FOR PUBLICATION



### UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

A L L I E D P RO F E S S I ON

AL S I N S UR A N C E C O MP A

N Y , A Risk Retention Group, Inc., an Arizona corporation,

Plaintiff-Appellee ,

v.

M I C HAE L S C O T T A

N GL E S EY ; E L I S E O G U T I E R

R EZ ; V E RON I C A G U T I E R

R EZ , Defendants-Appellants

. No. 18-56513

D.C. No.8:14-cv-00665-CBMSH

OPINION

Appeal from

the United States District Court for the Central District of California Consuelo B. Marshall, District Judge, Presiding Argued and Subm itted January 23, 2020 Pasadena, California
Filed March 12, 2020
Before: Richard R. Clifton and Kenneth K. Lee, Circuit Judges, and Frederic Block, * District Judge. Opinion by Judge Clifton

* The Honorable Frederic Block, United States District Judge for the Eastern District of New York, sitting by designation.A L L I ED P R O F E S S I ON

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SUMMARY * *

P reemption / Washington Law/ Arbitration

The panel affirm ed the district court’s order com pelling arbitration, and held that the W ashington anti-arbitration statute was preem

pted by the federal Liability Risk Retention Act o f 1986 (“LRRA”) as it applied to ri s k r e t ention groups chartered in another state.

The L RRA broadly preem pts the authority of n on
chartering states to re g ul a te the operation of risk retention groups within their borders. A W ashington state statute, RCW § 48.18.200(1)(b), has b een held to prohibit binding arbitration agreem ents in insurance contracts in that state. The panel held that the federal McCarran-Ferguson Act, which generally p rotects state regulati o n o f insurance, did not reverse-preempt the LRRA. The panel also held that W ashington’s anti-arbitration statute o ffended the LRRA’s preem ption language and that no excepti o n ap p lied to save the law. The panel concluded that the W ashington statute
was p reem

pted by the LRRA as it applied to out of state risk retention groups.

** This summ ary constitutes no part o f the opinion of the court. It h as been prepared by court staff for the convenience of the reader.A L L I ED P R O F E S S I ON

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C OUNSEL

Andrea J. Clare (argued), Telquist Mc m illen Clare, PLLC, Richland, W ashington, for Defendants-Appellants.

Mich ael Jo hn S chroeder (argued), Michael J. S chro ed er, P

. C

. , Orange, California; Michael B. Kadish, The Kadish Law Group, P.C., S anta Mo n ica, C alif o r n ia; f o r P lain tif f -A p p ellee. Joseph E. Deem s, Deem s Law O ffices, APC, E ncino, California, for Am icus Curiae National Risk Retention Association.

OPINION CLIFTON, Circuit Judge: The Liability Risk Retention Act of 1986 (“LRRA”), 15 U.S.C. § 3901 et seq ., broadly preem p ts the authority of nonchartering states to regulate the o p eration of risk retention groups within their b orders. A W ashington state statute, RCW § 48.18.200(1)(b), has b een held to prohibit binding
ar b itration agreem ents in insurance contracts in that stat e. Dep’t. of Transp. v. James River Ins. Co. , 292 P.3d 118, 123 (W ash. 2013) (“[W ]e h old that unless the legislature specifically provides otherwise, R CW 48.18.200 prohibits binding arbitration agreem ents in insurance contracts.”). This
case asks us to determ ine whether the LRRA preem pts this prov i s i o n a s it applies to a risk retention group chartered in Ar i z o n a but d oing b usiness in W ashington. W e h old that it does.A L L I ED P R O F E S S I ON

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I. Background

Pl aintiff-Appellee Allied Professionals Insurance Com pany (“APIC”) is a risk retention group, a l iability insurance com

pany owned b y its insured m em bers, chartered in Ari z o na and doing business in W ashington. APIC previously insured Dr

. M i chael Scott Anglesey, a ch iropractor in W ashington. In Decem b er 2 0 1 2 , D r. An g lesey pro v id e d ch iro p ractic treatment to Mr. E liseo Gutierrez which allegedly resulted in Mr. Gutierrez suffering a stroke. A few
m onths later, Dr. Anglesey renewed his coverage with APIC but, in doing so, did not inform the com pany of the potential
m alpractice claim against him by Mr. and M r s

. Gutierrez. When D r. Anglesey later notified APIC of this potential claim , the com

pany advised him that it was denying coverage and rescinding his 2012 and 2013 insurance policies.

A y e ar later, Dr. Anglesey inform ed APIC that he wa s planning to execute a co n sent judgm ent in favor of Mr. and Mrs. Gutierrez and to assign his rights against A PIC to them

. They had agreed to see k sa tisfaction o n the judgm ent from APIC and no t from Dr. Anglesey. APIC responded by dem anding that all claim s against A PIC be sent to arbitration, pursuant to the arbitration clause i n the underlying policies. Dr. Ang lesey refused, and APIC filed this lawsuit on April 28, 2014, in the Centra l District of C alifornia against both Dr. Anglesey and Mr. and Mrs. Gutierrez (co l l e c t ively, “Defendants”). 1

1 A ft e r th e c o mm e n c e m en t o f th i s a c t i o n i n d is tri c t c o urt , a W as h i n g ton state court held the settlem ent agreem ent between Dr. Anglesey and Mr. and Mrs. Gutierrez to be reasonable and entered the stipulated judgm ent. Dr. Anglesey and Mr. and Mrs. Gutierrez have filedA L L I ED P R O F E S S I ON

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The d istrict court initially held that APIC did not have standing to bring the underlying action to com pel Defendants to arbitrate. APIC appealed that decision to this court. W e rul ed that APIC had standing to bring the action against Dr. Anglesey to seek rescission of the policy and d e c l ar atory relief and had standing against all Defendants to com pel arbitration of those claim s. Allied Prof’ls Ins. Co. v. Anglesey , 680 Fed. Appx. 586 (9th Cir. 20 17 )

. On rem and, the district court granted APIC’s m otion to com pel ar b itration, granted the m otion to stay proceedings pending arbitration, d enied a m otion b y D efendants to transfer venue to the Eastern District of W ashington, and certified a contr olling interlocutory question of law to this court under 28 U .S.C. § 1292(b). This court granted perm ission to appeal.

II. Discussion

The question certified by the district court is “whether the Li ab il ity Risk Retention A ct preem pts W ash. Rev. Code § 48.18.200(1)(b) as ap pl i e d to risk retention groups.” “The district court’s decision to grant or d eny a m otion to compel arbitration is r e v iewed de novo.” Bushley v. Credit Suisse First Boston , 360 F. 3 d 1 1 4 9, 1152 (9th Cir. 2 004). W e review conclusions of l aw d e novo. See Mull for Mull v. Motion Picture Indus. Health Plan , 865 F.3d 1207, 1209 (9th Cir. 2017).

suit against APIC in the Eastern District of W ashington b ased on APIC’s denial of coverage. That suit is stayed pending a decision in this action.A L L I ED P R O F E S S I ON

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A. Regulatory Structure
Congress enacted the Product Liability Risk Retention Act of 1981 ( “ PLRRA”) as a response to “a seem ingly unprecedented crisis in the insurance m arkets, during which
m any bus inesses were unable to obtain product liability coverage at any cost.” Wadsworth v

. Al l ied Prof’ls Ins. Co. , 748 F.3d 100, 102 (2d C ir. 2 014). The Act suppo rt s the form ation of risk r e t ention g roups, organizations “whose pri m ary activity consists of assum ing, and spreading all, o r any portion, of the liability exposure of its group m em bers.” 15 U.S.C. § 3901(a)(4)( A). “Under the PLRRA, [a risk retention group] is p erm itted t o p rovide product liability insurance in all states, free o f insurance regulation by those states, if i t c o m

plies with the insurance laws of the state it chooses as its ‘chartering jurisdiction.’” Nat’l Warranty Ins. Co. RRG v. Greenfield , 214 F.3d 1073, 1075 (9th C ir. 2 000) (quoting 15 U.S.C. § 3901 ( a )(4)(C)(i)). The PLRRA only
covers risk retention groups in the product liability insurance
m arket. In 1986, Congress e n a c te d the LRRA to expand the benefits of the PLRRA to all comm ercial liability insurance.

The PLRRA and L RRA create a “tripartite” regula tory schem e for risk retention groups. See Wadsworth , 748 F .3d at 103. First, at the federal level, the statutes preem pt state laws regulating the operation of risk retention groups. 15 U.S.C. § 3902(a)(1). Se c o n d , at the state level, they authorize the chartering state to regulate the groups’ form ation and operati on. Id. Finally, also at the state level, they “sharply lim it[] the secondary regulatory authority of nondom iciliary states o v e r risk retention g roups to specified, if significant, spheres.” Wadsworth , 748 F.3d at 104; see a l s o 15 U.S.C. §§ 3902(a)(1)(A)–(I); 15 U.S.C. § 3905. These regulatory divisions allow for “the efficient o perat i o n of risk retentionA L L I ED P R O F E S S I ON

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groups by elim in atin g th e n eed f o r com pliance with num erous non-chart ering state statutes that, in the aggregate, would thwart the interstate operation [of]

... risk retention groups.” H.R. Re p. No. 97-190, at 12 (1981), reprinted in 1981 U.S.C.C.A.N. 1432, 1441.

B. The LRRA’s Preemptive Effect

Th e an s wer to the question posed in this case is that th e LRRA d oes preem

pt W ashi n gton’s anti-arbitration statute, RCW § 48.18.200(1)(b), as it applies to risk retention groups chartered in other states. In rea c hi ng this conclusion, we follow the guide of our own precedent and that of the S econd Ci rcuit. See Attorneys Liab. Prot. S oc’y, Inc. v. Inga ld

s o n Fitzgerald, P.C. , 838 F.3d 9 7 6 (9th Cir. 2016); Wadsworth , 748 F.3d 100.

1. The McCarran-Ferguson Act does not reversepreem pt the LRRA

Defendants first contend that the LRRA does not preem pt th e W ashington anti-arbitration statute because it is “reve r s e-preempted” by the McCarran-Ferguson A ct, 15 U.S.C. § 1011 et seq

. Th e M c Carran-Ferguson A ct is generally understood to p rotect state regulation of insurance. T h e Wa s h i n g to n Sup re me Co urt r e l i e d up o n th e M c C a r r a n
- F e r g u s o n A c t i n h o l d i n g t h a t R C W § 48.18.200(1)(b) is shielded from preem ption by the Federal Arbitration A ct. James Ri ver Ins. Co. , 292 P.3d at 124. Although our court has not opined on the precise issue of the relationship between the McCarran-Ferguson A c t and the Federal Arbitration Act, w e have repeatedly held that the LRRA is an exception to the McCarran-Ferguson Act’s preference for state regulation of insurance. See AttorneysA L L I ED P R O F E S S I ON

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Liab. Prot. S

oc’y, Inc. , 838 F.3d at 9 82 n.4 (“W e have squarely held that even though th e McCarran-Ferguson A ct
reserves insurance regulation to the states , the LRRA was m eant to b e an exception for [risk retention groups].”); Nat’l Warranty Ins. Co. , 214 F.3d at 1 077 (“Even with a g e neral p resu m p tio n th at insurance law should ordinarily b e r e gu lated under state law, as reinforced b y the McCarran-Ferguson Act, the languag e and purpose of the LRRA clearly indicate an intent to preem

pt state laws regulatin g [risk retention g r o u p s ]

. ” )

. U n d e r o u r p r e c e d e n t , t h e r e f o r e , t h e McCarran-Ferguson Act d oes not “reverse-preempt” the LRRA.

2. The LRRA preem

pts W ashington’s anti-arbitration statute
Defendants next contend that the LRRA was specifically designed not to preem

pt all state laws, including ones like the W ashington anti-arbitration statute. “Wh en considering whether the LRRA pre e mp t s a state law, we first determ ine whether the cha l l e n g ed aspect of the state law o f f ends the LRRA’s broad preem

ption language. I f so, we consider whether o n e of the LRRA’s exceptions, which are contained in § § 3902(a)(1) and 3905, applies to save the state law. If no exception applies, the law is preem pted.” Attorneys Liab. Prot. Soc’y, Inc. , 838 F .3d at 980 (citations om itted). W e conclude that W ashington’s anti-arb i tration statute offends the LRRA’s p r eem

ption language and that no exception applies to save the law.

The L RRA states in relevant part, “[e]xcept as provided i n this section, a risk retention group is exem pt fr om any State law, rule, regulation, or o r de r to the extent that such law, rule, regulation, or order would – (1) m ake unlawful, o rA L L I ED P R O F E S S I ON

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N GL E S EY 9 regulate, d irectly or indirectly, the o p e ration of a risk retention group[.]” 15 U.S.C. § 3902(a). De fe n dants argue this language ought to be construed narrowly. They contend that the LRRA only requires non-chartering states to refrain from passing laws which prevent risk retention groups from “opera t i n g” as an insurance com pany, and that the anti-arbitration statute in question d o es not concern their operation. In doing so, D efendants construe the LRRA as an anti-discrim ination statute, one which i s d esigned only to keep states f

rom treatin g risk reten

t ion g roups differently than other insurance companies.

Defendants’ understanding o f the statute is m istaken. The LRRA’s preem

ption provision is br o a d ly worded, and this court h as repeatedly held that the LRRA has a b r oad preem ptive effect. See Attorneys Liab. Prot. Soc’y, Inc. , 838 F.3d at 9 80–81 (“ Th e LRRA ...broadly preem pts ‘any [non-chartering] St a t e l aw

. . . . ’” (quoting 15 U.S.C. § 3902(a)(1))); All. o

f Nonprofits for Ins., Risk Retention Group v. K

ipper , 712 F.3d 1316, 1321 (9th Cir. 2013) (“The LRRA broadly preem

pts ‘any State

... order to the extent that such

... order w ould

... m ake unlawful, or regulate, directly o r i n directly, the operation of [an RRG].’” (quoting 15 U.S.C. § 3902(a)(1)) (alterations in o rigina l)); Nat’l Warranty Ins. Co

. RRG , 2 14 F.3d at1077 (“[T]he language and purpose o f the LRRA clearly indicate an int e nt to preem pt state laws regulating [r i s k retention groups].”). This b road effect requires that the term “operation” be read generously. W e have previously held that an Alaska statute which prohibited insurance providers from seekin g reim bursem ent of fees incurred d efending a non- co v ered claim regulated the “operation” of a foreig n r i s k retention group. See Attorneys Li a b

. Prot. Soc’y, Inc. , 838 F.3d at 980. The state statut e placed “a restriction o n Alaska c o n tr a c ts that is ‘notA L L I ED P R O F E S S I ON

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contem plated by the L RRA, and that is n ot [precluded] b y all other states,’” and therefore regulated the risk rete n ti o n group’s operations in conflict with th e LRRA. Id. at 981 (quoting Wadsworth , 748 F.3d at 108) (alteration in original). Sim ilarly, W ashington’s anti-arbitration statut e places a restriction on risk retention groups that is not required by the LRRA or by all other states. Thus, the Wa shington anti-arbitration statute “regulate[s], directly or indirectly, the operation of a risk retention group.” 15 U.S.C. § 3902(a)(1).
Moreover, Defendants’ reading of the L RRA would jeopardize th e p ur

pose of the statute. The LRRA w as not enacted sim

ply to keep states from discrim inating against risk retention groups. Instead, as described above, the LRRA was passed by Congress in an effort to support a struggling insurance m arket. In order to do so, the A ct “elim inat[ed] the need for co mp l iance with num erous non-chartering state statutes that, in the aggregate, would thwart the interstate operation [of]

. . . risk retention groups.” H. R. Re p

. No. 97- 190, at 1 2 (1981), reprinted in 1981 U. S. C.C.A.N. 1432, 1441 (House report for the P LRRA); see also H.R. Rep. No. 99-865, at 8–9 (1986), reprinted in 1986 U.S.C.C.A.N. 5303, 5305–06 (House report for the L RRA explaining that it “is necessary to exem

pt risk retention and purchasing gr o ups from State law

. . . in order to achieve the beneficial effects o f such g r o up s referred to above.”). A llowing a state such as W as hington to force foreign risk retention groups to alter their contracts would threaten this goal.

As the anti-arbitration statute “offends the LRRA’s broad preem ption language,” it may only b e “save[d]” if an exception in 15 U.S.C. § § 3 9 02(a)(1) or 3905 applies. Attorneys Liab. Prot. Soc’y, Inc ., 8 38 F.3d at 9 8 0. These exceptions generally “authorize[] n onchartering states toA L L I ED P R O F E S S I ON

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N GL E S EY 11 require risk retention groups to com ply o n ly with certain basic registration, capitalization, and taxing requirem ents, as well as various claim settlem ent and fr au dulent practice laws.” Wadsworth , 748 F.3d at 1 06. Defendants contend that the W ashington anti-arbitration statute falls into two of these exceptions. First, they argue that the anti-arbitration statute is
an exam ple of W ashington requiring foreign risk ret e n ti o n groups to “com

ply with the unfair claim settlem ent practices law of the State.” 15 U.S.C. § 3 902(a)( 1 ) ( A ). Second, they claim the W ashington statute falls un d e r the exception for state laws “regarding deceptive, f al se , or fraudulent acts o r prac t i ces.” 15 U.S.C. § 3902(a)(1)(G). Defendants fail to
e xp l a in how an anti-arbitration statute is an “unfair claim settlem ent p ractices law” or h o w it deals with “deceptive, false, o r f

raudulent acts,” an d we do not find support for either contention.

W ashington’s anti-arb itration statute offends the LRRA’s broad preem

ption languag e an d fails to fall into one of its exceptions. Therefore, the statute is p reem pted by the LRRA as it applies to out of state risk retention groups.

III. Conclusion

The W ashington anti-arbitration s ta tu te is preem p ted by the LRRA as it applies t o r i s k retention groups chartered in another state. W e affirm the orde r o f th e district court
com pelling arbitration. 2

2 Defendants m oved to certify a question t o the W ashington S uprem e Court. Specifically, Defendants proposed to ask that court whether RCW § 48.18.200(1)(b) applied to prohibit the arbi tra t ion clause in this ri sk retention contract. The question of whether that statute, if so interpreted,A L L I ED P R O F E S S I ON

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AFFIRMED and REMANDED FO R FURTHER PROCEEDINGS.

has been preem

pted by th e LR RA is a question of federal law, not state law. W e deny the m otion to certify.

W e grant the m otion of the National Risk Retention Association for leave to file an amicus curiae brief in support of APIC.