AFS Secured Win for Risk Retention Group: Florida Court Ruling Prevents Non-Charter States From Enforcing Charter State’s Bad Faith Law

The Risk Retention Group had issued commercial general liability insurance to one of its members located in Florida. The insured commenced a lawsuit in Florida state court against the Risk Retention Group, alleging bad faith premised upon Vermont law — where the Risk Retention Group was chartered — rather than Florida law — where the insured was located and the subject insurance policy was issued.

The Risk Retention Group moved to dismiss the second amended complaint, arguing that the federal Liability Risk Retention Act of 1986, 15 U.S.C. §§ 3901, et seq. (LRRA), as well as a Florida statute that mirrors the LRRA and sets forth the bases upon which Florida may regulate risk retention groups, Fla. Stat. § 627.944, both prohibit the insured from seeking to enforce Vermont law against the Risk Retention Group in Florida. On July 16, 2025, the Florida court granted the Risk Retention Group’s motion to dismiss. See Lincoln-Marti Community Agency, Inc. v. Boyd Richards Parker & Colonnelli, P.L., et al., No. 2023-008234-CA-1 (11th Jud. Cir. Ct., Miami-Dade Cty., Fla), Filing #227374499.

As noted by the Second Circuit Court of Appeals over a decade ago, the “federal Liability Risk Retention Act of 1986 … contains sweeping preemption language that sharply limits the authority of states to regulate directly or indirectly, the operation of risk retention groups chartered in another state.” Wadsworth v. Allied Professionals Ins. Co., 748 F.3d 100, 101 (2d Cir. 2014).  Only the state in which a risk retention group is chartered can freely regulate the operation of risk retention groups. Other states in which a risk retention group sells insurance are limited in how they may regulate such companies.

One of the limited exceptions for which a non-chartering state may regulate a risk retention group is to require the insurer to comply “with the unfair claim settlement practices law of the State.” 15 U.S.C. § 3902(a)(1)(A) (emphasis added). Similarly, Fla. Stat. § 627.944 states: “Any risk retention group, its agents, and its representatives shall comply with the unfair claim settlement practices law of this state as set forth in s. 626.9451(1)(i).” [Emphasis added] Nothing in the LRRA or the Florida statute permits the state of Florida, including its courts, from enforcing the laws of any other state against a risk retention group, including the law of the state in which the risk retention group is chartered.

Thus, the Florida court granted the Risk Retention Group’s motion to dismiss the insured’s bad faith claim against it, premised upon Vermont law, without prejudice to file such a claim in Vermont.

The AFS team included Jule Rousseau, James Westerlind, Lee Pepper, and Brianne Megahan. They are available to answer questions you may have.