Volume 95 · 949
Public Law 97–45
To facilitate the ability of product sellers to establish product liability risk retention groups, to facilitate the ability of such sellers to purchase product liability insurance on a group basis, and for other purposes.
Approved September 25, 1981
Statutory text
An Act
To facilitate the ability of product sellers to establish product liability risk retention groups, to facilitate the ability of such sellers to purchase product liability insurance on a group basis, and for other purposes.
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
short title
Section 1.
This Act may be cited as the “Product Liability Risk Retention Act of 1981”.
definitions
Sec. 2.
As used in this Act—
“completed operations liability” means liability arising out of the installation, maintenance, or repair of any product at a site which is not owned or controlled by—
any person who performs that work; or
any person who hires an independent contractor to perform that work;
but shall include liability for activities which are completed or abandoned before the date of the occurrence giving rise to the liability;
“insurance” means primary insurance, excess insurance, reinsurance, surplus lines insurance, and any other arrangement for shifting and distributing risk which is determined to be insurance under applicable State or Federal law;
“product liability” means liability for damages because of any personal injury, death, emotional harm, consequential economic damage, or property damage (including damages resulting from the loss of use of property) arising out of the manufacture, design, importation, distribution, packaging, labeling, lease, or sale of a product, but does not include the liability of any person for those damages if the product involved was in the possession of such a person when the incident giving rise to the claim occurred;
“risk retention group” means any corporation or other limited liability association taxable as a corporation, or as an insurance company, formed under the laws of any State, Bermuda, or the Cayman Islands—
whose primary activity consists of assuming and spreading all, or any portion, of the product liability or completed operations liability risk exposure of its group members;
which is organized for the primary purpose of conducting the activity described under subparagraph (A);
which is chartered or licensed as an insurance company and authorized to engage in the business of insurance under the laws of any State, or which is so chartered or licensed and authorized before January 1, 1985, under the laws of Bermuda or the Cayman Islands, except that any group so chartered or licensed and authorized under the laws of Bermuda or the Cayman Islands shall be considered to be a risk retention group only after it has certified to the insurance commissioner of at least one State that it satisfies the capitalization requirements of such State;
which does not exclude any person from membership in the group solely to provide for members of such a group a competitive advantage over such a person; and
which is composed of members each of whose principal activity consists of the manufacture, design, importation, distribution, packaging, labeling, lease, or sale of a product or products;
“purchasing group” means any group of persons which has as one of its purposes the purchase of product liability or completed operations liability insurance on a group basis; and
“State” means any State of the United States or the District of Columbia.
The definition of “product liability” in paragraph (4) of subsection (a) of this section shall not be construed to affect either the tort law or the law governing the interpretation of insurance contracts of any State.
risk retention groups
Sec. 3.
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—
make unlawful, or regulate, directly or indirectly, the operation of a risk retention group except that the jurisdiction in which it is chartered may regulate the formation and operation of such a group and any State may require such a group to—
comply with the unfair claim settlement practices law of the State;
pay, on a nondiscriminatory basis, applicable premium and other taxes which are levied on admitted insurers and surplus lines Insurers, brokers, or policyholders under the laws of the State;
participate, on a nondiscriminatory basis, in any mechanism established or authorized under the law of the State for the equitable apportionment among insurers of product liability or completed operations liability insurance losses and expenses incurred on policies written through such mechanism;
submit to the appropriate authority reports and other information required of licensed insurers under the laws of a State relating solely to product liability or completed operations liability insurance losses and expenses;
register with and designate the State insurance commissioner as its agent solely for the purpose of receiving service of legal documents or process, and, upon request, furnish such commissioner a copy of any financial report submitted by the risk retention group to the commissioner of the chartering or licensing jurisdiction;
submit to an examination by the State insurance commissioner in any State in which the group is doing business to determine the group’s financial condition, if—
the commissioner has reason to believe the risk retention group is in a financially impaired condition; and
the commissioner of the jurisdiction in which the group is chartered has not begun or has refused to initiate an examination of the group; and
comply with a lawful order issued in a delinquency proceeding commenced by the State insurance commissioner if the commissioner of the jurisdiction in which the group is chartered has failed to initiate such a proceeding after notice of a finding of financial impairment under subparagraph (F) of this paragraph;
require or permit a risk retention group to participate in any insurance insolvency guaranty association to which an insurer licensed in the State is required to belong;
require any insurance policy issued to a risk retention group or any member of the group to be countersigned by an insurance agent or broker residing in that State; or
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.
The exemptions specified in subsection (a) apply to—
product liability or completed operations liability insurance coverage provided by a risk retention group for—
such group; or
any person who is a member of such group;
the sale of product liability or completed operations liability insurance coverage for a risk retention group; and
the provision of insurance related services or management services for a risk retention group or any member of such group.
A State may require that a person acting, or offering to act, as an
State license requirement.
agent or broker for a risk retention group obtain a license from that State, except that a State may not impose any qualification or requirement which discriminates against a nonresident agent or broker.
purchasing groups
Sec. 4.
Except as provided in this section, a purchasing group is exempt from any State law, rule, regulation, or order to the extent that such law, rule, regulation, or order would—
prohibit the establishment of a purchasing group;
make it unlawful for an insurer to provide or offer to provide insurance on a basis providing, to a purchasing group or its members, advantages, based on their loss and expense experience, not afforded to other persons with respect to rates, policy forms, coverages, or other matters;
prohibit a purchasing group or its members from purchasing insurance on the group basis described in paragraph (2) of this subsection;
prohibit a purchasing group from obtaining insurance on a group basis because the group has not been in existence for a minimum period of time or because any member has not belonged to the group for a minimum period of time;
require that a purchasing group must have a minimum number of members, common ownership or affiliation, or a certain legal form;
require that a certain percentage of a purchasing group must obtain insurance on a group basis;
require that any insurance policy issued to a purchasing group or any members of the group be countersigned by an insurance agent or broker residing in that State; or
otherwise discriminate against a purchasing group or any of its members.
The exemptions specified in subsection (a) apply to—
product liability or completed operations liability insurance, and comprehensive general liability insurance which includes either of these coverages, provided to—
a purchasing group; or
any person who is a member of a purchasing group; and
the provision of—
product liability or completed operations insurance, and comprehensive general liability coverage;
insurance related services; or
management services;
to a purchasing group or member of the group.
A State may require that a person acting, or offering to act, as an agent or broker for a purchasing group obtain a license from that State, except that a State may not impose any (qualification or requirement which discriminates against a nonresident agent or broker.
applicability of securities laws
Sec. 5.
The ownership interests of members in a risk retention group shall be—
considered to be exempted securities for purposes of section
5 of the Securities Act of 1933 and for purposes of section 12 of the Securities Exchange Act of 1934; and
considered to be securities for purposes of the provisions of
section 17 of the Securities Act of 1933 and the provisions of section 10 of the Securities Exchange Act of 1934.
A risk retention group shall not be considered to be an investment company for purposes of the Investment Company Act of 1940 (15 U.S.C. 80a–1 et seq.).
The ownership interests of members in a risk retention group shall not be considered securities for purposes of any State blue sky law.
Approved September 25, 1981.