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| Home > Statutes > Usa-Arizona |
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USA Statutes : arizona
Title : Insurance
Chapter : RISK RETENTION GROUPS
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20-2401 Definitions
In this chapter, unless the context otherwise requires:
1. "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 either:
(a) A person who performs that work.
(b) A person who hires an independent contractor to perform that work. Completed
operations liability includes liability for activities which are completed or abandoned
before the date of the occurrence giving rise to the liability.
2. "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.
(b) For an unincorporated entity, the state of its principal place of business.
3. "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 to either:
(a) Meet obligations to policyholders with respect to known claims and reasonably
anticipated claims.
(b) Pay other obligations in the normal course of business.
4. "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.
5. "Liability":
(a) 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 other persons resulting from or arising out of
either:
(i) A business, whether for profit or nonprofit, trade, product, services,
including professional services, premises or operations.
(ii) An activity of a state or local government, or an agency or political
subdivision of the state.
(b) 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 United States Code section 51).
6. "Personal risk liability" means liability for damages because of injury to a
person, damage to property or other loss or damage resulting from any personal, familial
or household responsibilities or activities other than those listed in paragraph 5.
7. "Plan of operation or feasibility study" means an analysis which presents the
expected activities and results of a risk retention group including at least all of the
following:
(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 the group 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 to the extent that this experience is reasonably
available.
(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 and investment policies.
(g) Other matters as prescribed by the director for liability insurance companies
authorized by the insurance laws of the state in which the risk retention group is
chartered.
8. "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. Product liability does not include the liability of a person for those damages
if the product involved was in the possession of the person when the incident giving rise
to the claim occurred.
9. "Purchasing group" means a group which meets all of the following criteria:
(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 subdivision (c) of this paragraph.
(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.
(d) Is domiciled in any state.
10. "Risk retention group" means a corporation or other limited liability
association formed under the laws of any state which meets all of the following criteria:
(a) Its primary activity consists of assuming and spreading all or any portion of
the liability exposure of its group members.
(b) It is organized for the primary purpose of conducting the activity described in
subdivision (a) of this paragraph.
(c) It is either:
(i) Chartered and licensed as a liability insurance company and authorized to
engage in the business of insurance under the laws of any state.
(ii) It was, before January 1, 1985, chartered or licensed and authorized to engage
in the business of insurance under the laws of Bermuda or the Cayman Islands and, before
January 1, 1985, had certified to the insurance commissioner of at least one state that
it satisfied the capitalization requirements of the state. Any such group is a risk
retention group only if it has been engaged in business continuously since January 1,
1985 and only for the purpose of continuing to provide insurance to cover product
liability or completed operations liability.
(d) It does not exclude any person from membership in the group solely to provide
for members of a group a competitive advantage over the person.
(e) It either:
(i) Has as its owners only persons who comprise the membership of the risk
retention group and who are provided insurance by the group.
(ii) Has as its sole owner an organization which has as its members only persons
who comprise the membership of the risk retention group and has as its owners only
persons who comprise the membership of the risk retention group and who are provided
insurance by the group.
(f) Its members are engaged in businesses or activities similar or related with
respect to the liability which the members are exposed to by virtue of any related,
similar or common business, trade, product, services, premises or operations.
(g) Its 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.
(ii) Reinsurance with respect to the liability of any other risk retention group or
any members of any other group which is engaged in businesses or activities that meet the
requirement described in subdivision (f) of this paragraph from membership in the risk
retention group which provides the reinsurance.
(h) The name of the group includes the phrase "risk retention group".
11. "State" means any state of the United States or the District of Columbia.
20-2402 Risk retention groups chartered and licensed in this state
A. A risk retention group, pursuant to this title, shall be chartered and licensed
to write only liability insurance pursuant to this chapter and, except as provided in
this chapter, must comply with this title with respect to insurers which are chartered
and licensed in this state and with section 20-2403. Before it may offer insurance in
any state, each risk retention group shall also submit for approval to the director a
plan of operation or a feasibility study and revisions of the plan or study if the group
intends to offer any additional lines of liability insurance. The group shall 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 director.
B. Immediately on receipt of an application for a charter, this state shall provide
summary information concerning the filing to the national association of insurance
commissioners, including the name of the risk retention group, the identity of the
initial members of the group, the identity 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 initial capitalization, the coverages
to be afforded and the states in which the group intends to operate.
20-2403 Risk retention groups not chartered and licensed in this state
A. Before offering insurance in this state, a risk retention group shall submit to
the director all of the following:
1. Evidence that the group meets the criteria of a risk retention group.
2. A statement identifying the state or states in which the risk retention group is
chartered and licensed as a liability insurance company, the date of chartering and its
principal place of business.
3. A copy of its plan of operations or a feasibility study and revisions of the
plan or study submitted to its state of domicile.
4. A statement of registration which designates the director as its agent for the
purpose of receiving service of legal documents or process. The director shall determine
the filing fee for the statement of registration.
B. A risk retention group doing business in this state shall submit to the director
all of the following:
1. A copy of the group's financial statement submitted to the state in which the
risk retention group is chartered and licensed, which is certified by an independent
public accountant and contains 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 director.
2. A copy of each examination of the risk retention group as certified by the
director or public official conducting the examination.
3. On request by the director, a copy of any audit performed with respect to the
risk retention group.
4. Information required to verify it continues to meet the criteria as a risk
retention group under section 20-2401, paragraph 10.
C. Each risk retention group is liable for the payment of premium taxes and taxes
on premiums of direct business for risks resident or located in this state and shall
report to the director the net premiums written for risks resident or located in this
state. The risk retention group is subject to taxation and any applicable fines and
penalties related to the taxation on the same basis as a foreign admitted insurer. To
the extent licensed insurance producers are used pursuant to this chapter, they shall
report to the director the premiums for direct business for risks resident or located in
this state which the licensees have placed with or on behalf of a risk retention group
which is not chartered and licensed in this state. To the extent that insurance
producers are used pursuant to this chapter, the insurance producer shall keep a complete
and separate record of all policies procured from each risk retention group. The record
shall be open to examination by the director. These records, for each policy and each
kind of insurance provided under each policy, shall include all of the following:
1. The limit of liability.
2. The time period covered.
3. The effective date.
4. The name of the risk retention group which issued the policy.
5. The gross premium charged.
6. The amount of return premium, if any.
D. A risk retention group and its agents and representatives shall comply with
section 20-461 pertaining to unfair claims settlement practices.
E. A risk retention group shall comply with chapter 2, article 6 of this
title. However, if the director seeks an injunction regarding such conduct, the
injunction shall be obtained from a court of competent jurisdiction.
F. A risk retention group shall submit to an examination by the director to
determine its financial condition if the director of the jurisdiction in which the group
is chartered and licensed has not initiated an examination or does not initiate an
examination within sixty days after a request by the director of this state. Any
examination shall be coordinated to avoid unjustified repetition and conducted in an
expeditious manner and in accordance with rules established by the director.
G. A 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.
H. The following acts by a risk retention group are prohibited:
1. The solicitation or sale of insurance by a risk retention group to a person who
is not eligible for membership in the group.
2. 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.
I. No risk retention group may do business in this state if an insurance company is
directly or indirectly a member or owner of the risk retention group, other than a risk
retention group whose members are insurance companies.
J. A risk retention group which is not chartered and licensed in this state and is
doing business in this state must comply with a lawful order issued in a voluntary
dissolution proceeding or in a delinquency proceeding commenced by a state insurance
director if there has been a finding of financial impairment after an examination under
subsection F of this section.
K. The director, in establishing criteria for loss and loss adjustment reserves
under subsection B, paragraph 1 of this section and in conducting examinations under
subsection F of this section, for purposes of uniformity, shall consider any nationally
adopted criteria or procedure.
L. In addition to complying with the requirements of this section applicable to
risk retention groups doing business in this state, any risk retention group operating in
this state before August 18, 1987 shall comply with subsection A of this section within
thirty days after August 18, 1987.
M. A risk retention group which violates any provision of this chapter is subject
to fines and penalties applicable to licensed insurers generally, including revocation of
its license or the right to do business in this state.
20-2404 Compulsory associations
A. No risk retention group is required or permitted to join or contribute
financially to any insurance insolvency guaranty fund, or similar mechanism, in this
state, and no risk retention group, or its insureds or claimants against its insureds,
may receive any benefit from any fund for claims arising under the insurance policies
issued by the risk retention group.
B. If a purchasing group obtains insurance covering its members' risks from an
insurer that is not authorized in this state or a risk retention group, no risks wherever
resident or located may be covered by any insurance guaranty fund or similar mechanism in
this state.
C. If a purchasing group obtains insurance covering its members' risks from an
authorized insurer, only risks resident or located in this state may be covered by the
state guaranty fund.
D. A risk retention group shall participate in this state's joint underwriting
associations and mandatory liability pools as provided by this title.
20-2405 Countersignatures not required
A policy of insurance issued to a risk retention group or any member of that group
is not required to be countersigned as provided in section 20-229.
20-2406 Purchasing groups; exemption from certain laws relating to the group purchase of insurance
A. A purchasing group which meets the criteria established under the federal
liability risk retention act of 1986 is exempt from any law of this state relating to the
creation of groups for the purchase of insurance, prohibition of group purchasing or any
law that would discriminate against a purchasing group or its members.
B. This state shall not enact any law or the director shall not adopt a rule which
imposes prohibitions or requirements on purchasing groups in violation of section 3(a) of
the liability risk retention act of 1986, Public Law 99-563. A purchasing group is
subject to all applicable laws of this state.
20-2407 Notice and registration requirements of purchasing groups
A. A purchasing group which intends to do business in this state, before doing
business, shall furnish notice to the director which:
1. Identifies the state in which the group is domiciled.
2. Specifies the lines and classifications of liability insurance which the
purchasing group intends to purchase.
3. 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.
4. Identifies the principal place of business of the group.
5. Provides other information as may be required by the director to verify that the
purchasing group meets the criteria under section 20-2401, paragraph 9.
B. The purchasing group shall register with and designate the director as its agent
solely for the purpose of receiving service of legal documents of process. The director
shall determine the filing fee. This requirement does not apply in the case of a
purchasing group:
1. Which in any state both:
(a) Was domiciled before April 1, 1986.
(b) Is domiciled on October 27, 1986 in any state.
2. Which both:
(a) Before October 27, 1986 purchased insurance from an insurance carrier licensed
in any state.
(b) Since October 27, 1986 purchased its insurance from an insurance carrier
licensed in any state.
3. Which was a purchasing group under the requirements of the product liability
risk retention act of 1981 (15 United States Code section 3901) before October 27, 1986.
4. Which does not purchase insurance that was not authorized for purposes of an
exemption under the product liability risk retention act of 1981 (15 United States Code
section 3901), in effect before October 27, 1986.
C. Any purchasing group which was doing business in this state before the effective
date of this chapter, within thirty days after the effective date of this chapter, shall
furnish notice to the director pursuant to subsection A and furnish information required
pursuant to subsection B.
20-2408 Restrictions on insurance purchased by purchasing groups
A. A purchasing group may not purchase insurance from a risk retention group that
is not chartered in a state or from an insurer which is not admitted in the state in
which the purchasing group is located, unless the purchase is effected through a licensed
insurance producer.
B. No purchasing group may offer insurance policy coverage prohibited by this title
or declared unlawful by the supreme court of this state.
C. A purchasing group which obtains liability insurance from an insurer that is not
admitted in this state or a risk retention group shall inform each of the members of the
group which 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 the insurer may not be subject to all insurance laws and rules of this state.
20-2409 Administrative and procedural authority regarding risk retention groups and purchasing groups
The director may make use of any of the powers established under this title to
enforce the laws of this state so long as those powers are not specifically preempted by
the product liability risk retention act of 1981, as amended by the risk retention
amendments of 1986. This includes the director's administrative authority to
investigate, issue subpoenas, conduct depositions and hearings, issue orders and impose
penalties. With regard to any investigation, administrative proceedings or litigation,
the director may rely on the procedural law and rules of this state. The injunctive
authority of the director in regard to risk retention groups is restricted by the
requirement that any injunction be issued by a court of competent jurisdiction.
20-2410 Penalties
A risk retention group which violates any provision of this chapter is subject to
civil penalties set forth in section 20-220 and section 20-456 and to revocation or
suspension of its license and the right to do business in this state.
20-2411 Duty of insurance producer to obtain license
A. No person, firm, association or corporation may act or aid in any manner in
soliciting, negotiating or procuring liability insurance in this state from a risk
retention group unless the person, firm, association or corporation is licensed as an
insurance producer in accordance with this title.
B. No person, firm, association or corporation may act or aid in any manner in
soliciting, negotiating or procuring liability insurance in this state for a purchasing
group or any of its members from an authorized insurer or a risk retention group
chartered in a state unless the person, firm, association or corporation is licensed as
an insurance producer in accordance with this title.
C. No person, firm, association or corporation may act or aid in any manner in
soliciting, negotiating or procuring liability insurance from an insurer that is not
authorized to do business in this state on behalf of a purchasing group which is located
in this state unless the person, firm, association or corporation is licensed as a
surplus lines broker or excess line broker in accordance with this title.
D. For purposes of acting as an insurance producer or surplus lines broker for a
risk retention group or purchasing group pursuant to subsections A, B and C of this
section, the requirement of residence in this state does not apply.
E. Every person, firm, association or corporation that is licensed pursuant to this
title, on business placed with risk retention groups or written through a purchasing
group, shall inform each prospective insured of the provisions of the notice required by
section 20-2403, subsection G in the case of a risk retention group and section 20-2408,
subsection C in the case of a purchasing group.
20-2412 Binding effect of orders issued in United States district court
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 on a
finding that such a group is in a hazardous financial condition is enforceable in the
courts of this state.
20-2413 Rules
The director may adopt rules relating to risk retention groups as may be necessary
or desirable to carry out the provisions of this chapter.
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