On October 1, 2018, Medical Liability Mutual Insurance Company (“MLMIC”) was converted from a mutual insurance company to a stock company and sold to Berkshire Hathaway for $2.502 billion in cash consideration. Following MLMIC’s sale, litigation ensued throughout New York State between healthcare providers and their employers or former employers over which of them was entitled to receive the cash proceeds of sale: (i) the employees/healthcare providers, who became MLMIC policyholders—and thereby acquired an ownership interest in MLMIC—as part of the bargained-for exchange of consideration under their employment agreements; or (ii) their employers, who paid the MLMIC premiums pursuant to, and in exchange for their employees’ services under, the employment agreements.
On December 9, 2020, the Appellate Division, Second Department issued its decision in Maple Medical, LLP v. Joseph Scott, et al., 2020 NY Slip Op 07366 (2d Dep’t Dec. 9, 2020), ruling that the employees/policyholders are entitled to the MLMIC proceeds. In its Decision, the Second Department expressed its agreement with the Third and Fourth Departments’ decisions in Top of Form
Schoch v. Lake Champlain OB-GYN, P.C., 184 A.D.3d 338 (3d Dep’t June 18, 2020); Shoback v. Broome Obstetrics & Gynecology, P.C., 184 A.D.3d 1000 (3d Dep’t June 18, 2020); and Maple-Gate Anesthesiologists, P.C. v. Nasrin, 182 A.D.3d 984 (4th Dep’t 2020);Bottom of Form and rejected the First Department’s contrary holding in Matter of Schaffer, Schonholz & Drossman, LLP v. Title, 171 A.D.3d 465 (1st Dep’t 2019).
With the Maple Medical decision, the Second, Third and Fourth Departments have all ruled that the Policyholders are entitled to the MLMIC payout, leaving only the First Department’s decision in Schaffer supporting claims by employers to MLMIC funds. Notably, each of the other Departments have expressly rejected Schaffer. See, e.g., Maple Medical (“We do not agree with our colleagues in the First Department”).
Uniformity throughout New York State is likely to come in the first half of 2021. In early 2021, the First Department is expected to hear oral argument in Mid-Manhattan Physician Services, P.C. v. Dworkin, 2019 WL 4261348 (Sup Ct, New York County 2019). Given the well-reasoned analyses in the decisions of the other Departments, we expect that the Frist Department will give serious consideration to reversing its earlier decision in Schaffer.
In addition, the New York Court of Appeals will be hearing an appeal of the Third Department’s decision in Schoch. The Court is expected to hear argument in the Spring of 2021. An earlier decision from the First Department in Dworkin in favor of the Policyholder would likely render this appeal moot.
Nolan Heller Kauffman LLP represents more than 100 healthcare professionals in over 50 cases throughout New York State relating to disputes over MLMIC cash consideration, including those in Schoch, Shoback, Maple Medical and Dworkin. If you are or were a MLMIC policyholder and have questions, or would like to learn more about this subject, please contact Justin A. Heller, Esq. at firstname.lastname@example.org or Alexandra B. Becker, Esq. at email@example.com, or call us at (518) 449-3300.
Nolan Heller Kauffman LLP is a preeminent, award-winning business law firm with offices in Albany and Syracuse, New York, and serving clients throughout New York State.