Risk retention legislation breezed through House subcommittee and committee votes and could reach the House floor as early as Monday.
The bill that passed the House Energy and Commerce Committee Thursday would allow businesses to form self-insurance groups to deal with all commercial liability insurance coverage.It is similar to legislation that passed the Senate in July.
The legislation builds on the 1981 Risk Retention Act that allowed the formation of groups for either self-insuring or purchasing group insurance for product liability coverage only.
The pending legislation would expand the scope of risk retention groups to all commercial liability coverage, delineate state oversight powers relating to fraud and insolvency, and require such groups to be domiciled in the United States.
In this troubled time it may be the most and the least we can do, Rep. Norman Lent, R-N.Y., told his colleagues in acknowledging that product liability law reform will not be voted on in the House this year.
He said the bill he developed with Rep. Ron Wyden, D-Ore., would require members of such groups to have both similar interests and similar risks. Nurses and nurse-midwives could band together to self-insure but race car drivers and termite inspectors could not, he explained.
Rep. James Florio, D-N.J., chairman of the subcommittee with jurisdiction over insurance matters, told the full committee that he will try to get the legislation on the House suspension calendar for Monday.
Under that procedure, generally reserved for non-controversial legislation, no amendments would be allowed.
Rep. Wyden characterized the legislation as the one bill that can pass this session to do something about the high cost of insurance, and respond to the avalanche of mail each member of Congress has received on the liability insurance problem.
In subcommittee Thursday, members acted to delete from the bill controversial language supported by Rep. Henry Waxman, D-Cal., to include that state's health care interindemnity associations under the definition of a risk retention group.
Those associations provide medical and dental malpractice coverage, but are not regulated as insurance companies. Rep. Waxman agreed to having his amendment struck from the bill in order not to tie up the Risk Retention Act.
There was concern that no one knew what other organizations would be included under the amendment.
The bill that now goes to the House floor will forbid risk retention groups
from offering reinsurance or providing anything but commercial liability insurance.
The groups will be exempt from state laws requiring licensing in each state. A group would be able to be chartered in one state and operate in all.
But such groups could be required to comply with unfair claims settlement procedures in each state, participate in assigned risk pools and pay premium taxes.
They also could be obliged to submit to financial examination by state insurance commissioners and comply with state laws regarding deceptive or false practices.
States may monitor risk retention groups for fiscal condition and risk retention groups are required to submit annual financial statements to state insurance regulators.
The law makes it clear that the state retains its authority to direct how municipalities manage their liabilities and what are acceptable means of demonstrating fiscal responsibility.
A conference with the Senate will have to follow expected House passage. The bills are similar in intent, but the House version clarifies state authority to act against fraud or false and deceptive acts or on suspicion of a hazardous financial condition.