Wadsworth v. Allied Professionals Insurance
748 F.3d 100
2d Cir.2014Background
- Wadsworth sued APIC under NY Ins. Law § 3420 to collect a state court judgment against Ziegler’s insured.
- APIC is a New York-registered, Arizona-domiciled risk retention group with NY insureds.
- District court granted summary judgment for APIC, holding LRRA preempts NY § 3420(a)(2) for foreign RRGs.
- Wadsworth appealed de novo; LRRA preempts non-domiciliary state actions that regulate RRGs.
- New York’s § 3420(a)(2) requires a direct action against an insurer after judgment remains unsatisfied; applicability to a foreign RRG is at issue.
- Court analyzes LRRA structure: domicile state regulation, nondomiciliary limits, and broad preemption of non-chartering state regulation of RRGs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does LRRA preempt NY § 3420(a)(2) for foreign RRGs? | Wadsworth argues NY § 3420 operates against non-domiciliary RRGs and is not preempted. | APIC contends LRRA preempts any nondomiciliary regulation that would affect RRG operation. | Yes, LRRA preempts § 3420(a)(2) as applied to foreign RRGs. |
| Is LRRA’s preemption language broad enough to invalidate § 3420(a)(2) for nondomiciliary groups? | LRRA’s scope should be limited to discriminatory or directly controlling regulations. | LRRA’s text preempts any law that would regulate the operation of an RRG by nondomiciliary states. | Broad preemption applies; § 3420(a)(2) is preempted. |
| Would applying § 3420(a)(2) to foreign RRGs disrupt interstate operation of RRGs? | Applying § 3420 would impose NY-specific policy content on non-chartering groups. | LRRA aims to avoid multi-state policy tailoring by single-state regulation. | Application would undermine nationwide operation; preemption justified. |
| Do NY § 5904 controls and NY’s domestic/non-domestic structure affect preemption outcome? | Section 5904 lists laws for nondomestic RRGs, potentially excluding § 3420. | LRRA governs nondomiciliary regulation; § 3420 falls outside permitted controls. | Preemption remains; NY § 3420 not permitted for nondomiciliary groups. |
Key Cases Cited
- Preferred Physicians Mut. Risk Retention Grp. v. Pataki, 85 F.3d 913 (2d Cir. 1996) (LRRA breadth and purpose to facilitate inter-state RRG operation)
- Ins. Co. of Pa. v. Corcoran, 850 F.2d 88 (2d Cir. 1988) (foundation of LRRA preemption framework)
- Lang v. Hanover Ins. Co., 3 N.Y.3d 350 (N.Y. 2004) (statutory direct action rights; NY law context)
- Cont'l Ins. Co. v. Atl. Cas. Ins. Co., 603 F.3d 169 (2d Cir. 2010) (direct action rights and insurer liability in LRRA context)
- Ophthalmic Mut. Ins. Co. v. Musser, 143 F.3d 1062 (7th Cir. 1998) (LRRA preemption breadth regarding RRG regulation)
- Mears Transp. Grp. v. State of Fla., 34 F.3d 1017 (11th Cir. 1994) (purpose of LRRA to enable efficient interstate RRG operation)