Important MLMIC Demutualization and Sale Update: Policyholders who signed the MLMIC Consent Form in favor of their employers may still be able to recover their cash consideration from 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.  MLMIC’s Plan of Conversion provided that the proceeds of sale would be distributed to policyholders in exchange for the extinguishment of their membership interests in MLMIC.  Following MLMIC’s sale, litigation ensued throughout New York State between policyholder-employees and their employers, who maintained that they were entitled to the consideration because they had paid their employees’ MLMIC premiums.

The New York Court of Appeals resolved the issue in favor of policyholders in Columbia Mem’l Hosp. v. Hinds, Schoch v. Lake Champlain OB-GYN, P.C., Maple Medical, LLP v. Scott et al., 2022 N.Y. LEXIS 943, 2022 NY Slip Op 03306, 38 N.Y.3d 253 (2022), holding that “when an employer pays premiums to a mutual insurance company to obtain a policy of which its employee is the policyholder, and the insurance company demutualizes, absent contrary terms in the contract of employment, insurance policy, or separate agreement, the policyholder is entitled to the proceeds from the demutualization.”

However, a great many – perhaps thousands – of policyholders executed a Consent Form provided by MLMIC, which permitted policyholders to designate their policy administrators as their agent to receive their allocated share of cash consideration.  In these cases, the policy administrators (typically employers) received the consideration from MLMIC.  Many of these policyholders maintain that they were misled by their policy administrators into signing the Consent Forms.

Following the Court of Appeals’ decision in Hinds, the Appellate Division, First Department recently issued two decisions that impact claims by policyholders who designated their policy administrator-employers to receive their consideration.

In Riggs v. Brooklyn Hosp. Ctr., 207 AD3d 405 (1st Dept 2022]), the court rejected claims by a physician-policyholder that his former employer had obtained his MLMIC proceeds through fraud and breach of fiduciary duty. In that case, the employer was not the policyholder’s policy administrator,  and the policyholder had executed an assignment of the proceeds (not the MLMIC Consent Form).  The First Department held that, absent the policy administrator designation, the employer did not owe a fiduciary duty to its employee—particularly where the employment relationship had ended years prior to the assignment. Further, the assignment agreement disclosed sufficient information about the MLMIC demutualization to put the policyholder on notice of the rights he was assigning, thereby undercutting any claim that he justifiably relied on the employer’s misleading statements or omissions.

However, in Cordaro v AdvantageCare Physicians, P.C., ___AD3d___, 2022 NY Slip Op 05267 (1st Dept 2022), the First Department reversed the lower court’s dismissal of the policyholders’ fraud and breach of fiduciary duty claims. In contrast to Riggs, the employer in Cordaro was the policyholder-employees’ policy administrator. As such, the First Department held that the employer, as policy administrator, owed a fiduciary duty to its employees by virtue of being their agent. Based on that fiduciary relationship, the court held that the policyholder-employees’ allegations that their policy administrator misled them into signing the Consent Form by (a) withholding relevant information about the MLMIC sale transaction and (b) advising the policyholders that they were required to sign the form were sufficient to maintain their breach of fiduciary duty and fraud causes of action (among others).

Cordaro provides support for policyholders who were misled into executing the MLMIC Consent Forms and who wish to pursue recovery of their MLMIC distribution. Although not addressed in Riggs or Cordaro, another factor supporting policyholders’ claims is the fact that the MLMIC Consent Form does not purport to “assign” the proceeds; it simply designates the policy administrator to receive the consideration as “agent”.

It is important to emphasize that the likelihood of success of recovering the MLMIC cash distribution from a policy administrator that received it by reason of a signed Consent Form will depend on the particular facts involved.

Nolan Heller Kauffman LLP has represented more than 100 healthcare professionals in over 50 cases throughout New York State relating to disputes over MLMIC cash consideration, including (a) the policyholders in two of the three Appellate Division cases that went up on appeal to the Court of Appeals and led to the above-referenced Hinds decision (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]) and (b) the policyholders in the Cordaro case discussed above.

If you were a MLMIC policyholder prior to its demutualization and have questions, or would like to learn more about this subject, please contact Justin A. Heller, Esq. at or Brendan J Carosi, Esq. at, 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.

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