HARRISBURG, Pa. — A decision from a federal appeals court is overturning previous rulings that had prevented the Pennsylvania state government from extracting funds from a state-chartered medical malpractice insurer designated for use as a last resort.

The 3rd U.S. Circuit Court of Appeals issued its ruling on Monday concerning the Pennsylvania Professional Liability Joint Underwriting Association, clarifying that the insurer was established by the state, invested with its authority, and that the state retains sole ownership of it.

According to the court’s opinion, the state has the authority to change or eliminate the legislation that created the nonprofit entity without any interference from federal courts.

This ruling comes after a seven-year legal battle, initiated by the association’s lawsuit against the state in federal court, which aimed to prevent Pennsylvania from enforcing a demand for at least $200 million from its reserves under the threat of closure.
The association was founded in 1975 in response to a medical malpractice crisis and currently offers coverage to numerous healthcare providers, reporting a substantial surplus of $342 million as of December 31 of last year.
The association has the option to request a rehearing from the appeals court or appeal to the U.S. Supreme Court. A representative for the association declined to provide comments on the latest decision, while Democratic Governor Josh Shapiro’s office also withheld immediate responses.
Between 2017 and 2019, both the Legislature and then-Governor Tom Wolf attempted to access the association’s financial resources to alleviate a shortfall in the state’s operational budget.

In response, the association filed suit and achieved success multiple times in federal court. U.S. District Judge Christopher Conner previously ruled that the association functions as a private entity, asserting that it would be unconstitutional to seize its surplus without just compensation.
However, in the recent ruling, Judge Kent A. Jordan of the 3rd Circuit articulated that the state had established the insurer to fulfill broader health care objectives. He observed that the association’s funds are a product of these initiatives and that its policyholders do not possess any legal claims over its assets.
“It is challenging to envision where the assets, including the surplus, would be allocated other than to the Commonwealth, given that the Joint Underwriting Association lacks private stakeholders, holds no property in trust, and does not operate with a charitable intent,” he remarked.
The association maintains that its reserves were built solely from policyholder premiums, asserting that taxpayer funds have never contributed to its operational costs.