Much anticipated legislation has been introduced to clarify language defining captive insurers in the Nonadmitted and Reinsurance Reform Act of 2010 (NRRA), the State of Vermont announced.

The bill was introduced by Sen. Patrick Leahy (D-VT) and Sen. Lindsay Graham (R-SC) in the U.S. Senate. A companion bill was introduced by Rep. Peter Welch (D-VT) in the U.S. House of Representatives.

The issue had to do with whether captives are considered nonadmitted insurers if they are domiciled outside of their home state, and whether such a captive would be required to pay a self-procurement premium tax to its home state. Because of this ambiguity, some companies were hesitant to domicile captives outside of their state and some were redomiciled.

“Congress never intended the NRRA to include captive insurers, and the legislation I have introduced with Sen. Graham would simply clarify congressional intent,” Sen. Leahy said in a statement. “It is a straightforward, commonsense clarification that will give needed assurance to the captive insurance industries in Vermont, South Carolina, and across the country.”

Sen. Graham noted that the legislation, “will enable organizations to have a choice in where they domicile their captive. Our legislative fix will create opportunities for this emerging industry and I hope Congress will push it into law.”

The legislation “clarifies a provision within NRRA to ensure that captives in Vermont and around the country continue to operate in the same responsible way that they have for decades,” Rep. Welch said. “I am pleased to work with Senators Leahy and Graham on this practical fix to an unintended consequence.”

The new wording defines a “captive insurance company” as wholly owned, directly or indirectly, by a single parent company, group of companies or by an industry, trade, or service group or association whose primary purpose is to provide insurance to cover the risks of the organization.

The wording change has been the focus of the Coalition for Captive Insurance Clarity, formed by the captive industry in 2012 under the leadership of the Vermont Captive Insurance Association (VCIA).

I recently had the privilege of attending the 6th Annual Forum on Defending Employment Discrimination Litigation hosted by the American Conference Institute in New York, New York (I spoke on defense strategies for defending high stakes, multi-party age discrimination lawsuits).

Constance Barker, one of the five commissioners at the Equal Employment Opportunity Commission, gave the keynote address at the program. Her presentation was fascinating, and focused largely on the swirling controversy relative to the EEOC’s recent issuance of new enforcement guidance on the Pregnancy Discrimination Act (which we blogged on previously here). Commissioner Barker made public statements about the PDA Guidance—immediately after the EEOC posted the Guidance on its website—questioning the wisdom of the EEOC’s action on procedural and substantive grounds. She asserted that in adopting the new Guidance, the commission sought to legislate changes to, rather than interpret, Title VII (her written comments dated July 14, 2014, are here.

In broader terms, this squarely raises the issue of the proper role and responsibility of the EEOC. Should it enforce the law or expand the law to maximize the reach and public policies within employment discrimination prohibitions? Many critics of the EEOC have cited the new Guidance as further evidence that the commission is an activist agency that is result-oriented and willing to do whatever it takes to pursue litigation enforcement strategies it deems appropriate.

In response to questions from the floor at the program in New York, Commission Barker agreed that there is some truth to the criticism that the EEOC has sought to use its enforcement power and enforcement litigation to, in a sense, “legislate” behavior in the employer community.

She agreed that while societal goals and aspirations might counsel that a law like the PDA should be interpreted in the manner the new Guidance advocates, the role of the EEOC is not to engage in “social engineering.

” Instead, the role of the EEOC is to enforce the law as written, and leave policy decisions about the expansion of the law to Congress. In this respect, she reiterated her position that the new PDA Guidance represented an effort by the commission to “jump ahead” of Congress and the courts in fashioning the contours of employer obligations and employee rights under the law.

Commissioner Barker predicted that the EEOC’s action may become “an embarrassment” for the commission depending on how the U.S. Supreme Court adjudicates certain issues in Young v. United Parcel Serv. (4th Cir. 2013), in its next term (and may well grant the new Guidance no deference or criticize how the EEOC went about issuing the Guidance).

The issue is sure to heat up further. Stay tuned.

This blog was previously posted on the Seyfarth Shaw website.

You can find it here.