continued from page 1
constitutional proscription against governmental impairment of contract rights and the state’s sovereign authority to safeguard the welfare of its citizens,” said the Court in its decision.
The insurance policies sold by the JUA are contracts, the Court noted, adding that it had to determine whether the Legislature passing a law to appropriate the funds “impairs the contractual relationship between the policyholders and the JUA.” The Court stated, “We find that the language of the policies and regulations, taken together, confers upon the policyholders a vested contractual right in the treatment of any excess surplus. The policies entitle the policyholders to “participate in the earnings of the [JUA]” and the incorporated regulations mandate the board’s application of excess funds in one or both of two specified ways: either against future assessments, or distribution to the policyholders. Under either option, the policyholders have a direct financial interest, and not a mere expectancy, in any excess surplus. Thus, the policyholders have a vested right not necessarily in the distribution of the funds, but in the treatment of the funds for their benefit.” The Court noted that the Legislature’s action “effectively eliminates” the idea that the policyholders participate in their contracts with the JUA and that it takes away the right of the JUA board to use the surplus in a way that benefits its policyholders.
The state had argued that the funds would be more useful if they were used by the government to improve access to health care, rather than being “trapped” in the JUA.
The Court decided that, though funding state programs is a valid goal, the Act does not necessary achieve that.
Justices Linda Dalianis and James
Duggan dissented with the majori-
ty opinion, noting that the decision
overturned a legislative decision to pro-
mote health care access and created “a
potential $110 million windfall for the
doctors, hospitals and other health care
providers” insured through the JUA.
The dissenting opinion suggests that even if the Act impaired the policyholders’ contracts, the impairment is “insubstantial.” “The Act leaves intact the very purpose for which the policyholders entered into their contracts – to obtain otherwise difficult or impossible to obtain coverage for medical malpractice claims. Moreover, there is no evidence that transferring $110 million from the JUA will in any way jeopardize its solvency. An actuarial study shows that, even without the $110 million, the JUA has more than enough assets to cover future claims,” said the justices.
■
The majority ruling found favor with the National Association of Mutual Insurance Companies (NAMIC), which participated in a amicus brief in the case. Paul Tetrault, NAMIC’s Northeast state affairs manager, stated, “This is a significant decision standing for the principle that a state cannot raid a fund simply because money has built up. We have seen a troubling trend of states seeking to close budget gaps by going after insurance funds in a variety of inappropriate ways. In this case, both the lower court and the New Hampshire Supreme Court recognized the impropriety of the appropriation.”
continued from page 1
Tower Group said it would write and
manage the private passenger automo-
bile, homeowners and package policies
through the companies currently issu-
ing the policies and combine its existing
personal lines operations with the busi-
ness being acquired. Excluded from
the transaction are OneBeacon’s Au-
toOne, specialty collector car and boat
businesses, and Houston General com-
panies. The personal lines division has
offices in Canton, Mass.; South Port-
land, Maine; and Williamsville, N. Y.
The sale is subject to certain state regulatory approvals.
“This step will complete OneBeacon’s transformation into a specialty company. We have had great success with our specialty teams since 2001 and we are excited about our future profitability and growth in those markets. Additionally, the sale will free up significant capital which increases our financial flexibility, and also reduces our catastrophe exposure. This makes OneBeacon a much stronger and more focused company going forward,” said Mike Miller, OneBeacon’s chief executive officer. “Through Tower, our agents and customers will transition to a carrier that is committed to building its personal lines presence. Tower will acquire our personal lines underwriting entities and in-force business, will hire the majority of our personal lines employees, and plans to use our products and systems to ensure a seamless transition.” Michael Lee, president and chief executive officer of Tower, stated, “This transaction provides us with a unique opportunity to add a very high quality franchise to Tower’s group of companies. The transaction is consistent with our long term strategic plan to expand our diversified platform through acquisitions by strengthening our personal lines product offering, generating additional fee income from the management of the reciprocals and delivering greater value to our producers and customers. We are also very pleased with our ability to gain access to OneBeacon’s robust personal lines operating platform, experienced management team and staff, as well as their long tenured producers throughout the Northeast.”
■
Following the announcement, ratings agency A.M. Best put the A (Excellent) financial strength ratings of Massachusetts Homeland and York Insurance on review with negative implications. “Negative” in this case generally means that Best feels as though if the ratings were to change, they would more likely be downgraded than upgraded.
References:
Archives