We tend to avoid cases about insurance. Not because they are dull (as you might wrongly imagine). Indeed, there’s more excitement in insurance cases than you’d guess. But insurance law and the insurance regulation field needs a certain level of very niche expertise that we don’t possess. So normally, we would not have given the U.S. Court of Appeals for the Third Circuit’s opinion in Pennsylvania Prof. Liability Joint Underwriting Ass’n v. Gov. of the Commonwealth of Pennsylvania, No. 18-2297 (Dec. 16, 2024) a second glance.
But a case that at first glance seemed about insurance contained lot of “takings” references sprinkled across the many pages of the opinion, so it pinged our radar. And it turns out it was worth a download and review if you keep your expectations in check.
In the end, the court didn’t really tell us much about regulatory takings doctrine, even though the district court held that by adopting statutes pursuant to which the Commonwealth of Pennsylvania raided the funds held by the Joint Underwriting Association, it had taken private property. The JUA acts “as a professional liability insurer of last report for high-risk medical providers.” Although created by the Commonwealth, the government never funded the it. But the JUA must have been doing something right because “[s]ince its inception, it has amassed through investments a surplus of $300 million.”
Well, we know what happens when any entity, public or private, gets too much money: the Crown starts coveting it. Just ask the Knights Templar how their amassing of more money than King Philip worked out for them. In the end, the Crown thinks it has the trump card. Which it often does (except, perhaps, in the United States, where the Constitution bats last, at least in theory). Here, the Commonwealth legislature repeatedly enacted laws to transfer JUA’s surplus to the state’s general fund.
The JUA sued for, inter alia, a taking. One of the defenses posed by the Commonwealth was (you guessed it): the surplus is not “private property” because the JUA is part of the government. And the government cannot sue itself for a violation of the Constitution. However, as noted above, the district court agreed with the JUA.
The Third Circuit had a slightly different view. It asked whether the JUA a creature of the Commonwealth: “in other words, whether it is a public entity rather than a private one.” Slip op. at 7. The court held that the JUA is a public entity. We’ll let you read the opinion (all 44 single-spaced pages of it) for the exact reasons why. Here’s the court’s summary:
In sum, Pennsylvania established the JUA to serve an integral role in the administration of the Commonwealth’s insurance market and, consequently, in the health care market too. In doing so, it imbued the JUA with the coercive power of state government to compel private insurance companies to take specific actions. The JUA’s funds are the result of the Commonwealth’s enforced acquisition of funds to support those goals, and only the Commonwealth has a legally protectable interest in the JUA and its resources. We thus hold that, under Dartmouth College’s guidance, the JUA is a public institution and is without the ability to maintain the constitutional claims it has asserted against the Commonwealth.
Slip op. at 37.
No takings claim.
Even though there’s not a lot about takings here, we decided to post it mostly because the decision informs our analysis of those cases where a kinda-sorta-government actor is sued for a taking, but then claims to be a private actor and not a state actor. You know the drill: a utility, or a university, or similar. We’ve all been there trying to figure out of our defendant engages in “state action” for purposes of the Fourteenth Amendment, or even whether it enjoys Eleventh Amendment immunity from federal lawsuit.
On that, this one might be worth your time skimming, or even reading in detail, if you have the interest.