Tuttle v. N.H. Med. Malpractice Joint Underwriting Ass'n

• Decision Date: 28 January 2010
• Docket Number: No. 2009–555.,2009–555.
• Citation: 159 N.H. 627,992 A.2d 624
• Parties: Georgia TUTTLE, M.D. & a. v. NEW HAMPSHIRE MEDICAL MALPRACTICE JOINT UNDERWRITING ASSOCIATION and another.
• Court: New Hampshire Supreme Court

159 N.H. 627

992 A.2d 624

Georgia TUTTLE, M.D. & a.

v.NEW HAMPSHIRE MEDICAL MALPRACTICE JOINT UNDERWRITING ASSOCIATION and another.

No. 2009–555.

Supreme Court of New Hampshire.

Argued: Oct. 15, 2009.

Opinion Issued: Jan. 28, 2010.

Nixon Peabody, LLP, of Manchester (Kevin M. Fitzgerald, W. Scott O'Connell, and Gordon J. MacDonald on the brief, and Mr. Fitzgerald orally), for the petitioners.

Michael A. Delaney, attorney general (Anne M. Edwards, associate attorney general, and Glenn A. Perlow, assistant attorney general, on the brief), and Rackemann, Sawyer & Brewster, P.C., of Boston, Massachusetts (Eric A. Smith and J. David Leslie on the brief, and Mr. Leslie orally), for the State defendants.

William L. O'Brien, of Concord, & a. for the New England Legal Foundation and National Association of Mutual Insurance Companies, as amici curiae, joined by forty-nine members of the New Hampshire House of Representatives.

David I. Frydman, House Legal Counsel, for Terie Norelli, Speaker of the House, and Sylvia B. Larsen, Senate President, as amici curiae.

Sulloway & Hollis, PLLC, of Concord (Martin P. Honigberg and Amy Manzelli on the brief), for the New Hampshire Medical Society and the American Medical Association, as amici curiae.

CONBOY, J.

The State of New Hampshire, the Commissioner of Insurance, and the State Treasurer appeal an order of the Superior Court (McGuire, J.) declaring Laws 2009, 144:1 (the Act) unconstitutional. The Act requires the New Hampshire Medical Malpractice Joint Underwriting Association (JUA) to transfer a total of $110 million to the State's general fund during fiscal years 2009, 2010, and 2011. The trial court ruled that the Act constituted a taking without just compensation in violation of Part I, Article 12 of the State Constitution and the Fifth and Fourteenth Amendments to the Federal Constitution, and that it impaired the petitioners' contract rights in violation of Part I, Article 23 of the State Constitution and Article 1, Section 10 of the Federal Constitution. The trial court also decided that the State had no right to any "excess surplus" funds held by the JUA because the JUA is not a state agency. Because we find that the Act constitutes a retrospective law that results in impairment of contract rights in violation of the New Hampshire Constitution, we affirm.

I. Procedural History

In June 2009, the petitioners, present and past policyholders of the JUA, on their own behalf and on behalf of a purported class of policyholders, filed a petition for a writ of mandamus against the JUA, its board of directors, the New Hampshire Insurance Department (Department) and its commissioner, and for a writ of prohibition against the Department, the New Hampshire State Treasury (Treasury) and the State Treasurer. The petitioners alleged that, pursuant to their contracts with the JUA and certain administrative rules, they had a vested right in any excess surplus premiums collected by the JUA. The Act is based upon the State's assertion that the excess surplus held by the JUA amounted to $110 million.

The request for mandamus asked that the court compel the JUA "to evaluate its current surplus and determine what in its judgment should be declared earnings and returned to the [petitioners]." The request for a writ of prohibition asked that the court prohibit the Department and Treasury "from taking action in furtherance of [their] erroneous interpretation[s] of the insurance contract [s] and [New Hampshire Administrative Rule] Ins 1703.07(d)."

Also in June 2009, the petitioners, on their own behalf and on behalf of a purported class of policyholders, filed a petition for declaratory and injunctive relief against the State of New Hampshire. They asked the court to declare the Act unconstitutional because: (1) it was a retrospective law that substantially impaired their vested contract rights and, therefore, violated Part I, Article 23 of the State Constitution ; (2) it constituted a "taking" of property and, thus, violated Part I, Article 12 of the State Constitution and the Fifth and Fourteenth Amendments to the Federal Constitution; (3) it impaired their contracts with the JUA and, thus, violated Article I, Section 10, Clause 1 of the Federal Constitution ; and (4) it represented an unconstitutional tax in violation of Part II, Article 5 of the State Constitution. The trial court consolidated the cases.

The parties filed cross-motions for summary judgment. The State argued that the petitioners do not have vested property rights in any excess surplus funds held by the JUA, but have, at most, only an expectancy interest that is contingent upon actions by the JUA's board of directors. The State also asserted that any excess surplus funds belong to the State because the JUA is a state agency. After a hearing, the trial court ruled that the JUA is not a state agency, and that the Act violates both the State and Federal Constitutions because it constitutes a taking of property belonging to the petitioners, and because it impairs their contract rights. This appeal followed.

II. Facts

In 1975, the insurance commissioner determined that professional medical liability insurance was not readily available in the voluntary market, and that the public interest required such availability. See RSA 404–C:1 (2006). Accordingly, the commissioner adopted regulations creating the JUA to provide insurance coverage addressing the public need. See generally N.H. Admin. Rules, Ins 1700 et seq. The regulations also establish the plan of operation (the plan) for the JUA. See id. 1703. The plan has been in place, with some modifications, since 1975.

The JUA "was established to make available medical malpractice insurance for eligible risks." N.H. Admin. Rules, Ins 1701.01 (eff.Dec.1, 2000, exp.Dec.1, 2008). An "eligible risk" is "any health care provider operating legally in the state of New Hampshire," other than those who fail to timely pay premiums, have an outstanding judgment due for premiums, or who do not provide the information necessary to effect insurance coverage. N.H. Admin. Rules, Ins. 1703.01(e). Each eligible risk insured by the association must "receive the same level of service as is generally available in the voluntary market." Id. 1702.04. The petitioners, as healthcare providers and current and former JUA policyholders, are such eligible risks.

The JUA is governed by a board of directors. Id. 1703.04. The commissioner is required to "grant the board the authority to exercise all reasonable or necessary powers relating to the operation of the association." Id. 1703.04(l ). The authority of the board includes the power to operate and manage JUA funds by investing premiums. Id. 1703.04(p). The actual insuring functions are carried out by a "servicing carrier" chosen by the commissioner from among member insurers or qualifying non-member insurers, and the board itself acts as a servicing carrier if, for any reason, the commissioner does not appoint one. Id. 1703.05(c), 1702.04. The JUA enters into contracts and conducts its business independently of the Governor and Council and of the commissioner. See id. 1703.04(o ).

The plan requires all insurers authorized to write liability insurance in the state to be members of the JUA. Id. 1702.01; RSA 404–C:3. All member insurers are required to share in the JUA's premiums, expenses, servicing allowances and losses, based upon their portion of net direct premiums written in the state. Id. 1702.03(a).

The JUA's funding mechanism changed on January 1, 1986, in response to a finding by the commissioner that the JUA did not have sufficient assets to cover claims arising from policies written from 1975 to 1985. Compare id. 1703.07 with id. 1703.08. To cover the deficits incurred prior to 1986, a 15% surcharge was assessed on every medical malpractice liability insurance policy issued in the state beginning in 1986, and continuing until the commissioner should determine that a deficit no longer exists. Id. 1703.08(a), (b), (d). The JUA's reserves accrued, and policies issued, on and after January 1, 1986, are separately accounted for. Compare id. 1703.07 with id. 1703.08. The JUA reserves in question are funded by policy premiums and the interest earned thereon. See id. 1703.07(a), 1703.04(p). The State did not contribute funds to the JUA at the time of its creation, and has made no contributions to it at any other time. The State is not responsible for any JUA shortfalls, and does not guarantee performance of JUA obligations. Any deficits in the post–1985 fund are to be satisfied by assessments against the members, who are then to be reimbursed through assessments against policyholders and surcharges on subsequently sold policies. Id. 1703.07(f). The post–1985 JUA fund has not experienced a deficit and, therefore, no assessments or surcharges have been necessary.

In the event of fund excess, as is purportedly the case here, the plan provides as follows:

(c) If premiums written on association business exceed the amount necessary to pay losses and expenses, the board shall apply such excess to repay members for assessments previously levied, in proportion to the amount paid by each member.

(d) If premiums written on association business exceed the amount necessary to pay losses and expenses and to reimburse members for all assessments pursuant to Ins 1703.07(c), then with review and approval by the commissioner as being consistent with the purposes of this chapter, the board shall authorize the application of such excess in one or both of the following ways:

(1) Against and to reduce future assessments of the association; or

(2) Distribute the excess to such health care providers covered by the association as is just and equitable.

Id. 1703.07(c), (d) (emphasis added). The phrase "with review and approval by the commissioner as being consistent with the purposes of this chapter," was added in January 2009. Id. Also in January 2009, the regulations were amended to provide that "the [...