Important MLMIC Demutualization and Sale Update: In 2022 the New York Court of Appeals will resolve a split between the Appellate Division courts over who is entitled to receive the proceeds of the October 1, 2018 demutualization and sale of Medical Liability Mutual Insurance Company.
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.
In Matter of Schaffer, Schonholz & Drossman, LLP v. Title (171 A.D.3d 465 [1st Dep’t 2019]), the Appellate Division, First Department held, in a four-sentence decision, that the physician-policyholder’s employer was entitled to the MLMIC proceeds because it paid the policy premiums. Subsequently, the Appellate Division for the Second, Third and Fourth Departments each unanimously held, in detailed and well-reasoned decisions, that the policyholders – not the employers – were entitled to the consideration, based on the controlling provisions of the Insurance Law, the MLMIC Plan of Conversion, and the Dept. of Financial Services Decision approving the Plan, along with relevant demutualization and unjust enrichment case law, while specifically noting their disagreement with Schaffer. See Maple Med., LLP v. Scott, 191 A.D.3d 81 (2d Dep’t 2020); Schoch v. Lake Champlain Ob-Gyn, P.C., 184 A.D.3d 338 (3d Dep’t 2020); Shoback v. Broome Obstetrics & Gynecology, P.C., 184 A.D.3d 1000 (3d Dep’t 2020); Columbia Mem. Hosp. v. Hinds, 188 A.D.3d 1337 (3d Dep’t 2020); Maple-Gate Anesthesiologists, P.C. v. Nasrin, 182 A.D.3d 984 (4th Dep’t 2020).
As a result of the split between the First Department, on the one hand, and the Second, Third and Fourth Departments, on the other, the New York Court of Appeals granted leave to appeal in the Schoch, Hinds and Maple Medical cases. We expect that the Court of Appeals will schedule oral argument in the Spring of 2022. The Court’s eventual ruling is expected to resolve on a state-wide basis the competing claims of the physician-policyholders and their employers or former employers to the MLMIC cash consideration.
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 the Schoch, Shoback and Maple Medical Appellate Division appeals, and in the pending appeals in Schoch and Maple Medical before the New York Court of Appeals. 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 email@example.com, or call us at (518) 449-3300.
Nolan Heller Kauffman LLP is a preeminent, award-winning business law firm based in Albany, New York, and serving clients throughout New York State.