitions.

As used in this chapter, the following terms have the meanings indicated unless the context clearly requires otherwise:
(1) "Commissioner" means the insurance commissioner of Washington state or the commissioner, director, or superintendent of insurance in any other state.
(2) "Completed operations liability" means liability arising out of the installation, maintenance, or repair of any product at a site which is not owned or controlled by:
(a) Any person who performs that work; or
(b) Any person who hires an independent contractor to perform that work; but shall include liability for activities which are completed or abandoned before the date of the occurrence giving rise to the liability.
(3) "Domicile," for purposes of determining the state in which a purchasing group is domiciled, means:
(a) For a corporation, the state in which the purchasing group is incorporated; and
(b) For an unincorporated entity, the state of its principal place of business.
(4) "Hazardous financial condition" means that, based on its present or reasonably anticipated financial condition, a risk retention group, although not yet financially impaired or insolvent, is unlikely to be able:
(a) To meet obligations to policyholders with respect to known claims and reasonably anticipated claims; or
(b) To pay other obligations in the normal course of business.
(5) "Insurance" means primary insurance, excess insurance, reinsurance, surplus lines insurance, and any other arrangement for shifting and distributing risk which is determined to be insurance under the laws of this state.
(6) "Liability" means legal liability for damages including costs of defense, legal costs and fees, and other claims expenses because of injuries to other persons, damage to their property, or other damage or loss to such other persons resulting from or arising out of:
(a) Any business, whether profit or nonprofit, trade, product, services, including professional services, premises, or operations; or
(b) Any activity of any state or local government, or any agency or political subdivision thereof.
"Liability" does not include personal risk liability and an employer's liability with respect to its employees other than legal liability under the federal Employers' Liability Act 45 U.S.C. 51 et seq.
(7) "Personal risk liability" means liability for damages because of injury to any person, damage to property, or other loss or damage resulting from any personal, familial, or household responsibilities or activities, rather than from responsibilities or activities referred to in subsection (6) of this section.
(8) "Plan of operation or a feasibility study" means an analysis which presents the expected activities and results of a risk retention group including, at a minimum:
(a) Information sufficient to verify that its members are engaged in businesses or activities similar or related with respect to the liability to which the members are exposed by virtue of any related, similar, or common business, trade, product, services, premises, or operations;
(b) For each state in which it intends to operate, the coverages, deductibles, coverage limits, rates, and rating classification systems for each line of insurance the group intends to offer;
(c) Historical and expected loss experience of the proposed members and national experience of similar exposures;
(d) Pro forma financial statements and projections;
(e) Appropriate opinions by a qualified, independent, casualty actuary, including a determination of minimum premium or participation levels required to commence operations and to prevent a hazardous financial condition;
(f) Identification of management, underwriting and claims procedures, marketing methods, managerial oversight methods, investment policies, and reinsurance agreements;
(g) Identification of each state in which the risk retention group has obtained, or sought to obtain, a charter and license, and a description of its status in each of those states; and
(h) Such other matters as may be prescribed by the commissioner for liability insurance companies authorized by the insurance laws of the state.
(9) "Product liability" means liability for damages because of any personal injury, death, emotional harm, consequential economic damage, or property damage including damages resulting from the loss of use of property arising out of the manufacture, design, importation, distribution, packaging, labeling, lease, or sale of a product, but does not include the liability of any person for those damages if the product involved was in the possession of such a person when the incident giving rise to the claim occurred.
(10) "Purchasing group" means any group which:
(a) Has as one of its purposes the purchase of liability insurance on a group basis;
(b) Purchases the insurance only for its group members and only to cover their similar or related liability exposure, as described in (c) of this subsection;
(c) Is composed of members whose businesses or activities are similar or related with respect to the liability to which members are exposed by virtue of any related, similar, or common business, trade, product, services, premises, or operations; and
(d) Is domiciled in any state.
(11) "Risk retention group" means any corporation or other limited liability association:
(a) Whose primary activity consists of assuming and spreading all, or any portion, of the liability exposure of its group members;
(b) Which is organized for the primary purpose of conducting the activity described under (a) of this subsection;
(c) Which:
(i) Is chartered and licensed as a liability insurance company and authorized to engage in the business of insurance under the laws of any state; or
(ii) Before January 1, 1985, was chartered or licensed and authorized to engage in the business of insurance under the laws of Bermuda or the Cayman Islands and, before such date, had certified to the insurance commissioner of at least one state that it satisfied the capitalization requirements of such state, except that any such group shall be considered to be a risk retention group only if it has been engaged in business continuously since that date and only for the purpose of continuing to provide insurance to cover product liability or completed operations liability as the terms were defined in the federal Product Liability Risk Retention Act of 1981 before the date of the enactment of the federal Risk Retention Act of 1986;
(d) Which does not exclude any person from membership in the group solely to provide for members of such a group a competitive advantage over such a person;
(e) Which:
(i) Has as its owners only persons who comprise the membership of the risk retention group and who are provided insurance by the risk retention group; or
(ii) Has as its sole owner an organization that has:
(A) As its members only persons who comprise the membership of the risk retention group; and
(B) As its owners only persons who comprise the membership of the risk retention group and who are provided insurance by the group;
(f) Whose members are engaged in businesses or activities similar or related with respect to the liability of which such members are exposed by virtue of any related, similar, or common business trade, product, services, premises, or operations;
(g) Whose activities do not include the provision of insurance other than:
(i) Liability insurance for assuming and spreading all or any portion of the liability of its group members; and
(ii) Reinsurance with respect to the liability of any other risk retention group or any members of such other group which is engaged in businesses or activities so that the group or member meets the requirement described in (f) of this subsection from membership in the risk retention group which provides such reinsurance; and
(h) The name of which includes the phrase "risk retention group."
(12) "State" means any state of the United States or the District of Columbia.

NOTES:

SeverabilityImplementation1993 c 462: See RCW 48.31B.901 and 48.31B.902.



Requirements for chartering.

(1) A risk retention group seeking to be chartered in this state must be chartered and licensed as a liability insurance company authorized by the insurance laws of this state and, except as provided elsewhere in this chapter, must comply with all of the laws, rules, regulations, and requirements applicable to the insurers chartered and licensed in this state and with RCW 48.92.040 to the extent the requirements are not a limitation on laws, rules, regulations, or requirements of this state.
(2) A risk retention group chartered in this state shall file with the department and the National Association of Insurance Commissioners an annual statement in a form prescribed by the National Association of Insurance Commissioners, and in electronic form if required by the commissioner, and completed in accordance with its instructions and the National Association of Insurance Commissioners accounting practices and procedures manual.
(3) Before it may offer insurance in any state, each domestic risk retention group shall also submit for approval to the insurance commissioner of this state a plan of operation or a feasibility study. The risk retention group shall submit an appropriate revision in the event of a subsequent material change in an item of the plan of operation or feasibility study, within ten days of the change. The group may not offer any additional kinds of liability insurance, in this state or in any other state, until a revision of the plan or study is approved by the commissioner.
(4) At the time of filing its application for charter, the risk retention group shall provide to the commissioner in summary form the following information: The identity of the initial members of the group; the identify of those individuals who organized the group or who will provide administrative services or otherwise influence or control the activities of the group; the amount and nature of the initial capitalization; the coverages to be afforded; and the states in which the group intends to operate. Upon receipt of this information, the commissioner shall forward the information to the National Association of Insurance Commissioners. Providing notification to the National Association of Insurance Commissioners is in addition to and is not sufficient to satisfy the requirements of RCW 48.92.040 or this chapter.

NOTES:

SeverabilityImplementation1993 c 462: See RCW 48.31B.901 and 48.31B.902.



Required actsProhibited practices.

Risk retention groups chartered and licensed in states other than this state and seeking to do business as a risk retention group in this state shall comply with the laws of this state as follows:
(1) Before offering insurance in this state, a risk retention group shall submit to the commissioner on a form prescribed by the National Association of Insurance Commissioners:
(a) A statement identifying the state or states in which the risk retention group is chartered and licensed as a liability insurance company, date of chartering, its principal place of business, and any other information including information on its membership, as the commissioner of this state may require to verify that the risk retention group is qualified under RCW 48.92.020(11);
(b) A copy of its plan of operations or a feasibility study and revisions of the plan or study submitted to its state of domicile: PROVIDED, HOWEVER, That the provision relating to the submission of a plan of operation or a feasibility study shall not apply with respect to any line or classification of liability insurance which: (i) Was defined in the federal Product Liability Risk Retention Act of 1981 before October 27, 1986; and (ii) was offered before that date by any risk retention group which had been chartered and operating for not less than three years before that date;
(c) The risk retention group shall submit a copy of any revision to its plan of operation or feasibility study required under RCW 48.92.030(3) at the same time that the revision is submitted to the commissioner of its chartering state; and
(d) A statement of registration which designates the commissioner as its agent for the purpose of receiving service of legal documents or process.
(2) Any risk retention group doing business in this state shall submit to the commissioner:
(a) A copy of the group's financial statement submitted to its state of domicile, which shall be certified by an independent public accountant and contain a statement of opinion on loss and loss adjustment expense reserves made by a member of the American academy of actuaries or a qualified loss reserve specialist under criteria established by the National Association of Insurance Commissioners;
(b) A copy of each examination of the risk retention group as certified by the commissioner or public official conducting the examination;
(c) Upon request by the commissioner, a copy of any information or document pertaining to an outside audit performed with respect to the risk retention group; and
(d) Any information as may be required to verify its continuing qualification as a risk retention group under RCW 48.92.020(11).
(3)(a) A risk retention group is liable for the payment of premium taxes and taxes on premiums of direct business for risks resident or located within this state, and shall report on or before March 1st of each year to the commissioner the direct premiums written for risks resident or located within this state. The risk retention group is subject to taxation, and applicable fines and penalties related thereto, on the same basis as a foreign admitted insurer.
(b) To the extent insurance producers are utilized under RCW 48.92.120 or otherwise, they shall report to the commissioner the premiums for direct business for risks resident or located within this state that the licensees have placed with or on behalf of a risk retention group not chartered in this state.
(c) To the extent insurance producers are used under RCW 48.92.120 or otherwise, an insurance producer shall keep a complete and separate record of all policies procured from each risk retention group. The record is open to examination by the commissioner, as provided in chapter 48.03 RCW. These records must include, for each policy and each kind of insurance provided thereunder, the following:
(i) The limit of liability;
(ii) The time period covered;
(iii) The effective date;
(iv) The name of the risk retention group that issued the policy;
(v) The gross premium charged; and
(vi) The amount of return premiums, if any.
(4) Any risk retention group, its appointed insurance producers and representatives, shall be subject to any and all unfair claims settlement practices statutes and regulations specifically denominated by the commissioner as unfair claims settlement practices regulations.
(5) Any risk retention group, its appointed insurance producers and representatives, shall be subject to the provisions of chapter 48.30 RCW pertaining to deceptive, false, or fraudulent acts or practices. However, if the commissioner seeks an injunction regarding such conduct, the injunction must be obtained from a court of competent jurisdiction.
(6) Any risk retention group must submit to an examination by the commissioner to determine its financial condition if the commissioner of the jurisdiction in which the group is chartered has not initiated an examination or does not initiate an examination within sixty days after a request by the commissioner of this state. The examination shall be coordinated to avoid unjustified repetition and conducted in an expeditious manner and in accordance with the National Association of Insurance Commissioners' examiner handbook.
(7) Every application form for insurance from a risk retention group and every policy issued by a risk retention group shall contain in ten-point type on the front page and the declaration page, the following notice:
NOTICE
This policy is issued by your risk retention group. Your risk retention group may not be subject to all of the insurance laws and regulations of your state. State insurance insolvency guaranty funds are not available for your risk retention group.
(8) The following acts by a risk retention group are hereby prohibited:
(a) The solicitation or sale of insurance by a risk retention group to any person who is not eligible for membership in that group; and
(b) The solicitation or sale of insurance by, or operation of, a risk retention group that is in a hazardous financial condition or is financially impaired.
(9) No risk retention group shall be allowed to do business in this state if an insurance company is directly or indirectly a member or owner of the risk retention group, other than in the case of a risk retention group all of whose members are insurance companies.
(10) The terms of an insurance policy issued by a risk retention group may not provide, or be construed to provide, coverage prohibited generally by statute of this state or declared unlawful by the highest court of this state.
(11) A risk retention group not chartered in this state and doing business in this state shall comply with a lawful order issued in a voluntary dissolution proceeding or in a delinquency proceeding commenced by a state insurance commissioner if there has been a finding of financial impairment after an examination under subsection (6) of this section.

NOTES:

SeverabilityEffective date2008 c 217: See notes following RCW 48.03.020.
SeverabilityImplementation1993 c 462: See RCW 48.31B.901 and 48.31B.902.



Insolvency guaranty fund, participation prohibitedJoint underwriting associations, participation required.

(1) No risk retention group shall be permitted to join or contribute financially to any insurance insolvency guaranty fund, or similar mechanism, in this state, nor shall any risk retention group, or its insureds or claimants against its insureds, receive any benefit from any such fund for claims arising under the insurance policies issued by a risk retention group.
(2) A risk retention group shall participate in this state's joint underwriting associations and mandatory liability pools or plans required by the commissioners.
(3) When a purchasing group obtains insurance covering its members' risks from an insurer not authorized in this state or a risk retention group, no such risks, wherever resident or located, are covered by an insurance guaranty fund or similar mechanism in this state.
(4) When a purchasing group obtains insurance covering its members' risks from an authorized insurer, only risks resident or located in this state are covered by the state guaranty fund established in chapter 48.32 RCW.

NOTES:

SeverabilityImplementation1993 c 462: See RCW 48.31B.901 and 48.31B.902.



Countersigning not required.

A policy of insurance issued to a risk retention group or any member of that group shall not be required to be countersigned.



Purchasing groupsExempt from certain laws.

A purchasing group and its insurer or insurers are subject to all applicable laws of this state, except that a purchasing group and its insurer or insurers are exempt, in regard to liability insurance for the purchasing group, from any law that:
(1) Prohibits the establishment of a purchasing group;
(2) Makes it unlawful for an insurer to provide or offer to provide insurance on a basis providing, to a purchasing group or its members, advantages based on their loss and expense experience not afforded to other persons with respect to rates, policy forms, coverages, or other matters;
(3) Prohibits a purchasing group or its members from purchasing insurance on a group basis described in subsection (2) of this section;
(4) Prohibits a purchasing group from obtaining insurance on a group basis because the group has not been in existence for a minimum period of time or because any member has not belonged to the group for a minimum period of time;
(5) Requires that a purchasing group must have a minimum number of members, common ownership or affiliation, or certain legal form;
(6) Requires that a certain percentage of a purchasing group must obtain insurance on a group basis;
(7) Otherwise discriminates against a purchasing group or any of its members.

NOTES:

SeverabilityImplementation1993 c 462: See RCW 48.31B.901 and 48.31B.902.



Purchasing groupsNotice and registration.

(1) A purchasing group which intends to do business in this state shall furnish, before doing business, notice to the commissioner, on forms prescribed by the National Association of Insurance Commissioners which shall:
(a) Identify the state in which the group is domiciled;
(b) Identify all other states in which the group intends to do business;
(c) Specify the lines and classifications of liability insurance which the purchasing group intends to purchase;
(d) Identify the insurance company or companies from which the group intends to purchase its insurance and the domicile of that company or companies;
(e) Specify the method by which, and the person or persons, if any, through whom insurance will be offered to its members whose risks are resident or located in this state;
(f) Identify the principal place of business of the group; and
(g) Provide any other information as may be required by the commissioner to verify that the purchasing group is qualified under RCW 48.92.020(10).
(2) A purchasing group shall, within ten days, notify the commissioner of any changes in any of the items set forth in subsection (1) of this section.
(3) The purchasing group shall register with and designate the commissioner as its agent solely for the purpose of receiving service of legal documents or process, except that this requirement shall not apply in the case of a purchasing group that only purchases insurance that was authorized under the federal Product Liability Risk Retention Act of 1981 and:
(a) Which in any state of the United States:
(i) Was domiciled before April 1, 1986; and
(ii) Is domiciled on and after October 27, 1986;
(b) Which:
(i) Before October 27, 1986, purchased insurance from an insurance carrier licensed in any state;
(ii) Since October 27, 1986, purchased its insurance from an insurance carrier licensed in any state; or
(c) Which was a purchasing group under the requirements of the federal Product Liability Risk Retention Act of 1981 before October 27, 1986.
(4) A purchasing group that is required to give notice under subsection (1) of this section shall also furnish such information as may be required by the commissioner to:
(a) Verify that the entity qualifies as a purchasing group;
(b) Determine where the purchasing group is located; and
(c) Determine appropriate tax treatment.

NOTES:

SeverabilityImplementation1993 c 462: See RCW 48.31B.901 and 48.31B.902.



Purchasing groupsDealing with foreign insurersDeductible or self-insured retentionAggregate limits.

(1) A purchasing group may not purchase insurance from a risk retention group that is not chartered in a state or from an insurer not admitted in the state in which the purchasing group is located, unless the purchase is effected through a licensed insurance producer acting pursuant to the surplus lines laws and regulations of that state.
(2) A purchasing group that obtains liability insurance from an insurer not admitted in this state or a risk retention group shall inform each of the members of the group that have a risk resident or located in this state that the risk is not protected by an insurance insolvency guaranty fund in this state, and that the risk retention group or insurer may not be subject to all insurance laws and rules of this state.
(3) No purchasing group may purchase insurance providing for a deductible or self-insured retention applicable to the group as a whole; however, coverage may provide for a deductible or self-insured retention applicable to individual members.
(4) Purchases of insurance by purchasing groups are subject to the same standards regarding aggregate limits that are applicable to all purchases of group insurance.

NOTES:

SeverabilityEffective date2008 c 217: See notes following RCW 48.03.020.
SeverabilityImplementation1993 c 462: See RCW 48.31B.901 and 48.31B.902.



Premium taxesImpositionObligationsMember's liability.

Premium taxes and taxes on premiums paid for coverage of risks resident or located in this state by a purchasing group or any members of the purchasing groups must be:
(1) Imposed at the same rate and subject to the same interest, fines, and penalties as those applicable to premium taxes and taxes on premiums paid for similar coverage from authorized insurers, as defined under chapter 48.05 RCW, or unauthorized insurers, as defined and provided for under chapter 48.15 RCW, by other insurers; and
(2) The obligation of the insurer; and if not paid by the insurer, then the obligation of the purchasing group; and if not paid by the purchasing group, then the obligation of the insurance producer for the purchasing group; and if not paid by the insurance producer for the purchasing group, then the obligation of each of the purchasing group's members. The liability of each member of the purchasing group is several, not joint, and is limited to the tax due in relation to the premiums paid by that member.

NOTES:

SeverabilityEffective date2008 c 217: See notes following RCW 48.03.020.
SeverabilityImplementation1993 c 462: See RCW 48.31B.901 and 48.31B.902.



Authority of commissioner.

The commissioner is authorized to make use of any of the powers established under Title 48 RCW to enforce the laws of this state so long as those powers are not specifically preempted by the federal Product Liability Risk Retention Act of 1981, as amended by the federal Risk Retention Amendments of 1986. This includes, but is not limited to, the commissioner's administrative authority to investigate, issue subpoenas, conduct depositions and hearings, issue orders, impose penalties, and seek injunctive relief. With regard to any investigation, administrative proceedings, or litigation, the commissioner can rely on the procedural law and regulations of the state. The injunctive authority of the commissioner in regard to risk retention groups is restricted by the requirement that any injunction be issued by a court of competent jurisdiction.

NOTES:

SeverabilityImplementation1993 c 462: See RCW 48.31B.901 and 48.31B.902.



Penalties.

A risk retention group which violates any provision of this chapter shall be subject to fines and penalties applicable to licensed insurers generally, including revocation of its license and/or the right to do business in this state.



Soliciting, negotiating, or procuring liability insuranceLicense required.

(1) A person may not act or aid in any manner in soliciting, negotiating, or procuring liability insurance in this state from a risk retention group unless the person is licensed as an insurance producer for casualty insurance in accordance with chapter 48.17 RCW and pays the fees designated for the license under RCW 48.14.010.
(2)(a) A person may not act or aid in any manner in soliciting, negotiating, or procuring liability insurance in this state for a purchasing group from an authorized insurer or a risk retention group chartered in a state unless the person is licensed as an insurance producer for casualty insurance in accordance with chapter 48.17 RCW and pays the fees designated for the license under RCW 48.14.010.
(b) A person may not act or aid in any manner in soliciting, negotiating, or procuring liability insurance coverage in this state for a member of a purchasing group under a purchasing group's policy unless the person is licensed as an insurance producer for casualty insurance in accordance with chapter 48.17 RCW and pays the fees designated for the license under RCW 48.14.010.
(c) A person may not act or aid in any manner in soliciting, negotiating, or procuring liability insurance from an insurer not authorized to do business in this state on behalf of a purchasing group located in this state unless the person is licensed as a surplus line broker in accordance with chapter 48.15 RCW and pays the fees designated for the license under RCW 48.14.010.
(3) For purposes of acting as an insurance producer for a risk retention group or purchasing group under subsections (1) and (2) of this section, the requirement of residence in this state does not apply.
(4) Every person licensed under chapters 48.15 and 48.17 RCW, on business placed with risk retention groups or written through a purchasing group, must inform each prospective insured of the provisions of the notice required under RCW 48.92.040(7) in the case of a risk retention group and RCW 48.92.090(2) in the case of a purchasing group.

NOTES:

SeverabilityEffective date2008 c 217: See notes following RCW 48.03.020.
SeverabilityImplementation1993 c 462: See RCW 48.31B.901 and 48.31B.902.



Federal injunctions.

An order issued by any district court of the United States enjoining a risk retention group from soliciting or selling insurance, or operating, in any state or in all states or in any territory or possession of the United States, upon a finding that the group is in a hazardous financial or financially impaired condition, shall be enforceable in the courts of the state.

NOTES:

SeverabilityImplementation1993 c 462: See RCW 48.31B.901 and 48.31B.902.



Rules.

The commissioner may establish and from time to time amend the rules relating to risk retention or purchasing groups as may be necessary or desirable to carry out the provisions of this chapter.

NOTES:

SeverabilityImplementation1993 c 462: See RCW 48.31B.901 and 48.31B.902.