New Hampshire Judge Rejects State’s Claim on Malpractice Fund

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A New Hampshire judge has rejected the state’s claim on a $110 million surplus in a fund that underwrites malpractice insurance.

The state counted on $65 million of the money to help balance the budget in the fiscal year that just ended and used the other $45 million toward spending in the current two-year budget.

Superior Court Judge Kathleen McGuire froze the fund last month until its ownership was determined. On Wednesday, she said the fund’s board will decide if the surplus is returned to policyholders as dividends.

“The state did not financially contribute to the creation of (the fund) and has not contributed any funds since that time,” she said.

Gov. John Lynch said the state will appeal.

“These surplus funds belong to the citizens of New Hampshire, who created the Joint Underwriting Authority and gave it tax-exempt status,” he said in a statement.

The state set up the fund, the Medical Malpractice Joint Underwriting Association, in 1975 to fill a gap in the availability of malpractice insurance. It says the policyholders got what they paid for: coverage against malpractice claims.

The attorney general’s office advised lawmakers last winter any surplus could rightfully be used to pay for health care.

Lakes Region General Hospital in Laconia and other policyholders said the money is theirs and the state has no right to it. About half the 900 policyholders are doctors. The rest are nurses, physicians’ assistants, home care providers, nursing homes, a hospital group and other medical providers.

Lynch, a Democrat, and the Democratically controlled Legislature have insisted the state created the fund to provide access to malpractice insurance at a time many doctors could not buy it. The intent was to make the insurance available without making it so cheap the private market suffered.

State GOP Chairman John H. Sununu said he wasn’t surprised at McGuire’s ruling.

“It’s not surprising that the court did the right thing and blocked Gov. Lynch’s attempted theft of the JUA surplus funds,” he said. “The court’s decision confirms that the Democrats’ budget is a real disaster for the state of New Hampshire.”

House Speaker Terie Norelli, a Portsmouth Democrat, said that in establishing the fund “the Legislature certainly did not intend for the taxpayers to subsidize a windfall for doctors.”

The state would leave $42 million in the fund to cover claims. The medical providers questioned if that is adequate. The surplus is from premiums, investment income, efficient operations and good claims management. The surplus also grew partly because the association did not pay state taxes or assessments charged private companies to cover the Insurance Department’s operating costs.