Thursday April 29, 2010
State now questioning whether
JUA is even solvent
by Michael Kitch
CONCORD — After the New
Hampshire Supreme Court ruled that
policyholders — not the state — are
entitled to the surplus of the New
Hampshire Medical Malpractice Joint
Underwriting Association (JUA), state
officials are questioning the JUA’s
solvency. And the Attorney General
Office, which was barred from
representing the JUA by a Belknap
Superior Court Justice, is apparently
again doing just that.
On the recommendation of Governor
John Lynch, the Legislature included the
$110 million surplus of the JUA in the
2010-2011 budget. Policyholders, led by
LRGHealthcare, which pays $1.1-
million in annual premiums to the JUA,
challenged the state’s claim to the
money, to which the rules of the
association and their contracts with it
entitled them. In January, the New
Hampshire Supreme Court ruled in
favor of the policyholders and denied
the state’s claim to the money.
Kevin Fitzgerald of NixonPeabody,
representing the policyholders, claims
that since the court ruled, state officials
have not taken steps to comply with its
decision and suspects they are seeking
to circumvent it. He said yesterday that
since January he has sought assurances
from state officials that no effort will be
made to infringe the rights of
policyholders without success.
Last week he wrote to Michael
Aylward, legal counsel to the JUA,
reminding him that the authority to
calculate any surplus in the fund,
beyond what is required to meet
operating expenses and projected
claims, as well as to distribute any
dividend to the policyholders rests
solely with the board of directors. He
stressed that the JUA cannot delegate
these duties nor “may it rely on some
confidential examination of the State to
fulfill its independent fiduciary
obligations.
Fitzgerald demanded that the directors
of the JUA immediately call a special
board meeting to determine the amount
of the surplus and distribution to
policyholders. He advised Aylward that
if the JUA refused to act, the
policyholders were prepared to return to
court.
Yesterday Fitzgerald received a reply,
but from Associate Attorney General
Anne Edwards — not Aylward — who
said she was writing “responding on
behalf of our clients, (Insurance)
Commissioner (Roger) Sevigny and the
JUA board.”
Fitzgerald noted that when the litigation
began in Belknap County Superior
Court, Judge Kathleen McGuire, on a
motion by the policyholders,
disqualified the Attorney General from
representing the JUA, which she held is
not “an independent entity rather than an
executive department or agency.”
“We are profoundly disturbed by the
communication from the Attorney
General,” Fitzgerald said. “It is evidence
of a course of conduct that is unlawful
and directly inconsistent with court
orders relevant to this matter.”
Edwards reminded Fitzgerald that in
February, Sevigny ordered a financial
examination of the JUA and was
“determining the solvency of the JUA to
pay claims” in light of the court’s
decision. “Until the examination is
complete,” she wrote, “no final
determination of the status of funds held
by the JUA can be made.”
Fitzgerald noted that when the state
initially claimed the $110-million, the
Insurance Department certified that the
money could be transferred without
weakening the financial condition of the
JUA.
“What has changed in the intervening
period?” he asked. “They lost.” He
doubted that Edwards was “truthful or
forthcoming about the nature of the
financial examination.”
Fitzgerald took the letter to confirm his
belief that “the Attorney General
General, the Insurance Department and
the executive branch are engaged in an
exercise to thwart or end-run the law of
the state and again the JUA board
appears to acquiescing in this exercise.”
Henry Lipman, senior vice-president
and chief financial officer of
LRGHealthcare, who has followed the
litigation and its aftermath closely,
remarked, “Last year when the state
wanted the money, they made a
convincing case that there was a
surplus.”
He said that by interfering with the JUA,
the Attorney General and Insurance
Commissioner, “raise questions about
why they won’t let the JUA get on with
doing its work.”
Ever since the justices ruled Governor
John Lynch has repeatedly insisted that
the money belongs to the state and that
his administration is “exploring other
options.”