Under what condition does an LLC not have to maintain insurance?

The answer is correct because maintaining a designated capital fund can eliminate the requirement for an LLC to maintain insurance under specific conditions outlined in Massachusetts law. A designated capital fund serves as a financial reserve that ensures the business can cover potential liabilities, thus providing a level of financial security similar to what insurance might offer.

In this context, if the LLC has appropriately established and maintains this fund, it may be exempt from needing additional insurance coverage, fundamentally altering the risk management strategy of the business. This approach allows the LLC to self-insure against certain liabilities, aligning with regulations that govern business operations in the state.

The other options relate to different operational scenarios but do not provide a valid basis for exemption from insurance requirements in the same way that a designated capital fund does. Therefore, the focus on financial readiness through a capital fund is what renders this answer appropriate.