A federal court ruling has cleared the way for Pennsylvania to access surplus funds held by the Pennsylvania Professional Liability Joint Underwriting Association (JUA), reigniting debates over the insurer's public versus private status.
According to the AM Best report, the U.S. District Court for the Middle District of Pennsylvania determined that the state-created insurer operates as a public entity, giving the commonwealth sole legal interest in its assets and barring the JUA from making claims against the state.
The JUA was established in 1975 by Pennsylvania lawmakers as an insurer of last resort during a medical malpractice insurance crisis.
The current legal dispute dates back to 2016 when state legislators sought to transfer the association's surplus funds to the state’s general fund and attempted to gain control of the JUA through legislative measures. Initially, lower courts sided with the JUA, ruling it was a private entity.
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As of March 2020, the JUA held more than $298.27 million in surplus, which the court described as an “exceptional stockpile” accumulated largely through investments.
The Pennsylvania Department of Insurance previously requested that the JUA reduce its surplus, but the insurer’s board argued that it lacked legal authority to establish an operating range for excess surplus. The JUA also clarified that it has never distributed dividends to policyholders.
According to the district court, in the event of the JUA’s dissolution, its assets would be distributed according to a plan created by the board and subject to approval by the state insurance commissioner. The appeals court emphasized that, given the JUA’s lack of private stakeholders or charitable purpose, its assets would likely revert to the commonwealth.
The court stated that even if the JUA’s board attempted to allocate assets to its members, approval from the commissioner would be improbable. Efforts to obtain comments from the JUA were not successful.
This ruling shifts the management of significant surplus funds back to state control, potentially impacting future operations of the JUA.
How should Pennsylvania balance public access to surplus funds while maintaining the JUA’s operational integrity? Share your thoughts in the comments.
