Reis v. OOIDA Risk Retention Grp., Inc.

• Decision Date: 07 May 2018
• Docket Number: S18A0505
• Citation: 814 S.E.2d 338
• Parties: REIS et al. v. OOIDA RISK RETENTION GROUP, INC.
• Court: Georgia Supreme Court

303 Ga. 659

814 S.E.2d 338

REIS et al.

v.OOIDA RISK RETENTION GROUP, INC.

S18A0505

Supreme Court of Georgia.

Decided: May 7, 2018

Jason & Bradley, Daniel C. Jason, for appellants.

McMickle, Kurey & Branch, Scott W. McMickle, Zach M. Matthews, for appellees.

Levy & Pruett, Susan J. Levy, H. Lee Pruett, amici curiae.

HINES, Chief Justice.

This is an appeal by plaintiffs Candice Reis and Melvin Williams ("Plaintiffs") from the grant of summary judgment to defendant OOIDA Risk Retention Group, Inc. ("OOIDA") in this direct action against OOIDA and others arising from a vehicular collision involving Plaintiffs and a motor carrier insured by OOIDA. At issue is whether provisions in the federal Liability Risk Retention Act of 1986 ("the LRRA"), 15 USC § 3901 et seq., preempt Georgia’s motor carrier and insurance carrier direct action statutes ("direct action statutes"), OCGA §§ 40-1-112 (c),¹ 40-2-140 (d) (4),² in regard to risk retention groups,³ thereby precluding this direct action against OOIDA. For the reasons that follow, we conclude that there is federal preemption of this action against OOIDA, and consequently, we affirm.⁴

Background

On February 8, 2015, Plaintiffs were in a car when they were involved in a collision with a 2001 Freightliner driven by defendant

Andre Robinson ("Robinson") and owned by defendant James Powell ("Powell"), d/b/a Zion Train Express, Inc. ("Zion Train"), and insured by OOIDA. OOIDA is a liability risk retention group not chartered or domiciled in Georgia and created pursuant to the LRRA. OOIDA is registered in Georgia as a foreign risk retention group.

Plaintiffs filed the present action in superior court against Robinson, Powell, Zion Train, and OOIDA for alleged damages arising from the collision. OOIDA moved for summary judgment asserting that the direct action statutes do not contemplate suits against risk retention groups, and even if they did, they would be preempted by the LRRA. The superior court concluded that there was federal preemption of Georgia’s direct action statutes, and therefore, that OOIDA is not subject to suit under them.

Federal Preemption Doctrine

The Supremacy Clause of the United States Constitution mandates that federal law will preempt a state law that is inconsistent with it. U. S. Const., Art. VI, cl. 2. Such preemption may be either express or implied, and "is ‘compelled whether Congress’[s] command is explicitly stated in the statute’s language or implicitly contained in its structure and purpose.’ " Poloney v. Tambrands , 260 Ga. 850, 850–851 (1), 412 S.E.2d 526 (1991), quoting Fidelity Federal Savings & Loan Association v. de la Cuesta , 458 U.S. 141, 153, 102 S.Ct. 3014, 73 L.Ed.2d 664 (1982) and Jones v. Rath Packing Co. , 430 U.S. 519, 525, 97 S.Ct. 1305, 51 L.Ed.2d 604 (1977). And, "[w]hen a federal statute unambiguously precludes certain types of state [law], we need go no further than the statutory language to determine whether the state [law] is preempted." Poloney v. Tambrands , supra at 851 (1), 412 S.E.2d 526, quoting Exxon Corp. v. Hunt , 475 U. S. 355, 362, 106 S.Ct. 1103, 89 L.Ed.2d 364 (1986). However, when Congress has enacted legislation in an area traditionally regulated by the states, there is an assumption that the states’ powers are not to be superseded by the federal law unless that was Congress’s clear and manifest purpose. Wyeth v. Levine , 555 U.S. 555, 565, 129 S.Ct. 1187, 173 L.Ed.2d 51 (2009). The business of insurance is such an area traditionally regulated by the states. See the McCarran–Ferguson Act , 15 USC § 1011 et seq.⁵ Therefore, a state law enacted for the purpose of regulating insurance would not yield to a conflicting federal law unless the federal law specifically requires it. 15 USC § 1012 ;⁶ United States Dep’t of Treasury v. Fabe , 508 U.S. 491, 507, 113 S.Ct. 2202, 124 L.Ed.2d 449 (1993).

History of the LRRA

The original version of the LRRA was enacted by Congress in 1981 as the "Product Liability Risk Retention Act of 1981" ("PLRRA"), 15 USC §§ 3901 - 3904 (1982), and did not encompass motor vehicle liability insurance but was limited to product liability insurance. Mears Transp. Grp. v. State , 34 F.3d 1013, 1016 (11th Cir. 1994). The PLRRA was expanded by Congress in 1986 resulting in the LRRA in order to encompass all commercial liability insurance. Wadsworth v. Allied Professionals Ins. Co. , 748 F.3d 100, 103 (2d Cir. 2014).

The LRRA’s Statutory Scheme

The structure of the LRRA is ably explained in Wadsworth. Risk retention groups are governed by a tripartite scheme composed of both federal and state regulations:

First, at the federal level, [the LRRA] preempts "any State law, rule, regulation, or order to the extent that such law, rule, regulation or order would ... make unlawful, or regulate, directly or indirectly, the operation of a risk retention group," 15 [USC] § 3902 (a) (1)... The second part of the scheme secures the authority of the domiciliary, or chartering, state to "regulate the formation and operation" of risk retention groups. 15 [USC] § 3902 (a) (1). Federal preemption, therefore, functions not in aid of a comprehensive federal regulatory scheme, but rather to allow a risk retention group to be regulated by the state in which it is

chartered, and to preempt most ordinary forms of regulation by the other states in which it operates. Thus, [the LRRA] provides for broad preemption of a [nondomiciliary] state’s licensing and regulatory laws. Similarly, [the LRRA] prohibits states from enacting regulations of any kind that discriminate against risk retention groups or their members, but does not exempt risk retention groups from laws that are generally applicable to persons or corporations. 15 [USC] § 3902 (a) (4). While [the LRRA] assigns the primary regulatory supervision of risk retention groups to the single state of domicile, the third part of its regulatory structure explicitly preserves for [nondomiciliary] states several very important powers. [It] specifically enumerates those reserved powers in subsequent subsections, with many powers of the nondomiciliary state being concurrent with those of the chartering state. See 15 [USC] §§ 3902 (a) (1) (A)-(I), 3905 (d). In particular, subject to [the LRRA’s] anti-discrimination provisions, nondomiciliary states have the authority to specify acceptable means for risk retention groups to demonstrate "financial responsibility" as a condition for granting a risk retention group a license or permit to undertake specified activities within the state's borders. 15 [USC] § 3905 (d).... In short, as compared to the near plenary authority it reserves to the chartering state, [the LRRA] sharply limits the secondary regulatory authority of nondomiciliary states over risk retention groups to specified, if significant, spheres.

Wadsworth v. Allied Professionals Ins. Co. , supra at 103–104 (citations and punctuation omitted).

Discussion

As noted, 15 USC § 3902 (a) (1) provides, in relevant part, that "a risk retention group is exempt from any State law ... to the extent that such law ... would make unlawful, or regulate, directly or indirectly, the operation of a risk retention group. ..." And, it is undisputed that OOIDA is a risk retention group governed by the LRRA and that it is not chartered or domiciled in Georgia. Therefore, 15 USC § 3902 (a) (1), insofar as it relates to the powers of nondomiciliary states, governs the authority of Georgia to impose regulations on OOIDA's operations in Georgia. In the case at bar, the superior court concluded that the LRRA preempted Georgia’s direct action statutes after finding that the statutes would " ‘regulate, directly or indirectly the operation of the risk retention group as prohibited by 15 [USC] § 3902 (a) (1)."

Plaintiffs urge that the direct action statutes⁷ do not regulate the operation of risk retention groups but rather are "financial responsibility laws," as set forth in 15 USC § 3905,⁸ and therefore, are not preempted by the LRRA. They argue that the direct action statutes qualify as financial responsibility laws because they are in the nature of an indemnity policy benefitting the public, that the purpose of requiring an indemnity insurance policy, formerly a bond, is to evidence the financial responsibility of the motor carrier, and that the Federal Motor Carrier Safety Act designates laws requiring insurance or a bond for motor carriers as financial requirement laws. See 49 CFR § 387.7 (a).⁹ They further cite Mears Transp. Grp. v. State, supra, in support of their argument that the direct action statutes are really financial responsibility laws. But, Plaintiffs’ argument is unavailing. As acknowledged by Plaintiffs, Mears did not involve direct action statutes. Rather, Mears was a challenge by for-profit passenger transportation companies, and the risk retention group from which they purchased insurance, to the validity of a Florida statute¹⁰ which required owners and operators of for-hire transportation vehicles to maintain certain specified insurance coverage, expressly for the purpose of proving financial responsibility. Id. at 1014. The direct action statutes are not financial responsibility laws as they in no manner assure the financial soundness or solvency of a risk retention group. Rather, the direct action statutes provide a vehicle for directly naming a risk retention group as a party in a lawsuit.

In contrast, Wadsworth, like the present case, involved a state direct action statute. In Wadsworth , the plaintiff filed a personal injury action against a chiropractor in New York. Judgment was entered against the chiropractor, which judgment the chiropractor failed to satisfy. The plaintiff then filed a direct action against the chiropractor’s insurer, a risk retention group not domiciled in New York, pursuant to a New York insurance law¹¹ that required insurance policies issued in New York to contain a provision permitting, in specified circumstances, a party with an unsatisfied judgment to...