Malpractice group sues to block Pa. from looting its surplus

Nov. 08--A Montgomery County malpractice insurer on Wednesday sued Gov. Wolf in federal court to block what it called a "brazen, unconstitutional attempt to seize" $200 million from its surplus, as called for in legislation Wolf signed last week.

The law requires that the Pennsylvania Professional Liability Joint Underwriting Association (JUA), a Blue Bell nonprofit established by the state in 1975, but not part of state government, turn over the money by Dec. 1.

If it does not comply, the law calls for the abolishment of the JUA and the transfer of the money to the Department of Insurance.

This is the second year in a row that Pennsylvania legislators tried to get their hands on the JUA's surplus, but last year's attempt was in the "form of an involuntary, interest-free loan," according to the JUA's motion for a temporary restraining order and preliminary injunction filed in U.S. District Court for the Middle District of Pennsylvania in Harrisburg.

This year's law "purports to nationalize the JUA by declaring it an instrumentality of the Commonwealth without its consent and releasing its officers from any fiduciary obligations," JUA's attorneys from Duane Morris LLP wrote in the motion.

The seizure would violate the U.S. Constitution on multiple fronts, including the provision that no person shall be "deprived of life, liberty, or property, without due process of law," the motion said.

The governor's office did not respond to a request for comment.

At the end of last year, the JUA, which qualified as a nonprofit membership organization under IRS code section 501(c)(6), had a surplus of $268 million. It was founded as a last-ditch insurer for doctors in the state during a time when other insurers were fleeing the state.

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