Important MLMIC Demutualization and Sale Update: The New York State Court of Appeals has scheduled oral argument for April 20, 2022 in appeals which 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; or (ii) their employers, who paid the MLMIC premiums pursuant to, and in exchange for, their employees’ services under the employment agreements.
We have previously reported that the New York Court of Appeals will resolve a split in authority between the Appellate Division, First Department, which held, in a four sentence decision in Matter of Schaffer, Schonholz & Drossman, LLP v. Title (171 A.D.3d 465 [1st Dep’t 2019]), that the physician-policyholder’s employer was entitled to the MLMIC proceeds because it paid the policy premiums, and subsequent decisions by the Appellate Division for the Second, Third and Fourth Departments, which 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.
The Court has now scheduled oral argument in these cases for April 20, 2022. The Court’s 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 the Schoch and Maple Medical appeals that will be heard by the Court of Appeals on April 20, 2022. 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 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.