516-228-8766 schaum@schaumlaw.com

November 2022


Finally- finally- finally- we have a resolution of the endless litigation centering around the question of the party entitled to the premium distribution upon the dissolution of MLMIC some years ago. 

In the initial suit Columbia Memorial Hospital contended that it should be the recipient of the distribution on the basis that it had been the policy administrator had paid the premiums and that, in the past it had received any dividends paid by the company.   The hospital argued that although it was not the named assured it was, in fact, the “de facto” policy holder. The employees argued that only the person named in the policy qualified for receipt of distribution upon liquidation.

Resolution of the question by the Court of Appeals would be binding upon all those others who were perplexed by the issue.  There had been individual suits across the New York court landscape which had not yielded always similar results.  The Court of Appeals rejected the hospital’s interpretation of the State Insurance Law which called for an equitable share of premium upon dissolution divided among the policyholders. The court stated the so-called equitable share went only to the question of division of monies entitled and not as to who was entitled to receipt.  As to the question of whether employees had received an unjust enrichment the Court found that the employees had suffered a loss as they had been stripped of an ownership interest in the mutual company.

The court also quite forcefully pointed out that the issue of premium paid by the employer stemmed from employment contracts between the two parties.  The hospital could have contractually provided for any return premiums to be assigned to the payor-hospital but had chosen not to do so.    The hospital had further benefited by having a fully insured employee with the residual benefits from having an insured staff.  Please note that in any instance where a contract between employer and employee had spelled out the rights of the employer to receive payment upon a dissolution that independent contract would be honored, and the employer entitled to the distribution.

Respectfully Submitted,
Schaum Law Offices