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‘THE STATE OF NEW HAMPSHIRE BELKNAP, SS 09-E- Georgia Tuttle, M.D., LRGHealthcare and Derry Medical Center, On Behalf of Themselves And Those Similarly Situated v New Hampshire Medical Malpractice Joint Underwriting Association by and through its Board of Directors and Merwyn Bagan, M.D. Les MacLeod Robert M. Solitro David Jones Peter McArdle Mary Bidgood-Wilson Barry Stem, M.D. James M. Vacearino and ‘The Insurance Department for the State of New Hampshire and its Commissioner, Roger A. Sevigny and The New Hampshire State Treasurer, Catherine A, Provencher MEMORANDUM IN SUPPORT OF MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION I. INTRODUCTION This case can be summed up in a simple commandment: Thou shalt not steal. ‘The State has a well-recognized budget shortfall. The New Hampshire Medical Malpractice Joint Underwriting Association (“JUA") is a self-sustaining mandatory risk sharing plan that provides ‘medical malpractice coverage in New Hampshire. It which currently holds more than $150 million in funds derived solely from excess premiums and accumulated interest. The controlling statutes, regulations and contracts unambiguously instruct that JUA Policyholders — and not the State ~ have an interest in these funds.' Yet, the State, acting through the respondent Roger Sevigny and others, has embarked on a carefully orchestrated plan to transfer those funds to the general fund. Ifimplementation of this plan is not stopped, the funds will be effectively transferred on June 30, 2009, resulting in irreparable harm to JUA Policyholders. That is what is plainly contemplated under the terms of House Bill 2, which is now pending before the Legislature (“HB2”). The State's acts raise many legal and, indeed, constitutional issues, With this motion, the petitioners ~ current or past JUA Policyholders ~ simply ask this Court to enter a narrowly tailore, junction to preserve the status quo between and among the parties pending resolution of these issues. ‘The State has never contributed to the JUA coffers. All funds it currently holds came from Policyholders or JUA Members. Thus, any surplus” belongs exclusively to Policyholders or JUA members. However, within the past year, the prospect of raiding the surplus funds for other state purposes motivated officials within the Department of Insurance (“Department”) to undertake a fundamental change to the JUA’s architecture. Through a combination of regulatory amendments, groundwork was laid for this imminent theft. See Opinion, attached as Exhibit 4 to Verified Petition.’ Then, in a transparent effort to manufacture some shred of legitimacy, the "In limited circumstances, not present in the pending dispute, JUA “member ‘assessments” they paid to the JUA because of inadequate funding. JUA “ licensed to do bus :” may also be entitled to recover embers” are insurance companies ss in New Hampshire. Membership of such companies in the JUA is compulsory. * Under the accounting rules applicable to insurers liabilities. Tis the equivalent of “owners” equin surplus” is the amount by which an insurer's assets exceed its under accounting rules applicable to other businesses. References to the “Verified Petition” are to the Verified Emergency Petition for Extraordinary Writ of Mandamus and Writ of Prohibition filed herewith, Attomey General’s office offered a legal analysis which omits any discussion of the Poli holders’ rights under participating insurance contracts, See Opinion, p. 8 When the Policyholders, citing their contractual, regulatory, and statutory rights under current law to have the SUA. pay excess surplus to them, see Letter dated May 29, 2009, Exhibit 5 to Verified Petition, the Insurance Commissioner, relying on the Attorney General’s opinion, intervened to squelch this legally required outcome. See Letter dated June 2, 2009, Exhibit 6 to Verified Petition (Commissioner contends that actions by the JUA Board will be futile because he will not approve distribution). This unlawful obstruction of required JUA action is made all the more egregious in light of the Board Chairman’s admission to Policyholders that excess surplus payments to them would be likely if orchestrated taking through HB2 were defeated.* As such, there can be no dispute that the actions of the Commissioner and the Attorney General are interfering with the Board fulfilling its fiduciary, contractual and regulatory obligations. ‘The Policyholders — as opposed to the State ~ have a current right under law, contract and regulation to obtain the excess surplus. Recognizing this monumental problem with the State’s pending raid, the Insurance Commissioner and Attomey General are working aggressively and unlawfully to prevent the Board from performing its express contractual and regulatory duties so that HB2 can be passed, enacted and the raid accomplished. See Letter dated June 3, 2009, Exhibit 7 to V ied Petition, ‘The lust for these monies ~ which the Senate Finance Chair has referred to as the “easiest $110 million I have ever raised” — has caused state officials to abdicate current law, vested “On April 27, 2009, the Chairman ofthe JUA wrote to Petitioner Tutle that “If the Governor is ultimately unsuccessful, the JUA Board will most likely be forced to follow regulatory guidelines as regards any possible distribution or dividend, Essentially, the distribution would have to be limited to policy years where the "underwriting results (as compared (0 losses) were so successful that a return premium is justified.” See Exhibit 8 to Verified Petition