position in $110M JUA case by Michael Kitch As Attorney David Leslie, representing the state, challenged the policyholders’ CONCORD — The state’s claim to $110- right to a share of the funds Chief Justice million in “surplus” funds accumulated by John Broderick interrupted. the New Hampshire Medical Malpractice Referring to the rule of the JUA that Joint Underwriting Association (JUA) reads “if premiums “exceed the amount came under close questioning from the necessary to pay losses and expenses,” then justices when its appeal of a lower court’s “the board shall . . . distribute such excess decision denying it the money was heard by to those health care providers covered by the New Hampshire Supreme Court the association,” he remarked “it says yesterday. shall.” Governor John Lynch and the leaders of Leslie replied that because the decision the House and Senate are counting on to order a distribution rests with the JUA’s $110-million of the $142.3-million in assets directors, the language does not amount to accumulated by the JUA to help fill budget a right, but merely “an expectation.” gaps. However, about a third of the 900 “Could the board of directors have policyholders of the JUA — including distributed a dividend to the Legislature for LRGHeathcare, which pays more than $1- the general fund?” Broderick asked. “The million in annual premiums — challenged answer is no,” Leslie admitted. the state’s claim to the money, insisting that Reaching out with her arm and clutching the rules governing the JUA and the terms her hand as if to grasp something, Justice of their insurance contracts required its Linda Dalianis asked “then how does the board of directors to distribute any declared state government grab the money?” surplus to the policyholders, much like a Leslie said that the policyholders are not mutual insurance company would do. They akin to shareholders and play no part in the claimed that House Bill 2, the companion governance of the JUA. to the budget, represents impairs their Justice Gary Hicks wondered, “could the contractual rights in violation of the state judicial branch tap the clients protection and federal constitutions. In July, Justice fund to cover its deficit” and asked “isn’t Kathleen McGuire of the Belknap County that what is happening here?” Superior Court ruled that the state had no Replying that he knew nothing of the right to the funds and, while upholding the rules governing the fund, Leslie said that he claim of the policyholders, did not order the could not answer the question. JUA to distribute any money to them. Raising his eyebrows, Broderick distribution. “The record shows there is a returned to the word “shall” to ask “what surplus,” Fitzgerald replied, adding that by am I missing here?” When Leslie repeated authorizing the transfer of $110-million that the policyholders have no vested right from the JUA to the general fund, HB-2 to the funds, the chief justice asked if they amounts to a declaration of a surplus. had a right that the money not be given to a Justice Carol Ann Conboy asked third party, in this case the state. He went Fitzgerald how he could guarantee that a on to point out that the rules do not provide distribution to policyholders would comply that any third party benefit from the surplus with state law by not disrupting the market and if the state “swept the surplus fund,” for malpractice insurance, which includes the policyholders would be deprived of any private insurers. He said that because a opportunity to share in it.” distribution would not take the form of Arguing for the policyholders, Kevin reduced premiums, it could not effect Fitzgerald began where Broderick left off, pricing in the market. Likewise, he noted telling the court that the state’s case rested that Maine Medical Mutual Insurance on taking “shall” to mean “shall not.” Company, Inc., one the two major private Again referring to the rules, Broderick carriers in the market, distributed dividends asked if the directors of the JUA were to its policyholders with no adverse compelled “to do one of two things” — consequences and the JUA, with only a either apply any surplus against future fifth of the market, lacked sufficient market assessments or distribute it to share to disrupt it. In any event, he added policyholders. that the Insurance Commissioner has “Yes,” Fitzgerald replied. Following on, declared that the market is not competitive. Justice James Duggan asked what would Several attorneys present at the hearing happen if the Insurance Commissioner, later remarked that the justices appeared in who according to rules must approve the full command of the facts and arguments of board decisions, withheld his assent. the case and speculated that the court, after Fitzgerald reminded the justices that the granting the state’s motion for expedited commissioner was not granted that proceedings, could issue its opinion authority until January, in anticipation of quickly, perhaps by October 28 when the the state laying claim to the funds and said Legislature convenes to take up Governor that should he invoke his authority, John Lynch’s veto messages. presumably the JUA would file suit. If the state loses its appeal, the “What if the Legislature dissolved the Legislature will face an immediate budget JUA?” asked Broderick. “Who would get crisis. The budget specified that the funds the money?” “The policyholders,” were to be transferred by July 31 in order Fitzgerald answered. The chief justice then that $65-million could be applied to the turned to the state’s argument that since the fiscal year that ended on June 30 this year JUA board has yet to declare a surplus, the while the balance would be divided evenly policyholders have no vested right to a between the next two fiscal years.
United States v. Max Pollack, Formerly D/B/A Max Pollack Co., and Shirley Mestel and Ida Mestel, D/B/A King Holding Company, 370 F.2d 79, 2d Cir. (1966)