This time, insurance payout is $50 million

April 17--Merrimack County Superior Court Judge Richard McNamara recently put the brakes on releasing $50 million in surpluses from the New Hampshire Medical Malpractice Joint Underwriting Association to 6,200 policyholders -- even though all parties to this case were on board.

That's because nothing about this state-run group supplying malpractice insurance to doctors, hospitals and other health care providers for the past 40 years has been done quickly or without debate.

In 2009, at the height of peak earnings and its position in the marketplace, the JUA's surplus attracted the attention of former Gov. John Lynch.

Lynch proposed using $110 million of it to balance the state budget in the midst of the recession.

The New Hampshire Supreme Court, in a 3-2 decision, blocked the move in January 2010, ruling it violated the contractual rights of the policyholders.

"The Act constituted results in an impairment of contract in violation of the Constitution and is, therefore, unenforceable," wrote Justice Carol Ann Conboy.

Chief Justice Linda Dalianis dissented; she judged it to be an undeserved "windfall" for doctors and hospitals.

Scott O'Connell of the Nixon and Peabody firm in Manchester has represented the policyholders struggling with the state for nearly a decade.

"It seems like a large chunk of my adult life has been spent on this case," O'Connell observed. "We're approaching the finish line, but it's certainly been a long journey. People tend to forget how close we came to the state getting its hands on this money."

A labor of love

Traditional insurance companies have to return surplus profits every year either to shareholders or to customers, but the 1975 Insurance Department creating the New Hampshire Medical Malpractice Joint Underwriting Association (JUA) contained no such mandate.

"So the surpluses just grew and grew, year after year, decade after decade," O'Connell said.

The high court decision led to a lower court process which ultimately sent back that $110 million to policyholders in 2012.

Dr, Georgia Tuttle, a Lebanon dermatologist, was the lead plaintiff in the lawsuit against the state and led the effort to find the policyholders to make sure they got those court-ordered checks.

"Usually if you get 80 percent of money returned in a big class action like this, you're doing well," O'Connell said. "Thanks to Georgia, our return rate was 98.5 percent. It was all her sleuthing that found these folks or heirs decades later to make sure they were paid."

Tuttle said with the help of others, she spent more than three years searching for these medical professionals or their descendants, who were spread out over seven different countries.

"I guess it was a labor of love. I wanted to make sure they get that money back. The grateful reactions I have received from so many people, it's been the most satisfying experience of my entire life," said Tuttle, who recently stepped down as Lebanon's mayor.

Going private

Fast-forward five years and many legislative and regulatory moves later, the JUA is liquidating and making the transition to a competitive, private market.

Once again, there were a few hiccups along the way.

The Legislature had two commissions look at whether the insurance market was robust enough to break up the state insurer.

As recently as November 2014, the second commission said it was too soon to know.

"Until there is a finding that medical malpractice insurance is not readily available in the voluntary market, and there is a public interest that supports state action to make this coverage available, further legislative action is premature," that commission concluded.

That same month, Deputy Insurance Commissioner Alex Feldvebel wrote it wasn't time for the state to fully exit the market.

"I find that while some indicators of competitors have been improving in recent years, there continues to be substantial evidence in support of the conclusion that the medical malpractice insurance market for physicians, surgeons and hospitals is not a competitive market," Feldvebel said.

Time to act

But Insurance Commissioner Roger Sevigny told lawmakers they had to act on something in 2015 because the rule creating the JUA was to expire on Jan. 1, 2017.

Sevigny's agency ultimately agreed there would be sufficient carriers to offer this insurance and it came to support the JUA's dissolution.

Many medical joint underwriting associations in other states have similarly dissolved, but most with much smaller surpluses per capita than this one had.

"This one was truly remarkable in that way. It was really well-run, had great claims history, was invested prudently and was of a pretty decent size so it spread the risk," O'Connell said.

He credits the Legislature and then-Gov. Maggie Hassan's administration with crafting a 2015 law that set in motion an orderly and peaceful breakup.

"We had a good working relationship with the commissioner, the attorney general, the governor's office," O'Connell said. "We wanted to cover every contingency and not re-experience any of the problems from the past, The work that went into that legislation really removed a lot of the potential problems."

Sevigny is now the court-appointed receiver of this winding down of the JUA and due to that quasi-judicial role, he declined comment for this story.

$86 million surplus

The process resulted in awarding JUA's insurance business last July to a private company, the Medical Protective Co. (MedPro) which was given $23.8 million from the surplus to cover these customers.

Sevigny and his expert, Special Deputy Commissioner Peter Bengelsdorf, concluded the JUA still had $86 million in surplus.

In February he asked Judge McNamara to release $50 million to policyholders, leaving the balance for now to deal with tax, operating costs and any unresolved issues.

Bengelsdorf said these technical issues could keep the JUA in receivership for "another two years."

McNamara signaled in an April 2 ruling that he wanted to ensure there were no dissenters to what had been such a contentious process -- likely putting off the release of the $50 million to this fall.

Current Attorney General Gordon MacDonald was, with O'Connell, one of three Nixon Peabody lawyers who fought and beat the state over the JUA surplus; Kevin Fitzgerald served as lead counsel.

MacDonald, confirmed as attorney general earlier this month, said that in this and five other matters involving state government, that he would disqualify himself and turn over control to Deputy AG Ann Rice.

Dr. Tuttle said she looks forward to final distributions of the JUA surplus.

"The longer this goes on, the harder it will be to find these folks. I consider them the greatest generation," Tuttle said.

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