Swanco Ins. Company-Arizona v. Hager
| Decision Date | 23 August 1989 |
| Docket Number | A,COMPANY--ARIZON,No. 88-2113,88-2113 |
| Citation | 879 F.2d 353 |
| Parties | SWANCO INSURANCEppellant, v. William D. HAGER, Commissioner of Insurance of the State of Iowa, Appellee. |
| Court | U.S. Court of Appeals — Eighth Circuit |
John C. Schachterle, Des Moines, Iowa, for appellant.
Fred M. Haskins, Des Moines, Iowa, for appellee.
Before BOWMAN and MAGILL, Circuit Judge, and BATTEY, District Judge. *
This appeal involves the Product Liability Risk Retention Act of 1981 as amended by the Liability Risk Retention Act of 1986, 15 U.S.C. Secs. 3901-3906 (1982 & Supp. V 1987) (the Act), which authorizes persons and businesses with similar or related liability exposure to form "purchasing groups" for the purpose of purchasing liability insurance on a group basis and "risk retention groups" for the purpose of self insurance. 15 U.S.C. Sec. 3901(a)(4), (5). Because some states' laws make purchasing groups and risk retention groups illegal, the Act contains express provisions that preempt such laws. This appeal raises the question of whether, consistent with the Act, the State of Iowa may require an insurance company providing coverage to a purchasing group domiciled in another state but having members in Iowa to be licensed in Iowa.
In 1981, Congress enacted the Product Liability Risk Retention Act, Pub.L. No. 97-45, 95 Stat. 949 (1981) (1981 Act). The 1981 Act was Congress's response to the problems businesses had encountered in obtaining product liability coverage. Premiums had increased dramatically, and some businesses reportedly were unable to obtain coverage at any price. The 1981 Act attempted to redress the crisis by allowing businesses to purchase insurance at more favorable rates either by forming self-insurance pools called risk retention groups or by forming purchasing groups, which purchase group insurance from an existing insurer. Congress intended to reduce the cost and increase the availability of product liability insurance and to preempt certain state laws that prohibited or hindered the formation of these groups.
The 1981 Act was amended by the Liability Risk Retention Act of 1986, Pub.L. No. 99-563, 100 Stat. 3177 (1986), to expand the scope of the preemption to enable risk retention and purchasing groups to provide not only product liability insurance but all types of liability insurance. The 1986 Amendments also include provisions dealing with the permissible scope of state regulation of risk retention and purchasing groups.
This case involves the Ugly Duckling Rent-A-Car System, Inc. Risk Purchasing Group, which is domiciled in Arizona, and has members in Iowa. Appellant Swanco Insurance Company (Swanco) is a corporation chartered and licensed in Arizona as a property casualty insurer, with its principal place of business in Tucson. Swanco, which is not licensed under Iowa law to issue insurance in Iowa, insures the Ugly Duckling Purchasing Group.
On July 22, 1987, appellee William D. Hager, Commissioner of Insurance for the State of Iowa, scheduled a hearing to determine whether Swanco was in violation of the Iowa Unauthorized Insurers Act for providing coverage to a purchasing group with members in Iowa. Swanco moved to dismiss the proceeding on the ground that the Act preempts application of the Iowa statute to Swanco, in that the Act required Swanco to be licensed only in the state where the purchasing group is domiciled. After a hearing examiner denied Swanco's motion, Swanco filed a complaint in the District Court seeking declaratory and injunctive relief.
On cross-motions for summary judgment, the magistrate 1 granted summary judgment in favor of the Commissioner on the ground that the Act does not preempt the Commissioner's authority to require an insurer providing coverage to purchasing group members in Iowa to comply with Iowa's licensing laws. 2
Swanco appeals the magistrate's decision, contending that the plain meaning of the term "located" in section 4(f), 3 as well as the legislative history of that section, make it clear that a purchasing group is "located" in only one state, namely the state in which the group is domiciled. Swanco further argues that the Act as so construed preempts Iowa from requiring Swanco to be licensed in Iowa. Although we conclude that Swanco's reading of "located" in section 4(f) is correct, we nevertheless conclude that neither section 4(f) nor any other provision of the Act preempts states from applying licensing requirements that do not directly conflict with the express preemption provisions in section 4(a). Accordingly, we affirm.
We consider first the meaning to be given to the phrase "the State in which the purchasing group is located" in section 4(f) of the Act, the pertinent part of which is set forth in the margin of this opinion at footnote 3.
The Commissioner contends that a purchasing group is "located" wherever the group has members, and therefore section 4(f) requires an insurer providing coverage to a purchasing group to be licensed (or an eligible surplus lines carrier) 4 in each state where the group has members. Swanco contends that section 4(f) requires the insurer to be licensed only in its state of domicile.
Based upon our reading of the Act, we conclude that Swanco's position is correct. We think it is significant that section 4(f) uses the term "the State" in the singular. It does not refer to "the States" or to "every State" in which the purchasing group is located, nor does it refer to "a State," a form which could be construed to mean multiple states. Furthermore, section 4(f) refers only to the location of "the purchasing group," and not the location of its "members." Other sections of the Act refer separately to "the purchasing group," "members of the group," and "its members," see 15 U.S.C. Sec. 3903(a), (b), demonstrating a clearly drawn distinction between the purchasing group and its members. We therefore conclude that "the purchasing group" language of section 4(f) is not to be read as encompassing members of the group.
This conclusion--that section 4(f) refers to a single state--requires us to identify that state or, more precisely, to determine the statutory test for identifying the Basing the state of location on the group's highest premium volume, or where the most members reside, or the state which has the greatest interest in the purchasing group's activities, would be problematic because these factors may not be easily ascertainable and may change over time. That is not to say that Congress could not have decided to base "location" on one of these factors. We do not believe, however, that Congress intended to do so, for it chose to gear other sections of the Act to the purchasing group's domicile. See 15 U.S.C. Sec. 3901(a)(5)(D) (); 15 U.S.C. Sec. 3903(d)(1)(A) (). Further, the Act allows risk retention groups to declare the state in which the group will be chartered. See 15 U.S.C. Sec. 3901(a)(4)(C)(i). Though the statute is not a model of clarity, we conclude that the state of location referred to in section 4(f) is the state in which the purchasing group is domiciled. Since in the present case the purchasing group is domiciled in Arizona, section 4(f) requires the insurer (Swanco) to be admitted only in Arizona, not in all the various states, including Iowa, in which the purchasing group has members. Accordingly, we reject the Commissioner's argument that section 4(f) requires insurers to be licensed in every state in which a group has members.
Our conclusion that section 4(f) requires the insurer to be licensed (or an eligible surplus lines carrier) in only the purchasing group's state of domicile does not end our analysis. The question remains whether Congress intended to exempt insurers of purchasing groups from the licensing and regulatory laws of nondomiciliary states. The Commissioner contends that under the reading of the Act that we have adopted in Part II of this opinion, section 4(f) should be viewed as a minimum federal requirement leaving nondomiciliary states free to enforce their licensing laws and regulations to the extent they are not inconsistent with the Act. Swanco counters that Congress, by enacting section 4(f), has preempted nondomiciliary states from regulating insurers of purchasing groups.
Preemption occurs when Congress, in enacting a statute, expresses a clear and manifest intent to preempt state law, Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S.Ct. 1305, 1309, 51 L.Ed.2d 604 (1977); when there is an outright conflict between the federal law and state law, Free v. Bland, 369 U.S. 663, 666, 82 S.Ct. 1089, 1092, 8 L.Ed.2d 180 (1962); where Congress has legislated comprehensively, thus occupying the field so as to leave no room for the states to supplement federal law, Rice v. Sante Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947); or where state law stands as an obstacle to the execution of the federal law passed by Congress, Chicago & North Western Transportation Co. v. Kalo Brick & Tile Co., 450 U.S. 311, 317, 101 S.Ct. 1124, 1130, 67 L.Ed.2d 258 (1981). We begin our analysis with the well-established presumption against imputing to Congress an intention to preempt an area that traditionally has been left to state regulation. See Wisconsin Educ. Ass'n Ins. Trust v. Iowa State Bd. of Pub. Instruction, 804 F.2d 1059, 1064 (8th Cir.1986) (citing Jones v. Rath Packing Co., 430 U.S. at 525, 97 S.Ct. at 1309). 5
It is undisputed that insurance is an area that traditionally has been left to state regulation. It also is undisputed that Congress intended the Act to preempt certain state laws that...
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