2009-555, Georgia Tuttle, M.D. & a. v. New Hampshire Medical Malpractice Joint Underwriting Association & a.

Foundation and National Association of Mutual Insurance Companies, as amici William L. O’Brien, of Concord, & a. for the New England Legal

defendants. page is: http://www.courts.state.nh.us/supreme. a.m. on the morning of their release. The direct address of the court's home Smith and J. David Leslie on the brief, and Mr. Leslie orally), for the State reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00 and Rackemann, Sawyer & Brewster, P.C., of Boston, Massachusetts (Eric A. attorney general, and Glenn A. Perlow, assistant attorney general, on the brief), Michael A. Delaney, attorney general (Anne M. Edwards, associate

for the petitioners. O’Connell, and Gordon J. MacDonald on the brief, and Mr. Fitzgerald orally), Nixon Peabody, LLP, of Manchester (Kevin M. Fitzgerald, W. Scott

to press. Errors may be reported by E-mail at the following address: Opinion Issued: January 28, 2010

No. 2009-555 editorial errors in order that corrections may be made before the opinion goes Belknap Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any Readers are requested to notify the Reporter, Supreme Court of New ___________________________

well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule 22 as amounted to $110 million. p. 2 Act is based upon the State’s assertion that the excess surplus held by the JUA Constitution, we affirm. results in impairment of contract rights in violation of the New Hampshire

had a vested right in any excess surplus premiums collected by the JUA. The

state agency. Because we find that the Act constitutes a retrospective law that

pursuant to their contracts with the JUA and certain administrative rules, they Treasury (Treasury) and the State Treasurer. The petitioners alleged that, right to any “excess surplus” funds held by the JUA because the JUA is not a and for a writ of prohibition against the Department, the New Hampshire State of the Federal Constitution. The trial court also decided that the State had no violation of Part I, Article 23 of the State Constitution and Article 1, Section 10

Federal Constitution, and that it impaired the petitioners’ contract rights in

petition for a writ of mandamus against the JUA, its board of directors, the evaluate its current surplus and determine what in its judgment should be on their own behalf and on behalf of a purported class of policyholders, filed a of the State Constitution and the Fifth and Fourteenth Amendments to the The request for mandamus asked that the court compel the JUA “to constituted a taking without just compensation in violation of Part I, Article 12 during fiscal years 2009, 2010, and 2011. The trial court ruled that the Act

In June 2009, the petitioners, present and past policyholders of the JUA,

I. Procedural History Association (JUA) to transfer a total of $110 million to the State’s general fund

requires the New Hampshire Medical Malpractice Joint Underwriting (McGuire, J.) declaring Laws 2009, 144:1 (the Act) unconstitutional. The Act Insurance, and the State Treasurer appeal an order of the Superior Court CONBOY, J. The State of New Hampshire, the Commissioner of

American Medical Association, as amici curiae. Manzelli on the brief), for the New Hampshire Medical Society and the Sulloway & Hollis, PLLC, of Concord (Martin P. Honigberg and Amy

House, and Sylvia B. Larsen, Senate President, as amici curiae. David I. Frydman, House Legal Counsel, for Terie Norelli, Speaker of the

Representatives. curiae, joined by forty-nine members of the New Hampshire House of cases. p. 3 because it impairs their contract rights. This appeal followed.

premiums, have an outstanding judgment due for premiums, or who do not

of Part II, Article 5 of the State Constitution. The trial court consolidated the Federal Constitution; and (4) it represented an unconstitutional tax in violation because it constitutes a taking of property belonging to the petitioners, and contracts with the JUA and, thus, violated Article I, Section 10, Clause 1 of the 3

legally in the state of New Hampshire,” other than those who fail to timely pay

agency, and that the Act violates both the State and Federal Constitutions Fourteenth Amendments to the Federal Constitution; (3) it impaired their a state agency. After a hearing, the trial court ruled that the JUA is not a state asserted that any excess surplus funds belong to the State because the JUA is and that the public interest required such availability. medical liability insurance was not readily available in the voluntary market, exp. Dec. 1, 2008). An “eligible risk” is “any health care provider operating insurance for eligible risks.” N.H. Admin. Rules, Ins 1701.01 (eff. Dec. 1, 2000, The JUA “was established to make available medical malpractice

with some modifications, since 1975. operation (the plan) for the JUA. See id. 1703. The plan has been in place, Admin. Rules, Ins 1700 et seq. The regulations also establish the plan of provide insurance coverage addressing the public need. See generally N.H. violated Part I, Article 12 of the State Constitution and the Fifth and (2006). Accordingly, the commissioner adopted regulations creating the JUA to the State Constitution; (2) it constituted a “taking” of property and, thus, contingent upon actions by the JUA’s board of directors. The State also See RSA 404-C:1 impaired their vested contract rights and, therefore, violated Part I, Article 23 of In 1975, the insurance commissioner determined that professional

II. Facts

funds held by the JUA, but have, at most, only an expectancy interest that is Act unconstitutional because: (1) it was a retrospective law that substantially that the petitioners do not have vested property rights in any excess surplus The parties filed cross-motions for summary judgment. The State argued

1703.07(d).” insurance contract[s] and [New Hampshire Administrative Rule] Ins taking action in furtherance of [their] erroneous interpretation[s] of the

relief against the State of New Hampshire. They asked the court to declare the purported class of policyholders, filed a petition for declaratory and injunctive Also in June 2009, the petitioners, on their own behalf and on behalf of a

prohibition asked that the court prohibit the Department and Treasury “from declared earnings and returned to the [petitioners].” The request for a writ of subsequently sold policies.

p. 4 reimbursed through assessments against policyholders and surcharges on

necessary. should determine that a deficit no longer exists.

are to be satisfied by assessments against the members, who are then to be cover claims arising from policies written from 1975 to 1985. guarantee performance of JUA obligations. Any deficits in the post-1985 fund commissioner does not appoint one. other time. The State is not responsible for any JUA shortfalls, and does not

thereon. in the state. separately accounted for.

experienced a deficit and, therefore, no assessments or surcharges have been issued in the state beginning in 1986, and continuing until the commissioner Id. 1703.07(f). The post-1985 JUA fund has not

to a finding by the commissioner that the JUA did not have sufficient assets to insurers, and the board itself acts as a servicing carrier if, for any reason, the the JUA at the time of its creation, and has made no contributions to it at any

See id. 1703.07(a), 1703.04(p). The State did not contribute funds to

reserves in question are funded by policy premiums and the interest earned allowances and losses, based upon their portion of net direct premiums written Compare id. 1703.07 with id. 1703.08. The JUA JUA’s reserves accrued, and policies issued, on and after January 1, 1986, are the state to be members of the JUA. Id. 1703.08(a), (b), (d). The

surcharge was assessed on every medical malpractice liability insurance policy Council and of the commissioner. 1703.07 with id. 1703.08. To cover the deficits incurred prior to 1986, a 15%

The JUA’s funding mechanism changed on January 1, 1986, in response commissioner from among member insurers or qualifying non-member

Id. 1702.03(a).

insurers are required to share in the JUA’s premiums, expenses, servicing

The plan requires all insurers authorized to write liability insurance in

into contracts and conducts its business independently of the Governor and

insuring functions are carried out by a “servicing carrier” chosen by the manage JUA funds by investing premiums. Id. 1703.04(p). The actual Id. 1703.04(l). The authority of the board includes the power to operate and reasonable or necessary powers relating to the operation of the association.” commissioner is required to “grant the board the authority to exercise all The JUA is governed by a board of directors. Id. 1703.04. The

and former JUA policyholders, are such eligible risks. market.” Id. 1702.04. The petitioners, as healthcare providers and current “receive the same level of service as is generally available in the voluntary Rules, Ins. 1703.01(e). Each eligible risk insured by the association must provide the information necessary to effect insurance coverage. N.H. Admin. provide in full: named insured shall pay to the [JUA] the named insured’s part of p. 5 assessment against all policyholders during such year, and the directors of the [JUA] may make a premium contingency

of the Plan.” The policy provisions relating to assessments and dividends

exists at the end of any fiscal year the Plan is in effect, the board of

granted by RSA 404-C:1 and by RSA 400-A:15, and is subject to the provisions Joint Underwriting Association Plan established pursuant to the Authority “has been issued by the [JUA] under the New Hampshire Medical Malpractice named insured agrees, that in the event an underwriting deficit

LIABILITY POLICY (Assessable and Participating).” Each policy provides that it subject to the provisions of the Plan. The Plan provides, and the Authority granted by RSA 404-C:1 and by RSA 400-A:15, and is Underwriting Association Plan established pursuant to the

levied, in proportion to the amount paid by each member. titled, “LIABILITY POLICY (Assessable and Participating),” or “GENERAL

the [JUA] under the New Hampshire Medical Malpractice Joint 12. Assessable Policy Provision. This policy has been issued by

the purposes of this chapter, the board added in January 2009.

by the association as is just and equitable. apply such excess to repay members for assessments previously The JUA issues individual policies to its policyholders. The policies are

N.H. Admin. Rules, Ins. 1701.01. that consumers of health care services have adequate access to needed care.” amended to provide that “the [JUA] will promote the public interest in ensuring review and approval by the commissioner as being consistent with Id. Also in January 2009, the regulations were the commissioner as being consistent with the purposes of this chapter,” was members for all assessments pursuant to Ins 1703.07(c), then with Id. 1703.07(c), (d) (emphasis added). The phrase “with review and approval by amount necessary to pay losses and expenses and to reimburse

(2) Distribute the excess to such health care providers covered amount necessary to pay losses and expenses, the board shall association; or (1) Against and to reduce future assessments of the application of such excess in one or both of the following ways:

(d) If premiums written on association business exceed the

(c) If premiums written on association business exceed the

provides as follows: In the event of fund excess, as is purportedly the case here, the plan to the JUA with the following caveat: p. 6 that the Department commissioned on behalf of the JUA, which was submitted conclusion.” The report was premised upon an estimate of “risk-based capital”

Department has not engaged in any formal actuarial exercise in reaching this

amount of capital needed to support the [JUA].” The report stated that “[t]he board.” The Department concluded that the “surplus significantly exceeds the management and sound investments over a number of years by the [JUA]

purposes.

providing medical malpractice coverage in New Hampshire. $145 million . . . [as] a result of very efficient operations, good claims

insures about 900. It has accumulated assets of $152 million.

[The] report is not intended or necessarily suitable for any other denied. The board has not requested a distribution since that time. then made. The board’s 2001 application for a distribution, however, was level of surplus required to support its ongoing operations of distribution and received approval from the commissioner; distributions were JUA’s 2008 year-end surplus “is expected to be in the range of $140 million to will consider [these] findings for the purposes of evaluating the It is [the actuarial firm’s] understanding that [JUA] management

Of approximately 11,000 health care providers in New Hampshire, the JUA

the terms of this policy with respect to the payment of premium. policy, provided the named insured shall have complied with all the [JUA] in accordance with law and as made applicable to this

its policyholders. In 1999 and 2000, the board submitted proposals for In March 2009, the Department prepared a report indicating that the

approximately $8.8 million of the estimated $40 million in premiums written. malpractice insurance in New Hampshire based on premiums written. It wrote In 2008 the JUA was one of the three largest writers of medical

such conditions as shall be determined by the board of directors of

contingency assessment. Since 1986, the JUA has sought to make three distributions of surplus to cancel the policy of any policyholder who fails to pay the premium respect to that year. The Plan further provides that the [JUA] shall (Emphasis omitted.)

participate in the earnings of the [JUA], to such extent and upon 13. Participating Policy Provisions. The named insured shall

premium payment paid by the named insured to the [JUA] with the premium contingency assessment based upon the policy p. 7 JUA surplus under their policies, the regulations comprising the plan, or the

Constitution, since the petitioners do not have a vested property right in any

constitute an unconstitutional “taking” under either the State or the Federal against state action . . . .” Thus, the State argues that the Act does not the JUA can reasonably claim to have a vested right in surplus protected underserved persons. supporting programs that promote access to needed health care for general fund. This sum shall be used for the purpose of

only as it reflects on the question whether a person purchasing insurance from

additional sum of $22,500,000 from the Post-1985 Account to the

Laws 2009, 144:1, II. The Act accordingly provides: in such funds. It asserts that “[t]he nature of the JUA is properly considered it argues, we need only determine whether the petitioners have a “vested right” determine whether any JUA excess surplus funds belong to the State. Rather, additional sum of $22,500,000, and by June 30, 2011 the 2009 the sum of $65,000,000, and by June 30, 2010 the no later than July 31, 2009 for the fiscal year ending June 30,

determination as to what amount, if any, constitutes excess surplus. under any significant financial risk.” The JUA has not made its own the surplus to be transferred to the General Fund without placing the [JUA] transfer of the excess surplus of the Post-1985 Account to the general fund.” of promoting access to needed health care would be better served through a determined by the insurance commissioner,” and concluded that “the purpose The State asserts that, under the circumstances of this case, we need not

III. The Parties’ Arguments assets of the [JUA] are hereby authorized and directed to transfer

Laws 2009, 144:1, I.

retain a surplus of $55 million to support the [JUA], allowing the remainder of

in excess of the amount reasonably required to support its obligations as

responsibility and authority for the custody or investment of the through its board of directors, and any person having Notwithstanding any other provision of law, the [JUA], by and

capital estimate and reported that it “believes that it would be reasonable to any other purpose.” The Department nevertheless relied upon the risk-based JUA’s] use as described . . . . It is neither intended nor necessarily suitable for funds held in surplus by the [JUA] in the Post-1985 Account are significantly Governor signed into law on June 30, 2009. The legislature found that “the On June 24, 2009, the legislature passed House Bill 2, which the

report reiterated, “[The actuarial firm has] prepared this report solely for [the Under the heading “DISTRIBUTION AND USE,” the risk-based capital estimate in their own right, but also derivatively on behalf of the JUA.

p. 8 their policies. The petitioners also assert that they may bring claims not only permit impairment of the beneficial interests that have already vested under regulations comprising the plan may be altered by the legislature does not

New Hampshire Constitution. Furthermore, they contend, the fact that the

and deliberate consideration.” state government will not be interfered with until the matter has received full Clause and constitutes a retrospective law prohibited by Part I, Article 23 of the

constitutional.” (quotation omitted)). be unconstitutional where it is susceptible to a construction rendering it Claremont v. Truell, 126 N.H. 30, 39 (1985) (“A statute will not be construed to petitioners’ ability to assert claims derivatively on behalf of the JUA. Id. (quotation omitted); see also City of necessary to serve an important public purpose. The State also contests the test requiring that the court examine whether the Act is reasonable and State’s sovereign authority to safeguard the welfare of its citizens. [i]nescapable grounds; and the operation under it of another department of the Act’s interference with their contract rights violates the Federal Contract proscription against governmental impairment of contract rights and the (quotation omitted). “It will not be declared to be invalid except upon premiums paid and the interest accumulated thereon. They assert that the is to be presumed.” Opinion of the Justices, 118 N.H. 582, 584 (1978) the JUA is not a state entity and that its funds are private funds comprised of constitutionality of an act passed by the coordinate branch of the government burden of proof.” State v. Pierce, 152 N.H. 790, 791 (2005). “[T]he 67, 70 (2006). “The party challenging a statute’s constitutionality bears the question of law, which we review de novo.” Akins v. Sec’y of State, 154 N.H. action is well-established. “Whether or not a statute is constitutional is a analytical framework for assessing a constitutional challenge to legislative United States Trust Co. v. New Jersey, 431 U.S. 1, 21 (1977). The relevant Energy Reserves Group v. Kansas Power & Light, 459 U.S. 400, 410 (1983);

This controversy centers upon the tension between the constitutional

in violation of both the State and Federal Constitutions. They maintain that IV. Analysis

Furthermore, it argues, even if the Act were a retrospective law, it would not have the prerequisite vested property right in any JUA surplus. retrospective laws or the Federal Contracts Clause because the petitioners do policies and the regulations in place at the time their policies were purchased, which they have vested beneficial rights under the plain language of their The petitioners counter that the Act constitutes a taking of property in

that the Act does not violate the State constitutional proscription against statutes by whose authority the JUA was created. The State likewise contends p. 9 9 Contract Clauses, respectively. contract,” and will refer to their equivalent protections as the Federal and State

impairs those rights, the Act “must be deemed retrospective.” considerations already past, must be deemed retrospective.”

not simply retroactive application of a law, was alleged.”

protections found in the contract clause of the United States Constitution.” rights, it may not be applied retroactively.”

impairs a contract, or where a law abrogates an earlier statute that is itself a Goldman & Elliott, 151 N.H. at 772 (quotation omitted).

below, that the petitioners’ contracts embody vested rights, and that the Act imposes a new duty, or attaches a new disability, in respect to transactions or years 200 p. 9 9, 2010, and 2011. However, because we find, for the reasons stated vested property rights). The transfers required by the Act occur over fiscal resolve issues raised under part I, article 23 where contract impairment, and Div. of Aeronautics, 152 N.H. 30, 37 (2005) (contract rights can constitute claims are grounded in their contracts with the JUA. See, e.g., Hughes v. N.H. The vested rights that the petitioners assert as the predicate for their

punishment of offenses.” “Part I, Article 23 does not expressly reference Goldman & Elliott, 151 N.H. 770, 772 (2005) (quotation omitted). Thus, “[i]f therefore, should be made, either for the decision of civil causes, or the 23 [of the State Constitution] to offer equivalent protections where a law In the Matter of

vested rights, acquired under existing laws, or creates a new obligation, 537 (200 p. 9 9). We have held that “every statute which takes away or impairs retroactive application of a law.” Petition of Concord Teachers, 158 N.H. 529, federal counterpart, this court has relied on federal contract clause cases to “The party asserting a Contract Clause violation must first demonstrate

625, 630 (1 p. 9 992).

“Retrospective laws are highly injurious, oppressive, and unjust. No such laws, understand article I, section 10 [of the Federal Constitution] and part I, article Subpoena (Issued July 10, 2006), 155 N.H. 557, 564 (2007). “We therefore

New Hampshire [retrospective law] provision affords more protection than its say so.” State v. Fournier, 158 N.H. 214, 221 (200 p. 9 9) (quotation omitted). “Although the infringe on constitutionally protected rights, we cannot avoid our obligation to

Part I, Article 23 of the New Hampshire Constitution provides:

N.H. 226, 231-33 (1 p. 9 983). Constitution, citing federal opinions for guidance only. See State v. Ball, 124 (citations omitted). We address the petitioners’ claims first under the State

Alliance of American Insurers v. Chu, 571 N.E.2d 672, 678 (N.Y. 1 p. 9 991)

The effects of the legislation are obvious and acknowledged. If those effects “In this case, however, there is no question of statutory interpretation. petitioners whose contracts have expired may not assert such claims. p. 10 “policyholders”) whose Contract Clause claims we examine, because the documented by their insurance policies. It is these petitioners (hereafter

State’s legitimate exercise of its reserved police power. striking a balance between constitutionally protected contract rights and the undermining the core task involved in resolving Contract Clause claims: parties.” (quotation omitted)). The undisputed facts of this case establish that

contract is substantially impaired.”). (D. Haw. 2000) (“The contracts clause is only implicated when an existing University of Hawaii Prof. Assembly v. Cayetano, 125 F. Supp. 2d 1237, 1240

emphasis on a variety of factors.

to avoid a mechanical application of factors or criteria. Otherwise, we risk insurance policy, as in all contracts, is to carry out the intent of the contracting Ins. Co., 156 N.H. 719, 722 (2008) (“The fundamental goal of interpreting an An insurance policy is a contract. See, e.g., Bates v. Phenix Mut. Fire

are necessarily alike.” 1. Contractual Relationship

A. Substantial Impairment

expressed the balancing test using an array of phraseologies and placing

upon its own circumstances.” (quotation omitted)). Accordingly, we take care if it is reasonable and necessary to serve an important public purpose.” Assn. v. Blaisdell, 290 U.S. 398, 430 (1934) (“Every case must be determined (2d Cir. 2006), cert. denied, 550 U.S. 918 (2007); see also Home Bldg. & L.

Ultimately, “Contract Clause cases involve individual inquiries, for no two cases that contractual relationship, and whether the impairment is substantial.” Claridge of Pompano Condominium, 378 So. 2d 774, 780 (Fla. 1979). N.W.2d 468, 474 (Mich. 1994), cert. denied, 514 U.S. 1127 (1995); Pomponio v.

We note that other courts reviewing Contract Clause claims have

Furlough, 135 N.H. at 634 (quotation omitted).

must be performed, and . . . [the] law . . . may pass constitutional muster only balancing of the police power and the rights protected by the contract clauses (quotation omitted). If the legislation substantially impairs the contract, “a

whether there is a contractual relationship, whether a change in law impairs Claremont, 147 N.H. 73, 77 (2001). “This inquiry has three components:

as to whether the legislation operates as a “substantial impairment of a Contract Clause analysis in New Hampshire requires a threshold inquiry entitlement to share in the company’s excess surplus. p. 11 participating policies in other contexts have in common a policyholder’s accordance with law and as made applicable to this policy.” We note that

such conditions as shall be determined by the board of directors of the [JUA] in

insured “shall participate in the earnings of the [JUA], to such extent and upon also explicitly set out in the body of the policy, which provides that each Participating).” Each policyholder’s right to participate in excess earnings is

the company.”); Participating),” or “GENERAL LIABILITY POLICY (Assessable and

773 (6th Cir.), cert. denied, 363 U.S. 828 (1960) (“Mutual plan policies are

Ohio State Life Insurance Company v. Clark, 274 F.2d 771,

policyholders to participate in distributions from the annual divisible surplus of unambiguous. The title of each is either “LIABILITY POLICY (Assessable and like the policies issued by mutual insurance companies, entitle the taxpayer is a stock insurance company, it issues ‘participating’ policies which, Life Ins. Co. v. United States, 828 F.2d 1222, 1223 (8th Cir. 1987) (“Although

this court.” since Contract Clause protections apply in either case.

public contracts alike”). In this case, the relevant language in each policy is clear and

(citations omitted).

Contractual language is construed according to its common meaning, and this with the contractual arrangements between private citizens.” (quotation, determined based upon an objective reading of the agreement as a whole. (quotations omitted). “When interpreting contracts, the intent of the parties is

Riblet Tramway Co. v. Stickney, 129 N.H. 140, 146 (1987)

“Generally, the construction of a written contract is a question of law for is not contingent upon the JUA’s status as either a public or private entity,

Supp. 2d 492, 508 (D. Md. 2009) (“the Contract Clause applies to private and U.S. 1032 (1989); Fraternal Order of Police v. Prince George’s Cty., 645 F. Eckles v. State of Oregon, 760 P.2d 846, 853 (Or. 1988), appeal dismissed, 490 individuals’ contracts with the State are protected under the Contract Clause);

and Federal Contract Clauses prohibit the adoption of laws that would interfere Jury Subpoena (Issued July 10, 2006), 155 N.H. at 564 (“Generally, the State

conclusion was correct. Our examination of the policyholders’ contract rights JUA is not a state entity. We need not, however, determine whether its We note that the trial court, after detailed analysis, concluded that the

JUA. that impairs the contractual relationships between the policyholders and the Next, we must determine whether the Act constitutes a change in law

2. Impairment of Contractual Relationship future assessments, or distribution to the policyholders. Under either option, p. 12 contracting parties.

the JUA regulations. Those regulations define the obligations of the were issued, and that was incorporated into the policies by reference, includes

application of excess funds in one or both of two specified ways: either against

applicable to this policy.” The law that was in effect at the time the policies

in its terms.” (quotation omitted)); surplus JUA funds. provide no other alternative to the JUA board for disposition of any excess

end of any fiscal year and, conversely, entitling the policyholders to participate by the association as is just and equitable.” to pay premium assessments in the event an underwriting deficit exists at the association; or (2) Distribute the excess to such health care providers covered content, “assessable and participating,” expressly obligating the policyholders following ways: (1) Against and to reduce future assessments of the earnings of the [JUA]” and the incorporated regulations mandate the board’s any excess surplus. The policies entitle the policyholders to “participate in the confers upon the policyholders a vested contractual right in the treatment of by the board of directors of the [JUA] in accordance with law and as made We find that the language of the policies and regulations, taken together,

into and form a part of it, as if they were expressly referred to or incorporated 1703.07(d). These regulations, incorporated into the participating policies, making.”); N.H. Admin. Rules, Ins

policyholders’ insurance contracts are, therefore, by both their titles and their board shall authorize the application of such excess in one or both of the The regulations provide that, in the event of an excess surplus, “the

contract is formed define the obligation of that contract.”). by the phrase “to such extent and upon such conditions as shall be determined impair the obligation of future contracts because the laws in existence when a

and place of the making of a contract, and where it is to be performed, enter

Blaisdell, 290 U.S. at 429-30 (“[T]he laws which subsist at the time

(“To know the obligation of a contract we look to the laws in force at its

company’s experience or the discretion of its management.”). The dividends. These dividends are returned to policyholders based on the policyholder expects to receive premium rebates in the form of policyholder

The nature of the policyholders’ participation in JUA earnings is qualified Directors.”); to time to the respective mutual plan policies by the company’s Board of

premium than the nonparticipating policy for the same insurance, but the 118 F.3d 1563 (Fed. Cir. 1997) (“[A] participating policy has a higher stated

Gulf Life Ins. Co. v. United States, 35 Fed. Cl. 12, 13 (1996), aff’d,

profits of the company to the extent that such profits are apportioned from time ‘participating’ policies in that . . . such policies are entitled to share in the or earnings of the fund.

p. 13 potentially result from immediate distribution.

dividend, as argued by the State. discretionary, the policyholders had no property or contract rights in the assets benefit from the surplus by receipt of a dividend. to losses, and because the payment of dividends to policyholders was upon that fund, because the policyholders had no responsibility to contribute

ability to protect against any undermining of the private market that could distribution of such funds, the JUA board and the commissioner have the treatment of any surplus funds for their benefit, but not necessarily in the 571 N.E.2d at 677. In Chu, however, where the legislation at issue diverted

plan in place at that time, and are not contingent upon the declaration of a surplus by its reinvestment for application against future assessments; or they concluding that, because the state alone was liable for the payment of claims $190 million from the state insurance fund to the state’s general fund, Chu, 571 N.E.2d 672. In Methodist Hospital, the court upheld the transfer of 1985), appeal denied, 474 U.S. 801 (1985), as contrasted to its analysis in Methodist Hospital of Brooklyn v. State Insurance Fund, 476 N.E.2d 304 (N.Y. contract rights are vested from the New York Court of Appeals’ analysis in rights is twofold. First, because the policyholders’ vested rights are in the We draw support for our conclusion that the policyholders’ beneficial

vested in the policyholders upon issuance of their policies under the regulatory excess surplus is vested and not contingent: either they benefit from the rights in the treatment of any excess surplus are contract rights, those rights 1702.04, 1703.11(a); RSA 404-C:2, II (2006). Second, because the beneficial

non-mutual insurance company);

The significance of the policyholders’ beneficial, rather than possessory,

distributed to the contributors). Here, the policyholders’ interest in any JUA the monies would either remain in the fund to accumulate interest or be benefit. property right in the subject fund where the governing statute provided that in the distribution of the funds, but in the treatment of the funds for their Chu, 571 N.E.2d at 679 (finding a vested vested contract right to the beneficial interest in the surplus” of the issuing Life Insurance Company, 274 F.2d at 777 (holding that policyholders had “a constitute a vested property right, subject to protection, see, e.g., Ohio State (quotation, brackets and emphasis omitted), such interest may, nonetheless, Nordic Inn Condo. Owners’ Assoc. v. Ventullo, 151 N.H. 571, 575-76 (2004) something (such as a trust or an estate), as opposed to legal title to that thing,” possessory. While a “beneficial interest is defined as a right or expectancy in Importantly, the policyholders’ vested rights are beneficial, rather than

any excess surplus. Thus, the policyholders have a vested right not necessarily the policyholders have a direct financial interest, and not a mere expectancy, in refunded, we cannot read [the subject legislative provisions], either separately

collected and not used to pay liabilities either would earn interest or be

is limited by regulation. Most significantly, the unconstitutional. the consideration for the sale to the general fund was, therefore, does not guarantee performance of JUA obligations.” assessed to make it up. The State is not responsible for any JUA shortfalls and

relying upon a statute to establish the contract provisions.

“Absent an explicit expression of the Legislature’s intention that premiums

earnings of the company” as the board determines, and the board’s discretion policies expressly provide that the policyholders “shall participate in the them to such surplus. to income from the sale of the accident fund, and that an act transferring all of Id. at 476. Here, the policyholders’ participating contract right to surplus, in the absence of any contractual language entitling Further, the runs a deficit, as was the case in 1985, the members and policyholders are Certified Question plaintiffs relied upon an alleged implied Here, the policyholders’ rights arise directly from their contracts with the JUA.

accident fund, they alleged impairment of an asserted contract with the state, First, although the Certified Question plaintiffs also had contracts with the of Certified Question, however, are significantly different from the facts here. policyholders’ direct financial benefit. Court of Michigan upheld the constitutionality of the legislation. Id. The facts

policyholders of the state accident fund alleged that they had a property right conclusion as to the policyholders’ vested rights. In that case, the plaintiffanalogize this case, is not only distinguishable, but in fact supports our and has not contributed any funds since that time.” It noted that “[i]f the JUA earnings. The State did not financially contribute to the creation of the JUA In re Certified Question, 527 N.W.2d 468, to which the State attempts to assessments of members, premiums paid by policyholders, and investment constitutes a nearly identical regulatory framework to that at issue in Chu. 1703.07(d), with Methodist Hosp., 476 N.E.2d at 309. Thus, the plan here

options for application of any excess surplus, both of which inure to the regulations, rather than conferring discretion, mandate one or both of two vested property rights. Further, the JUA

to the contributors or credited toward future contributions,”

the trial court found, “All of the money in the JUA fund has come from State bears no liability for any deficit. N.H. Admin. Rules, Ins 1703.07(a). As with Chu. Here, the JUA must satisfy claims out of its own assets and the The facts of this case distinguish it from Methodist Hospital and align it

court found the newly enacted law constituted an unconstitutional taking of

that income earned on new contributions to the fund would be either returned monies to the general fund in contravention of prior statutes which “provided at the time of the issuance of their policies. p. 15 their contracts with the JUA are subject to any law other than the law in effect incorporated into the JUA policies, or constitute notice to the policyholders that

regulations — does not vitiate the binding nature of the regulations

authority to the commissioner — to make, amend and rescind insurance in general. RSA 400-A:15, I (2006). However, this legislative delegation of administration or effectuation of any provision” of the title governing insurance 15

company. this policy, signed by a duly authorized representative of the waived or changed, except by endorsement issued to form a part of

promulgate, amend and rescind reasonable rules and regulations for . . . the delegating to the commissioner the “full power and authority to make, plan or the policies. The State points to the provision in RSA chapter 400-A governmental reservation of power to amend the obligations established by the

dates”);

in any part of this policy . . . ; nor shall the terms of this policy be

charters may be amended by statute). Nor do the regulations, incorporated into the policies, make reference to any corporations originally were formed” and thus constitutes notice that corporate

changes in the Act or regulations in accordance with their respective effective

of’ the Act. 42 U.S.C. §1304.”); agent or by any other person shall not effect a waiver or a change 8. Changes. Notice to any agent or knowledge possessed by any regulatory scheme was subject to change. By contrast, the JUA policies provide:

York specifically reserves to the Legislature the right to alter laws under which Tancredi, 149 F. Supp. 2d at 88 (“[T]he Constitution of the State of New changed. The three cases on which the State relies in support of its position, (the subject agreements each stated that the parties “shall be bound by all

expressly reserved to itself ‘[t]he right to alter, amend, or repeal any provision

constitutional, statutory, or contractual provisions explicitly providing that the aff’d, 316 F.3d 308 (2d Cir. 2003), are all distinguishable. Each involved Metropolitan Life Insurance Company, 149 F. Supp. 2d 80 (S.D.N.Y. 2001), Department of Education, 929 F.2d 844 (1st Cir. 1991), and Tancredi v. (1986), Rhode Island Higher Education Assistance Authority v. Secretary, U.S. Bowen v. Public Agencies Opposed to Social Security Entrapment, 477 U.S. 41

create vested rights because they are subject to “applicable law,” which may be We are not persuaded by the State’s argument that the policies did not

provides such explicit regulatory expression. or together, as so promising.” Id. at 477. In contrast, the plan before us another. p. 16 enforcement of a demand, or a legal exemption from the demand of

become a title, legal or equitable, to the present or future

an anticipation of the continuance of existing law; it must have

constitutional scrutiny.

be vested, a right must be more than a mere expectation based on existing law. Those rights are designated as vested rights, and to deprive a person of a property right theretofore acquired under

contracts, may not be changed retroactively unless such change survives of the policyholders’ policies, and incorporated into the obligations of those assertion, the provisions of the regulations in effect at the time of the issuance fund. to completed transactions should not be disturbed.” their conduct accordingly and that the legal rights and obligations that attach statutory or common, at its pleasure, but in so doing, it may not

obtained unalterable vested property rights to certain payments.

(citation omitted). Therefore, we conclude that, contrary to the State’s program”; rather, it targets only one discrete fund for transfer to the general Chu, 571 N.E.2d at 678 Moreover, the Act is not part of “a comprehensive federal/state social welfare Further, the policyholders here are private parties and not state agencies. principles that persons should be able to rely on the law as it exists and plan Constitutions, the Legislature may change existing laws, both Id. at 774 (quotation omitted). “This doctrine reflects the deeply rooted

welfare program, forecloses a finding that the state agencies have legislative changes involve a comprehensive federal/state social terms of the [federal student loan] program and the fact that the

no provision indicating that they are subject to amendment by the legislature. Unless otherwise inhibited by either the State or Federal

laws, such legislative power is not without restriction. 773. However, in light of the constitutional prohibition against retrospective modify and repeal existing law, and to enact new laws.” Goldman, 151 N.H. at We appreciate the generally broad powers of the legislature to “change,

the express contractual reservation of the power to amend the

By contrast, the JUA policies, including the incorporated regulations, contain Rhode Island Higher Educ., 929 F.2d at 851 (quotation and brackets omitted).

The public nature of the reserve funds themselves, coupled with

funds did not constitute an unconstitutional taking: holding that a statute imposing conditions upon reimbursement to reserve In Rhode Island Higher Education, the court explained the basis for its examination of the nature and purpose of the state legislation.

p. 17 substantial.” parties to contract in the first place, a court can assume the impairment to be

impairment, on the other hand, will push the inquiry to a careful

abridged contract right. “[W]here the right abridged was one that induced the

entitled to rely on them. hint in the record that anyone had ever intended otherwise.” The State does

obligations may end the inquiry at its first stage. Severe

substantial may be influenced by whether the contracting parties relied on the

and obligations are binding under the law, and the parties are participating policy approved by the Commissioner since its inception with no omitted). The trial court found that “[t]he JUA has offered an assessable and

Fraternal Order of Police, 645 F. Supp. 2d at 510 (quotation the state legislation must clear. Minimal alteration of contractual

We recognize that the determination of whether a contract impairment is

omitted). Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 245 (1978) (footnote

their particular needs and interests. Once arranged, those rights individuals to order their personal and business affairs according to placed on the protection of private contracts. Contracts enable

[t]he severity of the impairment measures the height of the hurdle

impairment of the contracts is particularly pertinent because Furlough, 135 N.H. at 633 (quotation omitted). The degree of the Act’s

consider whether the impairment is substantial.

measured by the factors that reflect the high value the Framers The severity of an impairment of contractual obligations can be

459 U.S. at 411. impairs their contracts with the JUA. policies. The Act, diverting $110 million of purportedly excess surplus, thus not necessary for a finding of substantial impairment,” Energy Reserves Group, the treatment of any JUA excess surplus vested upon the issuance of their denied, 510 U.S. 1141 (1994), “[t]otal destruction of contractual expectations is Tchrs. Un. v. Mayor, Etc. of Baltimore, 6 F.3d 1012, 1017 (4th Cir. 1993), cert. guidance as to what constitutes a “substantial” contract impairment, Baltimore 633. Although the United States Supreme Court has provided little specific

Having found that the Act impairs the petitioners’ contracts, we next

3. Substantiality of the impairment

incorporating the regulations in effect at the time, their beneficial interest in Because the policyholders paid for and received participating policies, transferred from the JUA into the general fund.

p. 18 expect that the funds in which they have a beneficial interest would be industry, the record does not reflect a basis in law for the policyholders to distribution to the policyholders. Although insurance is a heavily regulated

accumulated funds other than application against future assessments, or

incorporated into their contracts likewise leave no potential outlet for the entitle them to participate in the JUA’s earnings, and the regulations participating policies. On the contrary, the policyholders’ contracts expressly

promise of certain work for certain income. Its impact would likely wreak

power to amend the rights and obligations established by the assessable and

such a requirement “impairs the very heart of an employment contract: the

incorporated in the policies, make reference to any governmental reservation of

[they] now object[].” “purchase[] into an enterprise already regulated in the particular to which vested contract rights to share in the JUA earnings. The policyholders did not

employees be furloughed would constitute a substantial impairment because In Furlough, we held that a legislative requirement that certain public general fund. Neither the JUA policies, nor the insurance regulations anticipate the transfer of monies retained by their insurer into the state’s the passage of the Act that would suggest that private insureds should

preclude a conclusion that the Act substantially impairs the policyholders’

state regulation. thus no substantial impairment.”).

to our analysis. (1940). The State cites no provision of the regulatory scheme in place prior to contracts clause.” regulation is never a sufficient condition for rejecting a challenge based on the Veix v. Sixth Ward Bldg. & Ln. Assn., 310 U.S. 32, 38

The simple fact that insurance is a heavily regulated industry does not

look to whether the subject matter of the contract has been the focus of heavy fact of regulation meant there was always foreseeability of more regulation and 125 F.3d at 14 n.7 (“Contract Clause analysis would be enervated if the mere (7th Cir. 1998), cert. denied, 525 U.S. 1177 (1999); see also Mercado-Boneta, policyholders relied upon the participating nature of the policies is not relevant Chrysler Corp. v. Kolosso Sales, Inc., 148 F.3d 892, 895 policies. Thus, under the circumstances of this case, whether any particular on appeal that the policyholders did not rely on the participating nature of the 125 F.3d 9, 13-14 (1st Cir. 1997). However, standing alone, “a history of impairment. See, e.g., Mercado-Boneta v. Admin. Del Fondo de Compensacion, caused by such regulation would not necessarily constitute a substantial further regulation might be foreseeable and, thus, any change to the contract

See, e.g., Energy Reserves Group, 459 U.S. at 413. If so,

In determining whether contract impairment is substantial, some courts

regarding the participating nature of the policies. Neither does the State assert not contest this ruling, nor does it contend that any factual dispute exists ability to meet operating costs and malpractice claims.

p. 19 to fulfill the purpose of the JUA. available . . . that there are sufficient funds within our own capital decrease investment earnings which are important to the JUA’s sense of the need . . . to make sure that there are funds there

against policyholders and members. Taking JUA funds would terms of the market . . . . [The board maintains] this conservative obligations which would have to be covered by assessments surplus guards against having insufficient assets to cover JUA 19

of any insurance plan. As the United States Supreme Court has observed:

keeping funds available for those uncertainties, both legally and in adequate surplus and defend those claims that may yet arise by point to the present benefit provided by any excess surplus. The the JUA to protect the policyholders in the interim to maintain

impact on the policyholders, finding: The retention of, and access to, large sums of capital is critical to the function

excess surplus funds created by their premium payments. policyholders’ rights to a fundamental contractual benefit — sharing in any

The assessable nature of their policies and consistent regulations profit or lost money in 1986, 1987 and 1988. It is incumbent on

The trial court recognized the importance of a JUA surplus, including its against insolvency. As the JUA advised the trial court,

contracts. The effect of the Act is to dramatically reduce, if not eliminate, the

The JUA can only comfortably state today that it has earned a

policyholders to treat any excess surplus for their benefit, including protecting Second, the Act divests the JUA board of its obligation to the

“participating” character of the policies, thus changing the very nature of the contract rights for at least two reasons. First, the Act effectively eliminates the Here, we conclude that the Act substantially impairs the policyholders’

significance of their actions taken prior to the enactment of a law.”). legislature from interfering with the expectations of persons as to the legal 637-38 (1973) (“The underlying policy of this prohibition is to prevent the Hydroelectric Assocs., 147 N.H. at 77; see also State v. Vashaw, 113 N.H. 636, an additional tax burden of nearly $40,000 to a plaintiff. Lower Village contractually set alternatives to tax obligations where such action resulted in the legislature’s retroactive repeal of a statute permitting municipalities to N.H. at 634. We have also found substantial impairment of contract rights by havoc on the finances of many of the affected workers . . . .” Furlough, 135 paramount to any rights under contracts between individuals.

p. 20 health, morals, comfort and general welfare of the people, and is of the sovereign right of the Government to protect the lives, various ramifications is known as the police power, is an exercise

individuals may thereby be affected. This power, which in its

distributed to the policyholders.

public, though contracts previously entered into between the common weal, or are necessary for the general good of the from exercising such powers as are vested in it for the promotion of 20

does not operate to obliterate the [State’s] police power . . . .” like other unforeseen events, can have this effect.

whether any excess surplus should be applied against future assessments or

funds for the policyholders’ benefit. impairing the obligation of contracts does not prevent the State the policies and divests the board of its obligation to treat any excess surplus

“Nevertheless, it is to be accepted as a commonplace that the Contract Clause changes in the legal rules governing pension and insurance funds, insurer’s solvency and, ultimately, the insureds’ benefits. Drastic board’s contractual responsibility to its policyholders — that is, to determine of major unforeseen contingencies, however, jeopardizes the

It is the settled law of this court that the interdiction of statutes contract rights because it effectively eliminates the participating character of N.H. at 634 (quotation omitted).

the JUA, it technically violates Part I, Article 23 of the State Constitution. Because the Act substantially impairs the policyholders’ contracts with the impairment flows, in part, from the fact that the Act contravenes the JUA contributions charged will reflect that calculation. The occurrence surplus is not dispositive of our analysis. Rather, the substantial character of B. Reasonable and Necessary Legislation surplus. However, whether some or all of the $110 million constitutes excess

In sum, we conclude that the Act substantially impairs the policyholders’

included in the calculation of liability, and the rates or insurer’s likely liability. Risks that the insurer foresees will be We note that it is not clear that the $110 million in fact represents excess set aside are determined by a painstaking assessment of the

Allied Structural Steel, 438 U.S. at 246-47 (quotation and brackets omitted).

accumulation of large sums to cover contingencies. The amounts These pension plans, like other forms of insurance, depend on the prerogative of self-protection.”

make it destructive of the public interest by depriving the State of its impairment of contractual obligations.” significant and legitimate public purpose is not, by itself, enough to justify the is certainly a legitimate and important goal. However, “the finding of a

“to protect the vital interests of its people.”

economic and social regulation, courts properly defer to legislative judgment as “[u]nless the State itself is a contracting party, ‘as is customary in reviewing Id. at 433. The Supreme Court has also held, to the means chosen to accomplish its purpose. The general rule is that, against a literalism in the construction of the contract clause which would exercise of that reserved power has repeatedly been sustained by this Court as U.S. 426, 432-33 (1934). As the United States Supreme Court has noted, “The Laws 2009, 144:1, I. Protection of the health of the people of New Hampshire

contracts does not prevent the State from legitimate exercises of police power serves to ensure that the constitutional prohibition against the impairment of N.H. at 634-35 (quotation, brackets and ellipses omitted). This deference

question is the degree of deference we must afford the legislature’s decision as In assessing the reasonableness and necessity of the Act, the threshold

programs that promote access to needed health care for underserved persons.” necessary to accomplish the stated public purpose. despite its substantial impairment of contract rights, is reasonable and Mercado-Boneta, 125 F.3d at 13. Accordingly, we examine whether the Act, the reasonableness of the law and the importance of the purpose behind it.” for the law, a court must undertake its own independent inquiry to determine legislature, and weight is given to the legislature’s own statement of purposes DeBenedictis, 480 U.S. 470, 505 (1987). “Although deference is due to the

legitimate police power.” The Act requires that the funds be used “for the purpose of supporting We first examine whether the law serves an important public purpose.

Boneta, 125 F.3d at 15. serve those interests reflect reasonable and necessary choices.” Mercadojustification in fact serves public interests and whether its mechanisms to (quotation omitted). We “must consider whether the [State’s] proposed

obligation may pass constitutional muster only if it is reasonable and performed, and a bill or law which substantially impairs a contractual the police power and the rights protected by the contract clauses must be

existing contractual relationships, even in the exercise of its otherwise be understood to impose some limits upon the power of a State to abridge “If the Contract Clause is to retain any meaning at all, however, it must

Allied Structural Steel, 438 U.S. at 241 (quotation omitted). does impose some limits upon the power of a State to abridge existing

p. 22 As we have previously held, “the [C]ontract [C]lause is not a dead letter and

standard of review we applied in

court, more deference is warranted, but complete deference is unsupportable.

protection at all.” be conceived for repudiating a contract[,] the Contract Clause would provide no reduce their financial obligations whenever an important public purpose could interferes with those contracts, would therefore be subject to the heightened petitioners’ participating policies would be public contracts. The Act, which assume, for the purposes of analysis, that the JUA is part of the State, then the contractual obligations when other policy alternatives are available,”

and necessity,

If, on the other hand, the JUA is a private entity, as found by the trial

JUA is a part of the State, less deference to legislative judgment is warranted.

135 N.H. at 635-36 (quotation and brackets omitted). “If governments could

upon the State’s assertion that “the JUA is part of the State.” If we were to is to mean anything, must prohibit the State from dishonoring its existing

Buffalo Teachers, 464 F.3d at 370, “[t]he [C]ontract [C]lause, if it

not imply no deference” to the legislature’s determination of reasonableness omitted) (quoting Furlough, 135 N.H. at 635). Although “less deference does permit states to abrogate contracts.” Lower Village, 147 N.H. at 78 (brackets (quotations and citations omitted)). necessity, though superficially compelling, has never been sufficient of itself to the legislation in those cases as unconstitutional, reasoning that “financial

justification for transferring funds from the JUA to the general fund is based JUA constitute State contracts. We note, however, that the State’s underlying We make no ruling as to whether the policyholders’ contracts with the

impairment of its own obligations perhaps should be treated differently.” debtors, and because the State’s self-interest is at stake, the Government’s them.” (1985) (“[T]he Court has observed that in order to maintain the credit of public its policy . . . the destruction of contracts or the denial of means to enforce principle preclude[s] a construction which would permit the State to adopt as National R. Passenger Corp. v. A. T. & S. F. R. Co., 470 U.S. 451, 472 n.24 obligations when it enters financial or other markets.” (quotation omitted)); every case, the Court has held a governmental unit to its contractual contract, it cannot simply walk away from its financial obligations. In almost 78; see also Furlough, 135 N.H. at 635 (“When a State itself enters into a legislative acts affecting such contracts. See, e.g., Lower Village, 147 N.H. at review is warranted and courts generally accord minimal deference to In cases where the State is itself a party to the contract, heightened

Id.

harmony with the fair intent of the constitutional limitation, and that this however, that “this essential reserved power of the State must be construed in review of federal economic legislation. p. 23 extent the standards differ, a less searching inquiry occurs in the

contracts under the Contract Clause, and, we observed, to the Contract Clause would provide no protection at all.

to the converse conclusion.” coextensive with the prohibitions against state impairment of the money for what it regarded as an important public purpose, the embodied in the Fifth Amendment’s due process guarantee are economic legislation]. . . . [W]e have never held that the principles 23

some indicia of self-interest, but the absence of a state contract does not lead contract-impairing law is self-serving, where existence of a state contract is capacity”). “The better rule therefore calls for focusing on whether the could reduce its financial obligations whenever it wanted to spend money, especially when taxes do not have to be raised. If a State not necessarily be the same [as a deferential review of federal at stake. A governmental entity can always find a use for extra Oil Virgin Islands Corp., 819 F.2d 1237, 1251 (3d Cir. 1987) (contrasting National R. Passenger Corp., 470 U.S. at 472-73 n. 25; see also Nieves v. Hess

but whether the state is acting in its own pecuniary or self-interested When the court reviews state economic legislation the inquiry will and necessity is not appropriate because the State’s self-interest is the deference accorded state, as opposed to federal, legislation: To the contrary, it can be.” We note also that the United States Supreme Court has distinguished stake. Accordingly, Furlough, 135 N.H. at 635 (quotation omitted).

is not so much whether the state is arguably a nominal party to the contract,

complete deference to a legislative assessment of reasonableness

believe the [contract-impairing legislation] cannot be self-serving to the state. the nature and effect of the Act, we conclude that the State’s self-interest is at

deference given to a legislative determination of reasonableness and necessity Mercado-Boneta, 125 F.3d at 16 (“the real issue in determining the level of

“[T]he absence of a contract with the state does not mean we thereby

chosen action, particularly where the action’s substantial impairment of must be able to consider the reasonableness and necessity of the legislature’s (1980) (quotations omitted). For the Contract Clause to retain any vitality, we power.” Smith Insurance, Inc. v. Grievance Committee, 120 N.H. 856, 863 contractual relationships, even in the exercise of its otherwise legitimate police argument, the trial court observed:

p. 24 distributed pursuant to the procedures contained in the policy and

distribution of the surplus funds. Dividends can only be discrete class of private parties.. . . hearing, it has no authority, and will not attempt, to order any receiv[e] a “windfall.” As the Court made clear at the outset of the

voluntary market by reducing the price of JUA insurance and creating an petitioners,” because such distributions have “the potential to disrupt the the market that would inevitably flow from the distributions sought by

to the State’s general fund discrete funds generated by premiums paid by a purpose justifying its adoption.” State does not get the $110 million, the policyholders will . . . thus This argument is based on the unwarranted assumption that if the

lag upon a narrow class of State employees);

freeze), asserts the benefit of its own statute. that “[t]he Act furthers the public purpose of the JUA by avoiding distortions of The State offers two justifications for the Act. First, the State contends

establishes a broad-based mechanism for addressing a public need. directed to meet a societal need. Rather, the Act singularly targets for transfer qualitatively different from social or economic regulatory legislation which be upon reasonable conditions and of a character appropriate to the public Allied Structural Steel, 438 U.S. at 247-49. The Act’s funding scheme is Steel applied so narrowly that “its sole effect was to alter contractual duties”); 462 U.S. 176, 192 (1983) (noting that the statute at issue in Allied Structural

1992) (striking down legislation as unconstitutional where it imposed a payroll with Ass’n of Sur. & Sup. Ct. Rptrs. v. State, 588 N.E.2d 51, 54 (N.Y. 69 (upholding legislation imposing a generally applicable public employee wage proving that the contract impairment is reasonable and necessary, since it Compare Buffalo Teachers, 464 F.3d at 368-

2009, 144:1, I, it does not constitute broad-based social or economic regulation legislation adjusting the rights and responsibilities of contracting parties must that promote access to needed health care for underserved persons,” Laws deference courts give to state laws directed to social and economic problems, While the Act’s stated purpose is to provide funds to support “programs Clauses”) (quotation and emphasis omitted). Thus, “[d]espite the customary 43 (D. Haw. 2000). 1096, 1106 (9th Cir. 1999), injunction dissolved, 125 F. Supp. 2d 1237, 1242- 1996); see also Univ. of Hawaii Professional Assembly v. Cayetano, 183 F.3d

(quotation and brackets omitted). Moreover, the State bears the burden of

standards imposed on [federal] economic legislation by the Due Process “limitations imposed on States by the Contract Clause with the less searching exhausted, or even considered. p. 25 not substantially interfere with the policyholders’ contracts, have been terms.”). Nor does the record reflect that other avenues of funding, which do

future reimbursement of the funds contemplated.

the reasonableness of its basic features; and (5) its limited effect in temporal

precipitated by an emergency, or that it constitutes a temporary measure, with 25 State has not suggested, and nothing in the record indicates, that the Act was reasonableness of the amount subject to transfer is questionable. Further, the

favored group; (3) the tailoring of its remedial effect to its emergency cause; (4) chosen to accomplish the Act’s stated purpose are reasonable and necessary. substantially impaired a contract). Thus, we cannot conclude that the means

freeze.”); essential was made, did the [governmental authority] institute the wage

of any excess surplus. Under these circumstances, any assessment of the legislature had addressed policyholders’ rights prospectively — that is, effective Our conclusion rests upon the retroactive effect of the Act; if the

express no opinion on that issue. board should make distributions of any excess surplus is not before us, and we emergency nature; (2) its purpose to protect a broad societal interest, not a regulations incorporated into their policies. The question of whether the JUA exhaust numerous alternatives before resorting to” legislation that various factors to determine reasonableness and necessity, including “efforts to providers that happen to be insured through the JUA.” Fraternal Order of Police, 645 F. Supp. 2d at 510-18 (examining than if the funds remained ‘trapped’ in the JUA or were distributed to those after . . . more drastic steps were taken and a finding that the freeze was

prepared for the JUA, the JUA board made no determination as to the amount is in fact “excess surplus.” Although a risk-based capital estimate was tailored to serve that purpose. First, it is not clear that all of the $110 million

and necessity of challenged legislation, court examines: “(1) [the legislation’s] excess surplus for their benefit in one or both of the ways specified by the Ins. Co., 630 F.2d 1001, 1008 (4th Cir. 1980) (in evaluating the reasonableness

access to health care through state programs for the medically underserved

important public purpose, we conclude that the Act is not appropriately Although funding state programs for the medically underserved is an

ruling is the enforcement of their contract rights to the application of any

that the excess surplus [in the JUA fund] would be more useful in promoting than merely financial,” asserting that the legislature “reasonably concluded Second, the State contends that the purpose of the Act is “much more

We likewise reject this argument. What the policyholders stand to gain by our

Commissioner. regulations: by request of the JUA board and approval of the have adequate access to needed care,”

p. 26 concludes that the Act violates Part I, Article 23 of the State Constitution

“promote the public interest in ensuring that consumers of health care services

the JUA, or their claims under the Federal Constitution. have a vested right in the surplus being used for their benefit, the majority policyholders with policies written on or after January 1, 1986 (policyholders) declines to defer to this legislative finding. Holding that only current

Association (JUA). Although one of the stated purposes of the JUA is to

policyholders’ “takings” claim, the claims they assert derivatively on behalf of not consider the merits of the former policyholders’ claims, or the current Constitution and is, therefore, unenforceable. In view of this holding, we need account] to the general fund,” Laws 2009, 144:1, (the Act), the majority

insured by the New Hampshire Medical Malpractice Joint Underwriting $110 million windfall for the doctors, hospitals and other health care providers needed health care for underserved persons and, instead, creates a potential

results in an impairment of contract in violation of the New Hampshire better served through a transfer of the excess surplus [in a certain JUA

legislative decision to allocate $110 million to programs that promote access to

legislature’s stated public purpose, the Act constitutes a retrospective law that although the legislature has specifically found that this purpose “would be

was DALIANIS and DUGGAN, JJ., dissenting. The court today overturns a in the record before us that this severe disruption of contractual expectations and responsibilities under newly-issued JUA policies. As “there is no showing contracts with the JUA, and is not reasonable and necessary to accomplish the JJ., dissented. BRODERICK, C.J., and HICKS, J., concurred; DALIANIS and DUGGAN,

particular measure, simply cannot stand in this case.”

reasonable alternatives to accomplish its goal, including amending the rights Because the Act substantially interferes with the current policyholders’

V. Conclusion

438 U.S. at 247 (quotation and citation omitted; emphasis added).

favoring legislative judgment as to the necessity and reasonableness of a necessary to meet an important general social problem[, t]he presumption

transfer of these funds reasonable and necessary. The legislature has other needed health care. But such expediency does not, in and of itself, render the legislature’s stated purpose of supporting programs that promote access to See Chu, 571 N.E.2d at 678. To be sure, the Act expediently accomplishes the upon issuance of new policies — our analysis would of necessity be different. p. 27 27

enough assets to cover future claims.

petitioners with such policies, the Act applies the Act’s effective date necessarily incorporate the Act’s provisions. As to

issued

judicial review of economic legislation. for their benefit, their constitutional claims must fail. ignores critical evidence in the record, and creates a new, expanded role for Because the policyholders lack vested rights either to the surplus or to its use In sum, we believe the majority misapplies settled New Hampshire law, study shows that, even without the $110 million, the JUA has more than million from the JUA will in any way jeopardize its solvency. An actuarial prospectively, not retrospectively. malpractice claims. Moreover, there is no evidence that transferring $110 problem at hand. policies cannot have a vested right to the excess surplus. Policies issued after purpose. Instead, the majority makes its own after the Act became effective, we believe that the petitioners with such 1240 (D. Haw. 2000). Moreover, to the extent that the “current” policies were See University of Hawaii Prof. Assembly v. Cayetano, 125 F. Supp. 2d 1237, not clear whether any petitioner has standing to bring a Contract Clause claim. not reveal whether any of the petitioners have current JUA policies; thus, it is with current JUA policies may assert Contract Clause claims. The record does may lack standing to bring it given the majority’s holding that only petitioners that a beneficial right is not a vested right entitled to constitutional protection. Fourth, this entire litigation may soon be moot and/or the petitioners

obtain otherwise difficult or impossible to obtain coverage for medical whether another alternative would have constituted a better solution to the

particular measure is reasonable and necessary to serve a legitimate public contract, this court is required to defer to the legislature’s determination that a standard of review. When, as in this case, the State is not a party to a Third, the majority subjects the Act to an unnecessarily stringent

that is beneficial; it is well-established under New Hampshire law, however,

very purpose for which the policyholders entered into their contracts – to impairment was insubstantial as a matter of law. The Act leaves intact the impaired the policyholders’ insurance contracts, we believe that any Second, even if we agreed with the majority that the Act in some way

First, the majority concludes that the policyholders have a vested right

contractual rights. We respectfully believe that in so doing the majority errs. because it is a retrospective law that substantially impairs the policyholders’ character appropriate to the public purpose justifying the law’s adoption. p. 28 responsibilities is not based upon reasonable conditions and is not of a 28

unconstitutionally impairs contractual rights. the Act is a retrospective law with its analysis of whether the Act public purpose for it, and the adjustment of the contracting parties’ rights and

separately. Accordingly, we will analyze the two prohibitions contained in Part I, Article 23 Federal Constitution with respect to contract impairment. Energy Reserves Group v. Kansas Power & Light, 459 U.S. 400, 411-12 (1983).

distinct. We believe that the majority errs by combining its analysis of whether arrangements between private citizens.” “prohibit[s] the adoption of laws that would interfere with the contractual the impairment is substantial, the State lacks a significant and legitimate detail below, a law does not unconstitutionally impair contractual rights unless unconstitutionally impairs contractual rights. As will be discussed in more already past.” operates retrospectively. It is not dispositive, however, of whether the law or attaches a new disability, in respect to transactions or considerations Whether a vested right is impaired determines whether the law at issue

N.H. at 221; Opinion of the Justices (Furlough), 135 N.H. at 630.

Constitution with respect to retrospective laws, and the same protection as the omitted). Our State Constitution affords more protection than the Federal

Article 23 concerns impairment of contracts. This section of Part I, Article 23 557, 564 (2007) (quotation omitted). The other prohibition contained in Part I,

In re Grand Jury Subpoena (Issued July 10, 2006), 155 N.H. making of retrospective laws and the impairment of contractual rights.

acquired under existing laws, or creates a new obligation, imposes a new duty, offenses.” We have held that Part I, Article 23 contains two prohibitions: the A retrospective law is one that “takes away or impairs vested rights, should be made, either for the decision of civil causes, or the punishment of

N.H. 625, 630 (1992), the prohibition against retrospective laws and the not always viewed them as such, see Opinion of the Justices (Furlough), 135 State v. Fournier, 158 N.H. 214, 218, 221 (2009). Although our case law has

laws are highly injurious, oppressive, and unjust. No such laws, therefore, Part I, Article 23 of the State Constitution provides that “[r]etrospective

A. In General

I. Part I, Article 23 p. 29 (those issued on or after January 1, 1986). In light of the majority’s holding

surplus itself or to its use for their benefit.

Administrative Rules, Ins 1703.07 governs the policies at issue in this case

policies do not confer upon the policyholders a vested right either to the excess surplus. We believe that the pertinent regulations and insurance policyholders have failed to establish that they have a vested right to any 29

legal exemption from the demand of another.” first set forth the pertinent regulatory language. New Hampshire

which the statute pertains.” effective date of the statute have not yet gone beyond the procedural stage to Act applies retroactively. Even if we were to agree, we believe that the

prospectivity when a statute affects substantive rights.” title, legal or equitable, to the present or future enforcement of a demand, or a To determine the nature of the policyholders’ right to the surplus, we

existing law.” it may not deprive a person of a property right theretofore acquired under

usually deemed to apply retroactively to those pending cases which on the Rather than analyze the issue, the majority apparently assumes that the such retroactive application is constitutionally permissible.

on an anticipation of the continuance of existing law; it must have become a rights, and to be vested, a right must be more than a mere expectation based because the underlying purpose of all legislation is to promote justice.”

Id. (quotation omitted). “Those rights are designated as vested

change existing laws, . . . statutory or common, at its pleasure, but in so doing, inhibited by either the State or Federal Constitutions, the Legislature may vested rights. See In re Estate of Sharek, 156 N.H. at 30. “Unless otherwise procedural in nature, however, the presumption is reversed, and the statute is at 218. This second inquiry concerns whether the legislation at issue impairs

If we find that the statute applies retroactively, we then inquire whether

(quotation and brackets omitted). retrospectively, our interpretation turns on whether the statute affects the

retrospective application rest[s] on a determination of fundamental fairness, unconstitutionally retrospective. (2000) (quotation omitted). “In the final analysis, however, the question of

156 N.H. 28, 30 (2007) (quotation omitted). “Where the statute is remedial or

legislature is silent as to whether a statute should apply prospectively or whether the legislature intended the law to apply retroactively. Id. “When the

Part I, Article 23, we conduct a two-part analysis to determine if it is but, in our view, does not fully analyze this issue. In testing legislation against The majority concludes that the Act “constitutes a retrospective law,”

B. Retrospective Law this distribution “as being consistent with the [regulatory] purposes” of the

p. 30 terms as are “just and equitable”; and (4) the insurance commissioner approves

(3) the board decides to distribute the excess to the policyholders under such the funds against and to reduce future assessments against insurer members; (1) the board declares an excess; (2) the board decides that it need not retain

Under the regulation, the policyholders have a right to the surplus itself only if:

authorize the application of such excess in one or both of the

that the policyholders have no vested, enforceable right to any surplus amount.

policy . . . . ”

being consistent with the purposes of this chapter, the board shall

it shall remain unchanged for his benefit.”

proportion to the amount paid by each [insurer] member.” The plain meaning of the regulatory and policy language demonstrates excess to repay [insurer] members for assessments previously levied, in

directors of the [JUA] in accordance with law and as made applicable to this extent and upon such conditions as shall be determined by the board of “The named insured shall participate in the earnings of the [JUA], to such [Commissioner of the New Hampshire Insurance Department] as We next set forth the policy language, which provides, in pertinent part: pursuant to Ins 1703.07(c), then with review and approval by the

covered by the [JUA] as is just and equitable. (2) Distribute the excess to such health care providers “No person has a vested interest in any rule of law, entitling him to insist that or (1) Against and to reduce future assessments of the [JUA];

the amount necessary to pay losses and expenses, the board shall apply such

and expenses and to reimburse members for all assessments If premiums . . . exceed the amount necessary to pay losses

Rules, Ins 1702.01, 1703.01(b), (i). Rule 1703.07(d) provides: regulating their JUA contracts remaining unchanged, the majority is mistaken. See N.H. Admin. the majority suggests that the policyholders have a “vested” right in the law currently in effect are incorporated into the policies at issue. To the extent that Rule 1703.07(c) provides: “If premiums written on [JUA] business exceed

White, 243 U.S. 188, 198 (1917). Thompson v. Forest, 136 N.H. 215, 219 (1992); New York Cent. R.R. Co. v. grounds by Young v. Prevue Products, Inc., 130 N.H. 84, 88 (1987), and Derrick, Inc., 127 N.H. 162, 171 (1985) (quotation omitted), overruled on other

claims, for the purposes of our discussion, we will assume that the regulations that only policyholders with current JUA policies may bring Contract Clause the policyholders.

the surplus by receipt of a dividend.” reinvestment for application against future assessments; or they benefit from rather than possessory. . . . [E]ither they benefit from the surplus by its

of its discretion, with the commissioner’s approval, to distribute the surplus to

participate in the JUA’s earnings.

policyholders’ so-called “beneficial interest” in the surplus is entitled to Additionally, we believe that the majority errs when it concludes that the The majority explains that “the policyholders’ vested rights are beneficial, insurers, not the policyholders. of the JUA’s decision to retain any surplus are, therefore, the JUA’s member the present laws, the existence of a . . . surplus,” as well as the board’s exercise N.H. Admin. Rules, Ins 1703.07, 1703.08, 1703.13. The primary beneficiaries to which the regulation refers are levied against insurers, not insureds. See from the JUA’s retention of the surplus is derivative. The “future assessments” We first observe that whatever benefit the policyholders would receive

“fixed, certain and absolute right” that the board must allow them to transform the policyholders’ hopes for a future discretionary distribution into a board may determine. In this context, the use of the word “shall” does not law.

distribution of the funds, but in the treatment of the funds for their benefit.” The policyholders, the majority asserts, “have a vested right not necessarily in contractual right in the treatment of any excess surplus.” (Emphasis added.) policyholders mere expectancies based upon “the anticipated continuance of policy language “taken together confers upon the policyholders a vested Perhaps to avoid this result, the majority holds that the regulatory and

create a vested right.”). (2009) (“The mere expectation of a future benefit or contingent interest does not J.D. Shambie Singer, Sutherland Statutory Construction § 41.6, at 456-57 In the Matter of Goldman & Elliott, 151 N.H. at 774; see 2 N. Singer & is modified by the phrase “to such extent and upon such conditions” as the (Tex. Ct. App. 1999). Mere expectancies are not vested rights as a matter of

At best, the regulatory and policy language together confer upon the

law.” The phrase “[t]he named insured shall participate” in the JUA’s earnings conditions as shall be determined” by the JUA’s board “in accordance with participate in the JUA’s earnings only “to such extent and upon such Similarly, under the terms of the policy the policyholders “shall”

protected. See In the Matter of Goldman & Elliott, 151 N.H. 770, 774 (2005). by definition, not a vested right, and, therefore, is not constitutionally would the policyholders have a claim to the surplus. A contingent interest is, JUA. N.H. Admin. Rules, Ins 1703.07(d). Only if these contingencies occur, contractual arrangements.” p. 32 would be able to obtain immunity from state regulation by making private contracts entered into prior to its enactment. If the law were otherwise, one

restricting, or even barring altogether, the performance of duties created by

infirmity of the subject matter.” or credits attributable to their contribution, they “could have asserted a proven inadequate to accomplish their task.”). State by making a contract about them. The contract will carry with it the it was “not disputed” that had the State failed to give the contributors payment are, are subject to state restriction, cannot remove them from the power of the policyholders had vested rights was undisputed. The court stated that because cases are inapposite. In Chu, 571 N.E.2d at 678, the issue of whether the therefore, inviolable for the purposes of Part I, Article 23. policyholders’ beneficial interests are entitled to constitutional protection. Both Insurers v. Chu, 571 N.E.2d 672 (N.Y. 1991), to support its contention that the 771 (6th Cir.), cert. denied, 363 U.S. 828 (1960), and Alliance of American The majority relies upon Ohio State Life Insurance Co. v. Clark, 274 F.2d does not violate the [Constitution] simply because it has the effect of 357 (1908); see Exxon Corp., 462 U.S. at 190.

laws which regulate contracts in the public interest where such laws have 230, 232 (1945). As Justice Holmes put it: “One whose rights, such as they (citation and quotation omitted); see East New York Bank v. Hahn, 326 U.S.

The United States Supreme Court “has long recognized that a statute

retrospective laws “was not intended to prevent the legislature from amending title, and, therefore, is not a vested right. LeBlanc, 114 N.H. 141, 145 (1974) (Part I, Article 23’s prohibition against

without citation, that the policyholders’ rights vested “upon issuance of their “vested” merely because they are contractual. The majority further concludes, The majority concludes that the policyholders’ “beneficial” rights are

more vested than beneficiary’s right to take under a will). Estate of Sharek, 156 N.H. at 31 (testator’s right to name a beneficiary is no right entitled to constitutional protection under Part I, Article 23. See In re Assoc., 151 N.H. at 575-76. Accordingly, a beneficial interest is not a vested

(quotations omitted). A beneficial interest is only an expectancy and not legal

property right”). To be vested, a right “must become a title, legal or equitable,” Smith, 135 N.H. 50, 59 (1991) (noting that “beneficiary interest is not a vested Condo. Owners’ Assoc. v. Ventullo, 151 N.H. 571, 575-76 (2004); cf. Dubois v. beneficial interest is not a vested right as a matter of law. See Nordic Inn only vested rights. See In re Estate of Sharek, 156 N.H. at 30. By definition, a constitutional protection under Part I, Article 23. Part I, Article 23 protects cover unanticipated large losses. p. 33 (usually not exceeding the amount of the premium) necessary to Some mutuals . . . have the option to assess the members for sums

policyholder at the end of the year in the form of a dividend. . . .

reserves, the company may refund a portion of the premium to the and expenses and the amount of investment income earned on the on an accumulated surplus. Depending on the company’s losses

their policies members of the company,”

organized and operated for the benefit of its policyholders who are by virtue of

expected loss plus a fair share of administrative expenses. In lieu New Appleman on Ins. L. Libr. Ed., supra § 1.08[4][c], at 1-83.

granted to its policyholders. Libr. Ed. (MB) § 1.08[4][c], at 1-83 (Oct. 2009) (emphasis omitted). It “is

the JUA is slightly larger than what is necessary to cover that individual’s Each member pays a premium in advance, usually in an amount

insurance company: language granting the policyholders ownership of the surplus. & Irwin, P.A. v. State Ins. Fund, 997 P.2d 591, 596 (Idaho 2000). In a mutual N.E.2d at 308, and is “managed by people elected by the policyholders.” Kelso

on a mutual plan, but also wrote policies on a stock plan, was expressly by the policyholders.” [1 Essentials of Insurance Law] New Appleman on Ins. L.

not a mutual insurance company. “[A] mutual company is owned

assumption that the JUA operates like a mutual insurance company. However, The majority’s entire discussion of vested rights is premised upon its

governing regulations nor its insurance policies contain similarly unconditional equitable plan as the directors may provide.” Id. at 777. Neither the JUA’s policies on the mutual plan and shall be apportioned and distributed on such charter stated that the company’s surplus “shall belong to the holders of

surplus retained by a life insurance company, which primarily wrote policies Clark is also factually distinguishable. In that case, ownership of the

(N.Y.), appeal dismissed, 474 U.S. 801 (1985). See Methodist Hosp. of Brooklyn v. State Ins. Fund, 476 N.E.2d 304, 309 from the surplus is entirely at the discretion of the JUA’s board of directors. Chu, 571 N.E.2d at 675. Here, whether the policyholders receive a distribution returned to the contributors or credited toward their future contributions. Chu, the relevant statutes mandated that income earned would be either Moreover, Chu is factually distinguishable from the instant case. In

guarantee.” Chu, 571 N.E.2d at 678 (quotation and citation omitted). legitimate claim of entitlement to the moneys, grounded in the statutory the vital interests of its people. This principle of harmonizing the constitutional

p. 34 23 because it substantially impairs the policyholders’ contractual rights. private mutual insurance company is owned by its policyholders. retrospective law, we next analyze whether it otherwise violates Part I, Article 34

obligations. Nevertheless, a State continues to possess authority to safeguard

legislature intended it to be “owned” by its policyholders in the same way that a retrospective laws. Having concluded that the Act is not an unconstitutional

entitlement to share in the company’s excess surplus.” trade and credit by promoting confidence in the stability of contractual “that participating policies in other contexts have in common a policyholder’s “[T]he general purpose of the [Contract] Clause [is] clear: to encourage premiums than they would have paid for non-JUA insurance.

B. Contract Impairment simply because they say they are.

the features of a mutual insurance carrier, there is no indication that the benefit, the Act does not violate Part I, Article 23’s prohibition against premiums so as to cover administrative expenses. While the JUA has some of constitutionally protected right either to the surplus itself or to its use for their there any evidence in the record that the policyholders paid slightly larger Because the policyholders have failed to establish a vested,

policies at issue describe themselves as “participating.” The majority observes nothing in the record demonstrates that the policyholders have paid higher Malpractice Joint Underwriting Assoc., 137 N.H. 680, 683 (1993). Moreover,

F.3d 1563 (Fed. Cir. 1997). The JUA policies, however, are not “participating” on the company’s experience or the discretion of its management.”), aff’d, 118 of policyholder dividends. These dividends are returned to policyholders based insurance, but the policyholder expects to receive premium rebates in the form higher stated premium than the nonparticipating policy for the same Co. v. United States, 35 Fed. Cl. 12, 13 (1996) (“[A] participating policy has a Commissioner” and requiring JUA to submit certain reports to same). Nor is See, e.g., Gulf Life Ins.

The majority also places great weight on the fact that the insurance regulations adopted by the commissioner. Irwin, P.A., 997 P.2d at 596.

manner), 1703.12 (providing that JUA “shall be subject to examination by the commissioner), 1703.04(p) (requiring JUA to invest premiums in certain 1703.04(a) (board is comprised of seven voting members appointed by

members are appointed by the insurance commissioner, pursuant to Admin. Rules, Ins 1702, 1703.04. The JUA is administered by a board whose administration.” Methodist Hosp. of Brooklyn, 476 N.E.2d at 308-09; see N.H. policyholders here are not members of the JUA and “have no vote or say in [its] Unlike the policyholders of a mutual insurance company, the p. 35 35

liability insurance. Further, we assume,

relationship, and whether the impairment is substantial.” a broad and general social or economic problem.” contractual relationship, whether a change in law impairs that contractual contractual rights. “This inquiry has three components: whether there is a

concludes that the Act impairs the contract. We disagree, however, that the

The parties do not dispute the existence of a contract for professional purpose justifying the legislation’s adoption.” of Claremont, 147 N.H. 73, 77 (2001). of their citizens.” 186; see Fournier, 158 N.H. at 221; Lower Village Hydroelectric Assocs. v. City

and legitimate public purpose behind the regulation, such as the remedying of We first examine whether the Act substantially impairs the policyholders’

1. Substantial Impairment

State.” brackets omitted).

constitutes an impairment of contract. upon reasonable conditions and is of a character appropriate to the public adjustment of the rights and responsibilities of contracting parties is based of sovereign power, necessarily reserved by the States to safeguard the welfare U.S. at 411-12 (citation omitted). The third step is to determine “whether the

step is to determine whether “the State in justification, . . . [has] a significant Co., 438 U.S. at 244. If, however, we find substantial impairment, the next a constitutional violation and our inquiry is at an end. Allied Structural Steel 503 U.S. 181, 186 (1992). If the impairment is minimal, then it does not rise to impairment of a contractual relationship. General Motors Corp. v. Romein, prohibition[s] must be accommodated to the inherent police power of the first step is to analyze whether the law has operated as a substantial

We employ a three-step analysis when determining whether legislation

“reconcil[ing] the strictures of the Contract Clause with the essential attributes 2006) (quotation omitted), cert. denied, 550 U.S. 918 (2007).

Buffalo Teachers Federation v. Tobe, 464 F.3d 362, 367 (2d Cir.

citizens, a power which is paramount to any rights under contracts between “does not trump the police power of a state to protect the general welfare of its imply,” Allied Structural Steel Co. v. Spannaus, 438 U.S. 234, 240 (1978), and prohibition “is not . . . the Draconian provision that its words might seem to Energy Reserves Group, 459 U.S. at 410. The Contract Clause’s

language of the Federal and State Contract Clauses is “facially absolute, [their]

Id. at 21 (quotation and citation omitted). Although the

ellipsis omitted). Accordingly, resolving a Contract Clause claim entails States Trust Co. v. New Jersey, 431 U.S. 1, 15 (1977) (quotation, citation and recognition in the decisions of [the United States Supreme] Court.” United prohibition with the necessary residuum of state power has had progressive considered substantial.”

p. 36 havoc on the finances of many of the affected workers and can only be promise of certain work for certain income. Its impact would likely wreak consideration here impairs the very heart of an employment contract: the

substantially impaired employment contracts, we stated: “The bill under impairs a party’s right to terminate a contract pursuant to its terms.

the right to compensation at the contractually specified level.” (quotation,

in holding that a law mandating forced unpaid leave for state employees statute affects the right to compensation in employment contracts or when it

employment context, no right is more central to the contract’s inducement than George’s Cty., 645 F. Supp. 2d 492, 510 (D. Md. 2009) (“Certainly, in the Baltimore Tchrs. Un., 6 F.3d at 1018; Fraternal Order of Police v. Prince (3) the practical effect the challenged law would have upon parties. impairment, Equipment Mfrs. Institute v. Janklow, 300 F.3d 842, 855-56 (8th Cir. 2002); reasonably relied upon those terms at the time they formed the contract; and See, e.g., legislation is in a previously regulated area.” (citations omitted)). For example, and other jurisdictions have held that an impairment is substantial when a parties; whether the law is temporary or indefinite in duration and whether the unconstitutional. and the extent to which the statute violates the reasonable expectations of the constitute a substantial impairment.” Id. Along similar lines, New Hampshire party to gains it reasonably expected from the contract does not necessarily Energy Reserves Group, 459 U.S. at 411. “[S]tate regulation that restricts a “[t]otal[ly] destr[oy] . . . contractual expectations” to be considered substantial. U.S. 1141 (1994), they agree that the impairment need not necessarily Mayor, Etc., of Baltimore, 6 F.3d 1012, 1017 (4th Cir. 1993), cert. denied, 510 Franchise Laws, 21 Franchise L.J. 13, 14 (2001); Baltimore Tchrs. Un. v.

see Coleman & Darden, The Constitutionality of Retroactive

Although courts have not precisely defined what constitutes substantial contract and the affected contractual terms; (2) the degree to which the parties

that impairment of the contract was substantial, and, accordingly, impaired, . . . whether the parties have relied on the preexisting contract right transfer from the JUA to the general fund is not sufficient, by itself, to establish Contrary to the policyholders’ assertions, the amount of money the Act seeks to

substantially impairs a contract, we have examined: (1) the nature of the

severity of impairment include the nature and significance of the right 850 (Ct. App. 1982) (“[S]pecific factors which may be important in gauging the 120 N.H. 856, 863 (1980); accord Mobil Oil Corp. v. Rossi, 187 Cal. Rptr. 845, (Furlough), 135 N.H. at 633-34; Smith Insurance, Inc. v. Grievance Committee, Village Hydroelectric Assocs., 147 N.H. at 77; Opinion of the Justices

In the few opportunities we have had to consider whether a law

substantial. policyholders have met their burden in proving that the impairment is words, when contracting for insurance, the policyholders had no choice but to

p. 37 insuring a larger primary care provider with typical claims history.” In other

policies is not relevant to our analysis.” selling coverage to our practice due to the greater risk they perceived in return of surplus, but because the commercial carriers were not interested in constrained to do business with [the JUA], not because of the prospect of a

whether any particular policyholders relied upon the participating nature of the

respondents’ summary judgment motion, concedes that “Derry Medical was

the policyholders did not rely upon the participating nature of the policies[,] . . . ruling,” or “contend that any factual dispute exists,” or “assert on appeal that otherwise.” It then concludes that, because the State does not “contest this Derry Medical Center, submitted with the policyholders’ opposition to the The affidavit of Thomas Buchanan, Chief Executive Officer of policyholder insurance. Indeed, their own statement runs contrary to establishing reliance.

since its inception with no hint in the record that anyone had ever intended

offered an assessable and participating policy approved by the Commissioner Instead, the majority simply quotes the trial court’s ruling that “[t]he JUA has of the policy in contracting with the JUA for professional liability insurance. case, the policyholders do not even attempt to argue that they relied upon the

omitted)).

what degree, the policyholders may have relied upon the participating provision Perhaps the reason that the majority avoids this issue is that, in this

first place, a court can assume the impairment to be substantial.” (quotation

reasonable expectations under the contract have been disrupted.”),

substantial. It conducts no analysis, however, to determine whether, and to impaired contractual term is relevant in determining whether the impairment is The majority acknowledges that evidence of a party’s reliance upon the

(“[W]here the right abridged was one that induced the parties to contract in the denied, 525 U.S. 923 (1998); Fraternal Order of Police, 645 F. Supp. 2d at 510

determining whether the impairment is substantial is the extent to which Stonington, 141 F.3d 46, 53 (2d Cir.) (“[T]he primary consideration in reasonable expectations of the parties.”); Sal Tinnerello & Sons, Inc. v. Town of substantiality of a contractual impairment, courts look long and hard at the Houlton, 175 F.3d 178, 190 (1st Cir. 1999) (“In order to weigh the reasonable expectations. See, e.g., Houlton Citizens’ Coalition v. Town of terms at the time they formed the contract, or put another way, their above: the degree to which the parties reasonably relied upon the impaired Courts have placed great weight upon the second consideration noted

N.H. at 634; Grievance Committee, 120 N.H. at 863. F. Supp. 2d 844, 873 (N.D. Ill. 2000); Opinion of the Justices (Furlough), 135 ellipses, and brackets omitted)); Kendall-Jackson Winery, Ltd. v. Branson, 82 p. 38 State’s pervasive and longstanding regulation, the legislative act at issue here

would not exist but for the regulation that created it. Thus, in light of the

regulated insurance industry, it is a creature of state regulation itself and commissioner. All this is to say that, not only is the JUA part of the highlyits operations are controlled by regulations promulgated by the insurance

complaining party has entered has been regulated in the past.” but otherwise unable to obtain such coverage.” It is a State-created entity, and

contract was made.”

remain unchanged.

negotiations over the terms of the contract.” reliance is reasonable is greatly influenced by “whether the industry the insurance coverage for any risks in this state which are equitably entitled to pursuant to his authority under RSA 404-C:1 (2006) “to provide such specifically, the JUA was established in 1975 by the insurance commissioner, violates the contracts clause is the foreseeability of the law when the original Fondo de Compensacion, 125 F.3d 9, 13-14 (1st Cir. 1997). In New Hampshire Regulation, 29 Tort & Ins. L.J. 651, 652 (1994); Mercado-Boneta v. Admin. del Ethics 53, 56 (2009); see Brown, Constitutional Limits on State Insurance obligations,” thereby making it unreasonable to expect that the law would industry.” Jost, Health Insurance Exchanges: Legal Issues, 37 J. L. Med. & commissioner, It is well-established that “[i]nsurance has long been a heavily regulated

highly-regulated industry and is a creature of state regulation. Whether 894-95 (7th Cir. 1998), cert. denied, 525 U.S. 1177 (1999). This is because

inclined to say controlling, importance in the determination of whether a law 1195 (Me. 2004), cert. denied, 544 U.S. 906 (2005). “Of great, and we are

exists, it is foreseeable that changes in the law may alter contractual distributed given that the disposition of surplus is subject to approval by the Reserves Group, 459 U.S. at 411. This is because “[w]hen regulation already

necessarily requires that the facts arising under the contract term and its provision, any reliance would be unreasonable because the JUA is part of a Even if we were to find that the policyholders relied upon the impaired plan contained the opportunity for surplus distribution. to policyholders have only been made twice, in 1999 and 2000. since. Indeed, in the thirty-four years since the JUA was created, distributions for distribution was denied in 2001, and no distributions have been requested

see N.H. Admin. Rules, Ins 1703.07(d), the JUA’s last request

surplus, it would not be reasonably foreseeable that any surplus would be

Moreover, proving reliance upon a term affected by a change in law

based upon any features other than liability coverage, including whether the contract with the JUA, and were not in a bargaining position to choose a plan citations omitted)); p. 39 remain intact unless surrendered in unmistakable terms.” (quotations and vested contract rights to share in the JUA earnings.” preclude a conclusion that the Act substantially impairs the policyholders’ that “[t]he simple fact that insurance is a heavily regulated industry does not

unexercised, is an enduring presence that governs all contracts[,] . . . and will policy, signed by a duly authorized representative of the company. or changed, except by endorsement issued to form a part of this purported reliance on the impaired contract term. Instead, it concludes only part of this policy . . . ; nor shall the terms of this policy be waived

contradicted by well-settled precedent.

reserve[ ] the right to exercise that power. . . . [S]overeign power, even when

regulation has any impact on the reasonableness of the policyholders’ by any other person shall not effect a waiver or a change in any Notice to any agent or knowledge possessed by any agent or reserves the authority to change the applicable law. Such a conclusion is particularly misplaced. Paragraph 8 provides: The majority’s reliance upon paragraph eight in the JUA policies is

“a creature of special legislation in an industry that is extensively regulated”). see also Hayes, 114 N.H. at 145. corporation’s] Directors of all compensation” in part because the non-profit was

the right to exercise one of its sovereign powers” if it fails to “expressly Sec. Entrap., 477 U.S. 41, 52 (1986) (noting that the State does not “waive[ ] apply this factor in determining whether the insurance industry’s history of See Bowen v. Agencies Opposed to Soc. that insurance is, in fact, a heavily-regulated industry. It fails, however, to and regulations in effect at their formation unless the legislature expressly Clause mandates that contracts between parties be governed by the statutes In reading the majority’s analysis, one might conclude that the Contract

impairment even though statute at issue “totally deprive[d] [non-profit

such reliance is, without question, unreasonable. factor courts consider in determining whether impairment is substantial and the JUA’s funds, beyond those that are necessary to cover their claims, any The majority concedes that a history of regulation in the industry is one

1530449, at *7-8 (R.I. Super. June 23, 2005) (finding no substantial Rhode Island v. Rhode Island Dept. of Bus. Reg., No. 04-5769, 2005 WL subject to further legislation upon the same topic.”); Blue Cross/Blue Shield of already regulated in the particular to which he now objects, he purchase[s] Assn., 310 U.S. 32, 38 (1940) (When a party “purchase[s] into an enterprise

policyholders argue that they relied upon the law relevant to the disposition of was by no means unforeseeable. Accordingly, to the extent that the based capital level more than three times that of the industry minimum. p. 40 insurers writing medical malpractice insurance in New Hampshire, at a riskover a three-year period, the JUA will remain as well-capitalized as private

determined that even after the $110 million is transferred to the general fund

calculated expected financial results. Based upon this report, the Department assumptions in place, the firm created a financial projection model that the New Hampshire market. With the premium assumptions and other

expand its writings significantly because one or more carriers departed from

continuing to grow modestly, with five percent annual growth, to it having to premium volume. The premium volume assumptions ranged from the JUA modeled four different scenarios reflecting different levels of anticipated JUA

based capital levels for the years 2009 through 2013, the actuarial firm

needs to support its overall business operations. To develop a range of risk-

Commissioners to measure the amount of capital that an insurance company regarding potential insolvency appears to be ephemeral. based capital is a method developed by the National Association of Insurance period during which the policyholders have any rights, the majority’s concern estimating the JUA’s risk-based capital levels for 2009 through 2013. Risk- year, and may have expired while this litigation was pending. Given the limited

towns in which they were located.

majority acknowledges, the record shows that the Department contracted with will become insolvent during the term of the current policyholders’ contracts. surplus,” this proposition is squarely contradicted by the record. As the in three years or later, as the majority appears to state, but whether the JUA Lower Village Hydroelectric Assocs., 147 stating that “it is not clear that the $110 million in fact represents excess have rights at stake, the solvency issue is not whether the JUA will be solvent negotiate payment-in-lieu-of-taxes (PILOT) agreements with the cities and retroactive repeal of a statute that had permitted qualifying businesses to issue in Lower Village Hydroelectric Associates. That case concerned the We note that the impairment of contract in this case is unlike that at

suggests that the surplus could be required to protect the JUA from insolvency, Moreover, given that the majority holds that only current policyholders

ability of the JUA to cover future policyholder claims. While the majority removing $110 million from the fund would have no practical effect upon the effect the challenged law would have upon parties – the record reflects that

of the legislature to amend laws regulating contracts.

We observe also that, relevant to the third consideration – the practical

145.

bearing whatsoever upon the commissioner’s regulatory authority or the power This paragraph defines the responsibilities of the JUA and its insured; it has no p. 41 “wreak havoc” on them.

surplus to the general fund would affect the policyholders’ finances, let alone contracted for, and there is nothing in the record indicating that transfer of the this case is financial protection from professional liability in the amount

the impairment to be substantial.” U.S. at 244. However, even if we were to assume that the impairment is violation, and we could here end our inquiry. See Allied Structural Steel, 438 liability insurance with the JUA. The “very heart” of the contract at issue in Because there is no substantial impairment, there is no constitutional upon that reduced tax burden as it structured its business. 2. Legitimate Public Purpose

U.S. at 411. would [have] likely wreak[ed] havoc on [LVHA’s] finances.” accordingly, there is no substantial impairment. Energy Reserves Group, 459 policyholders] to gains [they] reasonably expected from the contract,” and,

parties to contract in the first place,” and, accordingly, we correctly “assume[d]

distribution of surplus induced the policyholders to contract for professional particular PILOT for a period of fourteen future tax years, presumably relying By contrast, there is no indication in the record that the right to a

Justices (Furlough), 135 N.H. at 634.

question that the contract . . . was substantially impaired.” the statute “impair[ed] the very heart” of LVHA’s contract and “[i]ts impact Justices (Furlough), where we also found substantial impairment, the repeal of at 510 (quotation omitted). Consistent with our holding in Opinion of the

The repeal of the law permitting the contract abridged a right “that induced the

totally destroyed LVHA’s contractual expectations. LVHA contracted for a LVHA, the statute permitting the PILOT agreements was repealed with a The retrospective law at issue in Lower Village Hydroelectric Associates

law “nullified the PILOT agreement,” and that, accordingly, “there can be no the New Hampshire Constitution. Id. at 75-77. Specifically, we stated that the repeal of the statute was a retrospective law in violation of Part I, Article 23 of Id. at 75. Finding that there was a binding contract in effect, we held that the $6,570.61, the amount that would have been due under the PILOT agreement. agreement, assessed LVHA’s facility $46,338.24 in ad valorem taxes, instead of

the agreement was finalized and before the first payment had been tendered by from 1997 to 2004 and 5% of gross revenues from 2005 to 2011. Id. Before agreement with Claremont under which it would pay 2.5% of gross revenues statute, Lower Village Hydroelectric Associates, L.P. (LVHA) negotiated a PILOT local small power production and cogeneration facilities. Id. Pursuant to the N.H. at 74. The purpose of the statute was to encourage the propagation of legislation’s adoption” (quotations and brackets omitted)). p. 42 and is of a character appropriate to the public purpose justifying the and responsibilities of contracting parties is based upon reasonable conditions

the court “must also satisfy itself that the legislature’s adjustment of the rights

by itself, enough to justify the impairment of contractual obligations”; rather,

deference,” but rather that we examine whether the adjustment of contract windfall to the JUA’s insureds. additional legitimate public purpose is to eliminate a potential unforeseen reasonableness of a particular measure.” the Act is reasonable and necessary to achieve its legitimate public purpose. regulation, courts properly defer to legislative judgment as to the necessity and

(holding that “the finding of a significant and legitimate public purpose is not, See Keystone Bituminous Coal Assn. v. Debenedictis, 480 U.S. 470, 505 (1987)

majority’s assertions, this does not mean that we give the legislature “complete See Lower Village Hydroelectric Assocs., 147 N.H. at 78. Contrary to the underserved persons, is a “legitimate and important goal.” We agree. An the JUA and the policyholders, we must defer to the legislature’s judgment that a contracting party, as is customary in reviewing economic and social In this case, because the State is not a party to the agreements between providing a benefit to special interests.” see United States Trust Co., 431 U.S. at 25-26, 30-32. Islands Corp., 819 F.2d 1237, 1243 (3d Cir.), cert. denied, 484 U.S. 963 (1987); reasonable in light of changed circumstances.” Nieves v. Hess Oil Virgin contract rights could achieve the same purpose and whether the law is inappropriate, and the court may inquire whether a less drastic alteration of at 634-35. “If the state is a party to the contract, such deference is brackets and ellipsis omitted); see Opinion of the Justices (Furlough), 135 N.H.

to achieve the legislature’s legitimate public purpose. “Unless the State itself is purpose guarantees that the State is exercising its police power, rather than Finally, we determine whether the legislation is reasonable and necessary

3. Whether Legislation is Reasonable and Necessary

interest is the elimination of unforeseen windfall profits”).

412. The majority concedes, as it must, that the purpose of the Act, which is

legitimate public purpose for the Act. “The requirement of a legitimate public The second step is to determine whether the State has established a

would still lead us to conclude that there is no constitutional violation. substantial, consideration of the remaining steps in the three-step analysis funds in the JUA’s account.

p. 43 that the legislature has reasonably adjusted the contract rights at issue.

transfer of the excess surplus . . . to the general fund,” than by retaining the

occurred, is amply justified by the public purposes served by the Act, and also impairment of the policyholders’ contractual rights, to the extent that any has promoting access to needed health care would be better served through a policyholders’ contractual rights. Accordingly, we conclude that the solvency. The legislature has further determined that “the purpose of actuarial study that shows that the transfer will not jeopardize the JUA’s

the JUA’s solvency, we believe that the State has reasonably adjusted the

determination is supported by evidence in the record, which includes an

actuarial study showing that transfer of the funds would in no way jeopardize access to healthcare serves this public purpose. Particularly given the determined by the insurance commissioner.” Laws 2009, 144:1. This of funds from the JUA to the general fund to support programs that provide 43 excess of the amount reasonably required to support its obligations as determined that the funds held by the JUA in its account “are significantly in

contractual rights (to the extent that any has occurred) to allow for the transfer

access instead of retaining them in the JUA’s coffers. The legislature has Keystone Bituminous Coal Assn., 480 U.S. at 505.

group.”

Additionally, in our view, the State’s adjustment of the policyholders’

accomplishes the legislature’s stated purpose.” better meet this need by transferring funds to programs that provide such

serves broad societal interests, not merely some ‘favored’ special interest limited to the duration of the emergency.

situation”);

In our view, the Act is a reasonable decision by the legislature that it can

Ken Moorhead Oil, 476 S.E.2d at 489.

healthcare for underserved populations. “The protection of public health . . . whether the imposed conditions are reasonable; and (5) whether the law is standard. The Act was passed to protect a basic societal interest – affordable group; (3) the law is appropriately tailored to the targeted emergency; (4) In our opinion, the Act easily survives scrutiny under this deferential law was enacted to protect a basic societal interest, rather than a favored

Allied Structural Steel, 438 U.S. at 249 n.24.

public purpose need not be addressed to an emergency or temporary Energy Reserves Group, 459 U.S. at 412 (observing that, to be legitimate, “the however, before a state may enact a law that impairs a private contract. See Accountancy, 118 N.H. 567, 570 (1978). An emergency need not exist, Mut. Ins., 476 S.E.2d 481, 488-89 (S.C. 1996); Kimball v. N.H. Bd. of Blaisdell, 290 U.S. 398, 444-47 (1934); Ken Moorhead Oil Co., Inc. v. Federated

upon such as factors as whether: (1) the law meets an emergency need; (2) the In analyzing the reasonableness of the legislation, courts have focused societal interest rather than a narrow class.”

p. 44 based social or economic legislation because it was enacted “to protect a broad parties.” Regardless of its funding mechanism, the Act constitutes broadfund discrete funds generated by premiums paid by a discrete class of private

majority describes as “singularly target[ing] for transfer to the State’s general

standard. economic regulatory legislation because of its “funding scheme,” which the

health care programs for underserved populations, serves at 249.

offices or terminated their pension plans.

interest is at stake, thus, justifying reviewing the Act under a heightened The majority concludes that the Act is not broad-based social or regulation directed to meet a societal need,” but a sign that the State’s selfthat the United States Supreme Court struck down in general fund, the majority reasons, is not “broad-based social or economic F.3d at 15. interests of the public” in having affordable health care. Mercado-Boneta, 125 to meet a societal need.” The legislature’s justification for the Act, to support interests when it enacted [the Act], and sought only to protect the legitimate 249. By contrast, here, the State “was not legislating on behalf of private

248. As such, the law had an “extremely narrow focus” and was not enacted

private pension plans and only when such employers closed their Minnesota fund. Allied Structural Steel applied only to certain private employers with voluntary 438 U.S. at 248-49. Mercado-Boneta, 125 F.3d at 15. The law at issue in

stands “in stark contrast to the narrowly focused, private interest-oriented law” modification of a State’s own financial obligations”). This transfer to the

determination” regarding the necessity and reasonableness of the law), access to health care is not “broad-based social or economic regulation directed we fail to see how an act designed to support programs that promote public In our view, the majority’s reasoning is flawed in several respects. First,

unwarranted because the Act transfers money from the JUA to the general

(holding, “[t]he Contract Clause is not an absolute bar to subsequent denied, 457 U.S. 1117 (1982); but cf. United States Trust Co., 431 U.S. at 25

factors underlying the legislation and to make a totally independent contracts are involved, courts are not required to “reexamine de novo all the Etc. v. Comm. of Mass., 666 F.2d 618, 642 (1st Cir. 1981) (even where public contracts are at issue, some deference is due a legislature”); Local Div. 589, But see Mercado-Boneta, 125 F.3d at 16 n.8 (noting, “even where public

added). The majority contends that substantial judicial deference is legislation,” the majority declines to do so. Nieves, 819 F.2d at 1249 (emphasis concerning the necessity and reasonableness of economic and social Although “[c]ourts are required to defer to the legislature’s judgment p. 45 [stands] to [gain].”

such a scheme, “it [is] the public welfare, not the [State’s] bank account, that provide underserved populations with access to needed healthcare. Under the Act specifically earmarks the transferred funds to support programs that 45

police powers.” private insurers that fund the insurance department.

scrutiny.” State’s financial benefit.” Unlike the majority, we give credence to the fact that

legislature’s judgment (quotation omitted));

F.3d at 373. essentially acting not according to its economic interests, but pursuant to its interest and dividends tax. It is also exempt from assessments levied upon motive of political expediency or unjustified welching.” Buffalo Teachers, 464 paid the New Hampshire business profits tax, business enterprise tax, and the evidence in the record that the legislature enacted the Act because of “an illtax and New Hampshire premium tax. It is also exempt from and has never Id. Contrary to the majority’s implication, there is no

statute that impairs a purely private contract would be subject to heightened We disagree with the majority’s conclusion that the Act “inures to the

the State is itself a contracting party, courts should properly defer” to the Mercado-Boneta, 125 F.3d at 16 (emphasis added).

reasonable and necessary “deserves significant deference because the state is as a obligations,” then the legislature’s assessment of whether the legislation is When, as in this case, “the state has in fact altered none of its own financial assessments paid by private insurers.” The JUA is exempt from federal income [Court] would not enact the legislation in the first place.” N.H. at 78 (judicial deference required unless State is contracting party). cert. denied, 467 U.S. 1259 (1984); Lower Village Hydroelectric Assocs., 147 contracts; such scrutiny applies only when the State is a contracting party), argument that heightened scrutiny applies to legislative impairment of private broadly. Under the majority’s construction of the term, “virtually every state 724 F.2d 1247, 1270 (7th Cir. 1983) (holding that there is “no merit” to the

480 U.S. at 505 (United States Supreme Court “has repeatedly held that unless further important public policies.” Id.; see Keystone Bituminous Coal Assn., party to a contract, rather than to its interests as a sovereign seeking to to which the United States Supreme Court has referred “is the state’s interest

resulted from the accumulation of “investment income free of taxes and statute is intended to serve [the State’s] self-interest; otherwise the General surplus has resulted, in part, from the accumulation of premiums, it has also Ken Moorhead Oil Co., 476 S.E.2d at 488. “Presumably, every state to the deputy commissioner of the insurance department, while the excess

Second, we believe that the majority construes the term “self-interest” too

“generated by premiums paid by a discrete class of private parties.” According Moreover, the record refutes the majority’s assertion that the funds were for purposes of Part I, Article 12 of the State Constitution has occurred. p. 46 N.H. CONST. pt. I, art. 12. In the absence of a vested property right, no taking

part of a man’s property shall be taken from him . . . without his own consent.”

Act constitutes a “taking.” The New Hampshire Constitution provides that “no surplus itself or to its use for their benefit is dispositive of their claim that the

operate as a “taking” for the purposes of Part I, Article 12. Accordingly, because the policyholders lack vested rights, the Act does not Adams v. Bradshaw, 135 N.H. 7, 14 (1991), cert. denied, 503 U.S. 960 (1992).

State and Federal taxes?

without violating the policyholders’ constitutional rights? Our determination that the policyholders lack vested rights to the

III. Part I, Article 12

private medical malpractice insurance market in New Hampshire? • If it is distributed to policyholders, what impact will this have on the

• What effect will this decision have on the JUA’s exemption from both

legislature could require the JUA to transfer the $110 million surplus became effective upon issuance of the policyholders’ new policies, the that, as the majority suggests, if new legislation were passed that right to the $110 million surplus also expire? If so, does this mean

strict scrutiny.” • Once the policyholders’ policies expire, does their supposed vested

to a given problem.” Contract Clause claims? as the majority holds, only “current policyholders” have viable underlying the legislation at issue and to make a [JUA],” does that include both current and past policyholders, even if, • If it is to be distributed “to such health care providers covered by the does not imply no deference.” • What now becomes of the $110 million surplus?

Finally, today’s decision leaves a number of unresolved issues, including:

Buffalo Teachers, 464 F.3d at 371.

heightened scrutiny to be applied as exacting as that commonly understood as

whether another alternative would have constituted a better statutory solution

self-interest is at stake, courts are not required “to reexamine all of the factors

we disagree with the majority’s application of this standard. “[L]ess deference Third, even if a heightened standard of review were justified in this case, p. 47 47

citizens have delegated the power to make the law.”

is not for us to decide.”

challenged . . . under the due process clause”),

their elected representatives, not to the members of the judiciary that the

the rule that “[t]he wisdom, effectiveness, and economic desirability of a statute

and burdens . . . is reviewable under the rational basis criterion when

purpose, the majority encroaches upon legislative decision-making. reasonable and necessary measure to further an indisputably legitimate public of the basic principle that under the doctrine of separation of powers, it is to cannot join it, and respectfully dissent.

policy are reserved for the legislature”). The majority’s opinion is contrary to (1989); Petition of Kilton, 156 N.H. 632, 645 (2007) (noting, “[m]atters of public

604, 613 (1988) (observing, “legislation merely regulating economic benefits (Hancock, J., dissenting) (citation omitted); see Appeal of Bosselait, 130 N.H.

believe that by failing to defer to the legislature’s judgment that the Act is a down regulatory legislation, courts have been mindful of this rule in recognition Lochner era concept of economic due process as a justification for striking 284, 288 (2009). “Particularly since the Supreme Court’s abandonment of the (Hancock, J., dissenting); see N.H. Assoc. of Counties v. State of N.H., 158 N.H. to be unconstitutional beyond a reasonable doubt.” Chu, 571 N.E.2d at 690 presumed to be constitutional and may be struck down only when it is proven review of legislative enactments it is this: that an act of the Legislature is “If there is one rule that is now ingrained in the doctrine of judicial

Article 23 of the State Constitution is erroneous as a matter of law. We also We believe that the majority’s conclusion that the Act violates Part I,

IV. Conclusion