Ophthalmic Mut. Ins. Co. v. Musser, 97-1347
| Decision Date | 07 May 1998 |
| Docket Number | No. 97-1347,97-1347 |
| Citation | 143 F.3d 1062 |
| Parties | OPHTHALMIC MUTUAL INSURANCE COMPANY, (a Risk Retention Group), Plaintiff-Appellant, v. Josephine MUSSER, Commissioner of Insurance, State of Wisconsin, and the Wisconsin Patients Compensation Fund, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Brian W. McGrath (argued), Foley & Lardner, Milwaukee, WI, for Plaintiff-Appellant.
Laura Sutherland (argued), Office of the Attorney General, Wisconsin Department of Justice, Madison, WI, for Defendants-Appellees.
Before CUDAHY, COFFEY and EVANS, Circuit Judges.
Plaintiff-appellant Ophthalmic Mutual Insurance Company ("OMIC"), a risk retention group (RRG), brought suit against Josephine Musser, in her capacity as Commissioner of Insurance of the State of Wisconsin, and the Wisconsin Patients Compensation Fund, asking the federal district court to declare that § 655.23, Wis. Stats., was preempted by the federal Liability Risk Retention Act of 1986 ("LRRA"), 15 U.S.C. §§ 3901-3906. The district court granted summary judgment in favor of the defendants. OMIC appeals. We affirm.
The Products Liability Risk Retention Act ("PLRRA") was enacted by Congress in 1981 to encourage the formation of risk retention groups, because of the lack of product liability insurance at affordable rates. National Risk Retention Ass'n v. Brown, 927 F.Supp. 195, 197 (M.D.La.1996), citing Mears Transp. Group v. State, 34 F.3d 1013, 1016 (11th Cir.1994), cert. denied, 514 U.S. 1109, 115 S.Ct. 1960, 131 L.Ed.2d 852 (1995). The PLRRA sought to "reduce the problem of the rising cost of product liability insurance by permitting product manufacturers to purchase insurance on a group basis at more favorable rates or to self-insure through insurance cooperatives called risk retention groups." H.R.Rep. No. 190 at 4 (1981), reprinted in 1981 U.S.C.C.A.N. 1432, 1432. The Act as adopted permitted manufacturers to pool their resources into risk retention groups to provide those members of the group with insurance coverage. The Act preempted certain state laws and regulations that tended to inhibit a nationwide distribution of liability insurance for this type of coverage.
In 1986, Congress enacted the Liability Risk Retention Act ("LRRA") to broaden the PLRRA and allowed professional groups, including health care providers, to form risk retention groups. Under the LRRA, Congress was effectively attempting to preclude most state regulation of risk retention groups. The LRRA provides:
(a) Except as provided in this section, a risk retention group is exempt from any State law, rule, regulation, or order to the extent that such law, rule, regulation, or order would-
(1) make unlawful, or regulate, directly or indirectly, the operation of a risk retention group [excepting regulation by the State in which the risk retention group is chartered and certain limited regulation by non-domiciliary states];
....
(4) otherwise discriminate against a risk retention group or any of its members, except that nothing in this section shall be construed to affect the applicability of State laws generally applicable to persons or corporations.
For a risk retention group to operate under federal law, the law requires that the group must be domiciled in at least one state and be subject to that state's insurance regulatory laws, including adequate rules and regulations allowing for complete financial examination of all books and records, including but not limited to proof of solvency. 15 U.S.C. § 3901(a)(4)(C). Congress placed primary responsibility for regulating the formation and operation of risk retention groups on the state in which the risk retention group is chartered.
While the Act precludes most non-domicile regulation of risk retention groups, it allows for a limited number of exceptions to the preemption rule. See 15 U.S.C. § 3902(a)(1)(A)-(I). Most significantly, the LRRA excepts from preemption state laws that require adequate proof of financial responsibility for licensees. 1
As is the norm among states, Wisconsin requires licensee corporations (including health care providers) to offer proof of financial responsibility in order to do business within the state, with health care providers obligated to maintain their first $400,000 of professional liability insurance coverage with a state-admitted insurer. 2 In 1989, the Wisconsin Legislature amended its "financial responsibility" statute to limit the manner in which health care providers are able to establish proof of financial responsibility. The amended law provides:
Except as provided in par. (d), every health care provider either shall insure and keep insured the health care provider's liability by a policy of health care liability insurance issued by an insurer authorized to do business in this state or shall qualify as a self-insurer.
§ 655.23(3)(a), Wis. Stats. (emphasis added).
In response to the new law, the Wisconsin Office of the Commissioner of Insurance ("OCI"), the agency charged with the responsibility of administering the Wisconsin statutes concerning insurance, contacted all Wisconsin health care providers to inform them that any medical malpractice insurance purchased or renewed after July 1, 1990, must be obtained from an insurer licensed in Wisconsin, if it is to satisfy the "financial responsibility" requirement of § 655.23.
OMIC, the plaintiff-appellant, is a risk retention group chartered and licensed under the laws of the State of Vermont to write liability insurance coverage for ophthalmologists on the national level. Although not licensed to sell insurance in the State of Wisconsin, OMIC, prior to the enactment of the § 655.23 amendment, had provided professional liability insurance to numerous ophthalmologists licensed in Wisconsin. As a result of the amendment and the OCI's letter, all ophthalmologists in Wisconsin who had previously been insured by OMIC canceled their policies, resulting in OMIC bringing this suit to challenge § 655.23.
At the trial level, OMIC alleged that § 655.23(3)(a) is unconstitutional because it imposes impermissible regulations on RRGs in violation of § 3902(a)(1) of the LRRA, and it discriminates against RRGs in violation of § 3902(a)(4) of the LRRA.
The trial judge found that § 655.23 neither impermissibly regulates RRGs nor discriminates against them, but, rather, is a proper exercise of state police powers under the § 3905(d) exception, with its underlying goal to make certain that the Wisconsin policy holders are doing business with a financially responsible insurance company. On appeal, OMIC does not renew its argument that § 655.23 discriminates in violation of § 3902(a)(4); rather, OMIC argues that § 655.23 impermissibly regulates RRGs in violation of § 3902(a)(1), or, alternatively, that § 655.23 does not properly fit within the exception contained in § 3905(d). We agree with the finding of the district court and hold that the LRRA does not preempt § 655.23 because § 655.23 fits within the exception contained in § 3905(d).
1. Whether § 655.23, Wis. Stats., is a valid and proper "financial responsibility" law such that it fits within 15 U.S.C. § 3905(d), which provides that the Risk Retention Act does not preempt a statute from establishing financial responsibility requirements of state licensees, such as health care professionals.
2. Whether § 655.23, Wis. Stats., which requires health care professionals, such as ophthalmologists, to purchase health care malpractice liability insurance only from insurance companies which are licensed by the State of Wisconsin, is preempted by 15 U.S.C. § 3902(a)(1) of the Risk Retention Act.
In this case, the parties have stipulated that there are no material facts and that summary judgment is proper. We review the district court's order granting summary judgment de novo. Thomas v. Ramos, 130 F.3d 754, 759 (7th Cir.1997).
Under its constitutional authority, the federal government is empowered to preempt state or local laws to the extent it believes such action to be necessary. See DeHart v. Town of Austin, Ind., 39 F.3d 718, 721 (7th Cir.1994). This federal action is authorized by the Supremacy Clause of the Constitution, which states that "the Laws of the United States ... shall be the supreme Law of the Land; ... any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." U.S. Const. Art. VI, cl. 2. The phrase "Laws of the United States" of Article VI, Clause 2 includes both federal statutes and federal regulations properly adopted in accordance with statutory authorization. See, e.g., DeHart, 39 F.3d at 721.
A preemption analysis commences with a determination of the Congressional intent in enacting the legislation. Id. at 722. Courts look to the very language used by Congress and assume that the ordinary meaning of the language accurately reflects the legislative purpose. Id. Where Congress' command is explicitly stated in the statute's language or implicitly contained in its structure and purpose, preemption is compelled. See, e.g., Time Warner Cable v. Doyle, 66 F.3d 867, 875 (7th Cir.1995). However, courts do not lightly attribute to Congress or to a federal agency the intent to preempt state or local laws. See DeHart, 39 F.3d at 722. In fact, in fields traditionally occupied by the states, courts start with the presumption that the historic police powers of the states were not to be superseded by federal law unless Congress has enacted legislation enunciating that preemption was the "clear and manifest" purpose of Congress. Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947). Traditional areas occupied by the state include the authority to provide for the public health, safety, and morals. See DeHart, 39 F.3d at 722.
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