Yet Another Appellate Department Unanimously Rules That the MLMIC Buyout Proceeds Belong to the Physician-Policyholder, Regardless of Who Paid the Malpractice Premiums or Acted as Policy Administrator

On December 9th, a four-judge panel in the Appellate Court in New York’s Second Department unanimously ruled that the MLMIC Buyout Proceeds from the sale and demutualization of the State’s largest medical malpractice insurer, the Medical Liability Mutual Insurance Company (“MLMIC”), belong to the physician-policyholder and not to his/her employer, even if such employer paid the malpractice premiums and/or acted as the Policy Administrator.

The Second Department’s unanimous decision in Maple Medical, LLP v. Joseph Scott, etc., 2020 WL 7233649, is consistent with the unanimous conclusions reached by the Appellate Divisions in both the Third and Fourth Departments in recent months. The Appellate Court in Maple Medical held as follows:

“The plain language of Insurance Law Section 7307, [MLMIC’s] plan of conversion, and the NYS Department of Financial Services’ decision make clear that the policyholder is entitled to the consideration paid in connection with the MLMIC demutualization.”

As such, there is only one Appellate decision that is in conflict with the holdings by the Second, Third, and Fourth Departments and that is the First Department, which held in Matter of Schaeffer, Schonholz & Drossman, LLP v. Title (171 AD3d 465) that the MLMIC buyout proceeds belong to the party who paid the malpractice premiums. That First Department decision will be reviewed in coming months in the case of Mid-Manhattan Physician Services, P.C. v. Dworkin, 2019 WL 4261348 (Sup Ct, New York County 2019). It is contemplated that in that pending appeal, the First Department will likely reverse its earlier decision in Schaeffer based upon the analyses set forth in the recent appellate decisions from the Second, Third, and Fourth Departments. 

If the First Department does in fact reverse itself, then all four of New York’s Appellate Division departments will have spoken with one voice on this issue and there will no longer be any conflict among the Departments. Whether New York’s highest tribunal–the Court of Appeals–will nevertheless still entertain an appeal from the Third Department’s decision in Schoch v. Lake Champlain OB-GYN, P.C. (184 AD3d 338, leave granted 35 NY3d 918) under those circumstances, or a possible appeal from either of the appellate decisions rendered by the Second and Fourth Departments, is unclear at this time. 

 

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