Friday, January 29, 2010

New Hampshire Supreme Court Tells State "Keep Hands Off Of Private Funds"

It appears that for once in a long while, the New Hampshire Supreme Court got it right in the case of the Georgia Tuttle, MD et al vs. the New Hampshire Medical Malpractice Joint Underwriters Association et al, where the state legislature tried to raid $110 million of JUA premium surpluses to fill a budget deficit.

The state failed to make its case during its first attempt, the Belknap County Court deciding in favor of the plaintiffs, clients of the JUA, stating the State of New Hampshire had no rights to those funds even though the state created the JUA to begin with because the JUA is not a state agency. The state provided no tax monies, no state personnel, and no facilities to the JUA. The JUA was a state sanctioned private entity created in 1975 to ensure malpractice insurance was available to all physicians and other medical personnel in New Hampshire. All funding came through premium payments to the JUA. The law that created the JUA clearly states that surplus premiums balances must be returned to the policy holders past and present or used to reduce premiums to those it served.

The New Hampshire Supreme Court decided 3-2 that the state could make no claim and had no rights to the JUA funds, upholding the lower court decision and denying the state the right to take the funds. (The complete text of NHSC decision can be found here.)

The basis of the decision dealt more with the Legislature's passage of the bill that would have 'acquired' over two-thirds of the JUA's surplus funds in violation of the contracts the JUA entered into with their policyholders, stripping from them the disbursements of surplus funds as guaranteed in their policies. And since both the lower court and the Supreme Court agreed the JUA is not a state agency, the state had no rights to the proceeds of judicious investment and policy disbursements by the JUA, particularly in light of the fact that even state agencies cannot violate contracts with private individuals at the behest of the Legislative or Executive branches of government.

While the dissenting opinion was strongly worded, I believe the Supreme Court made the right decision. Had the decision gone the other way it would have possibly opened the door for other state seizures of surplus finds from insurance companies (they are all licensed by the state) or other state licensed businesses without due compensation as guaranteed in both the New Hampshire and US constitutions. And don't believe for a minute the Democrat-controlled Legislature wouldn't do exactly that if they thought they could get away with it. After all, they have ever more profligate and wasteful spending to fund.

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