Fargo, N.D.-based Nodak Mutual Insurance Co.’s directors have ignored appeals to allow contested elections for the company’s board, according to a lawsuit that seeks to overhaul how its directors are chosen. Nodak’s chief executive officer said the claim was baseless.
The Ward County Farm Bureau, which filed the lawsuit in Northwest District Court in Minot, wants Nodak Mutual to allow policyholders to nominate board candidates and propose changes in the company’s bylaws.
Nodak is one of North Dakota’s largest insurers. The company has rebuffed attempts to put candidates on the ballot to run against incumbent directors, said John Fjeldahl, president of the Ward County Farm Bureau. In the past two years, five of Nodak’s 12 directors have been re-elected without opposition.
Fjeldahl said the requests were not unreasonable to make of a mutual insurance company, which is owned by its policyholders.
The president of Nodak’s board is Menoken farmer Doug Goehring, who is the Republican candidate for North Dakota agriculture commissioner. Goehring is opposing Democratic incumbent Roger Johnson for the second time in two years, after narrowly losing to Johnson in 2004.
Nodak Mutual says it has 27,000 policyholders, and provides homeowners’ coverage, auto insurance and farm and ranch coverage.
Its board members include former Republican U.S. Sen. Mark Andrews, North Dakota Farm Bureau President Eric Aasmundstad and two GOP state lawmakers, Grand Forks Sen. Duaine Espegard and Finley Rep. William Devlin.
The Ward County Farm Bureau has pushed unsuccessfully in court to overhaul Nodak Mutual’s management practices. It wanted Insurance Commissioner Jim Poolman to order the company to make changes, but a district judge and the North Dakota Supreme Court ruled Poolman could not be forced to do so.
Jim Alexander, Nodak’s chief executive officer, said the Ward County Farm Bureau is advocating “frivolous” legal claims.
“It’s unfortunate that we have one policyholder that continues to file lawsuits about issues that have already been decided,” Alexander said Monday.
The lawsuit demands that Nodak Mutual’s board adopt rules to permit contested elections for its 12-member board, and to allow policyholders to suggest changes to the company’s bylaws. Minot attorney Lynn Boughey, who is a former deputy state insurance commissioner, is representing the Ward County Farm Bureau.
“The fact of ownership demands the right to control that which is owned,” the court filing says. “This right has been denied, and must be remedied.”
Prospective Nodak board members are now screened by a nominating committee that controls access to the ballot.
The Ward County Farm Bureau has twice nominated Jim Lee, who farms near Max in rural Ward County, as a potential candidate, only to have the committee refuse to put him on the ballot. Instead, incumbent directors were allowed to run unopposed.
Lee and Goehring competed for the Republican endorsement for agriculture commissioner, with GOP convention delegates favoring Goehring at the party’s convention in Minot last month.
Alexander said the nominating committee determined Lee was not qualified to serve on Nodak’s board. Shareholders of most companies do not have the right to demand ballot access, Alexander said.
“What we do, I think, is fairly typical in corporate America,” he said. “If I said, ‘I want to serve on General Electric’s board,’ I don’t think I could automatically be put on their ballot.”
The Ward County Farm Bureau has suggested that Nodak allow candidates to be nominated for the board by getting petition signatures from 25 or more policyholders, at least three months before the election. The proposed bylaw has never been put to a vote of policyholders.
Nodak Mutual’s governing structure was reorganized after Poolman took over administrative control of the company in September 2002.
Nodak’s five senior vice presidents had asked Insurance Commissioner Jim Poolman to intervene, claiming company directors had attempted to squelch questions about Nodak’s management and approved dubious royalty payments to the North Dakota Farm Bureau for use of the organization’s logo. Farm Bureau members founded the company in 1946.
Until the shake-up, the Farm Bureau’s directors controlled the company, and only policyholders who made their living farming or ranching could vote for them. The changes brought in outside directors, and gave all policyholders voting rights.
Poolman relinquished control of Nodak Mutual in July 2003.
Topics Lawsuits Agribusiness
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