20-2401

20-2401. Definitions

In this chapter, unless the context otherwise requires:

1. "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 either:

(a) A person who performs that work.

(b) A person who hires an independent contractor to perform that work. Completed
operations liability includes liability for activities which are completed or abandoned
before the date of the occurrence giving rise to the liability.

2. "Domicile", for purposes of determining the state in which a purchasing group is
domiciled, means:

(a) For a corporation, the state in which the purchasing group is incorporated.

(b) For an unincorporated entity, the state of its principal place of business.

3. "Hazardous financial condition" means that, based on its present or reasonably
anticipated financial condition, a risk retention group, although not yet financially
impaired or insolvent, is unlikely to be able to either:

(a) Meet obligations to policyholders with respect to known claims and reasonably
anticipated claims.

(b) Pay other obligations in the normal course of business.

4. "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 the laws of this state.

5. "Liability":

(a) Means legal liability for damages, including costs of defense, legal costs and
fees and other claims expenses, because of injuries to other persons, damage to their
property or other damage or loss to other persons resulting from or arising out of
either:

(i) A business, whether for profit or nonprofit, trade, product, services,
including professional services, premises or operations.

(ii) An activity of a state or local government, or an agency or political
subdivision of the state.

(b) Does not include personal risk liability and an employer's liability with
respect to its employees other than legal liability under the federal employers'
liability act (45 United States Code section 51).

6. "Personal risk liability" means liability for damages because of injury to a
person, damage to property or other loss or damage resulting from any personal, familial
or household responsibilities or activities other than those listed in paragraph 5.

7. "Plan of operation or feasibility study" means an analysis which presents the
expected activities and results of a risk retention group including at least all of the
following:

(a) Information sufficient to verify that its members are engaged in businesses or
activities similar or related with respect to the liability to which the members are
exposed by virtue of any related, similar or common business, trade, product, services,
premises or operations.

(b) For each state in which the group intends to operate, the coverages,
deductibles, coverage limits, rates and rating classification systems for each line of
insurance the group intends to offer.

(c) Historical and expected loss experience of the proposed members and national
experience of similar exposures to the extent that this experience is reasonably
available.

(d) Pro forma financial statements and projections.

(e) Appropriate opinions by a qualified, independent casualty actuary, including a
determination of minimum premium or participation levels required to commence operations
and to prevent a hazardous financial condition.

(f) Identification of management, underwriting and claims procedures, marketing
methods, managerial oversight methods and investment policies.

(g) Other matters as prescribed by the director for liability insurance companies
authorized by the insurance laws of the state in which the risk retention group is
chartered.

8. "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. Product liability does not include the liability of a person for those damages
if the product involved was in the possession of the person when the incident giving rise
to the claim occurred.

9. "Purchasing group" means a group which meets all of the following criteria:

(a) Has as one of its purposes the purchase of liability insurance on a group
basis.

(b) Purchases the insurance only for its group members and only to cover their
similar or related liability exposure, as described in subdivision (c) of this paragraph.

(c) Is composed of members whose businesses or activities are similar or related
with respect to the liability to which members are exposed by virtue of any related,
similar or common business, trade, product, services, premises or operations.

(d) Is domiciled in any state.

10. "Risk retention group" means a corporation or other limited liability
association formed under the laws of any state which meets all of the following criteria:

(a) Its primary activity consists of assuming and spreading all or any portion of
the liability exposure of its group members.

(b) It is organized for the primary purpose of conducting the activity described in
subdivision (a) of this paragraph.

(i) Chartered and licensed as a liability insurance company and authorized to
engage in the business of insurance under the laws of any state.

(ii) It was, before January 1, 1985, chartered or licensed and authorized to engage
in the business of insurance under the laws of Bermuda or the Cayman Islands and, before
January 1, 1985, had certified to the insurance commissioner of at least one state that
it satisfied the capitalization requirements of the state. Any such group is a risk
retention group only if it has been engaged in business continuously since January 1,
1985 and only for the purpose of continuing to provide insurance to cover product
liability or completed operations liability.

(d) It does not exclude any person from membership in the group solely to provide
for members of a group a competitive advantage over the person.

(e) It either:

(i) Has as its owners only persons who comprise the membership of the risk
retention group and who are provided insurance by the group.

(ii) Has as its sole owner an organization which has as its members only persons
who comprise the membership of the risk retention group and has as its owners only
persons who comprise the membership of the risk retention group and who are provided
insurance by the group.

(f) Its members are engaged in businesses or activities similar or related with
respect to the liability which the members are exposed to by virtue of any related,
similar or common business, trade, product, services, premises or operations.

(g) Its activities do not include the provision of insurance other than:

(i) Liability insurance for assuming and spreading all or any portion of the
liability of its group members.

(ii) Reinsurance with respect to the liability of any other risk retention group or
any members of any other group which is engaged in businesses or activities that meet the
requirement described in subdivision (f) of this paragraph from membership in the risk
retention group which provides the reinsurance.

(h) The name of the group includes the phrase "risk retention group".

11. "State" means any state of the United States or the District of Columbia.