Attorney general seeks intervention in $110 million settlement

New Hampshire's attorney general objected yesterday to a proposed settlement in a tug-of-war over $110 million of surplus money in a state-created malpractice insurance fund because lawyers would get up to $27.5 million of it.

Attorney General Michael Delaney wrote the Legislature that the settlement is inconsistent with legislative intent and wants lawmakers to intervene.

"The people of New Hampshire will be outraged when they learn a private law firm is being paid $27 million at a time when there have been severe budget cuts to health and human services - services that could have been supported by these funds but instead are going to a private law firm," said Colin Manning, spokesman for Gov. John Lynch.

Lynch had wanted to use the surplus to pay for services in the last budget, but the courts rejected the state's claims to the money.

The rulings left policyholders, who include doctors and medical providers, expecting at least some of the money. Delaney said the Legislature directed that the surplus be paid to the policyholders and the proposed financial settlement exceeds the threshold amount requiring their approval.

Manning said he hopes the Legislature will block the settlement.

Delaney said the law firm of Nixon, Peabody, LLP would be paid up to $27.5 million, which represents 25 percent of the $110 million surplus fund at issue.

Kevin Fitzgerald, an attorney at Nixon, Peabody who represented the plaintiffs in the case, called Delaney's letter nothing more than an attempt at payback from the losing side.

"The attorney general is not party to the case," he said.

Fitzgerald said the plaintiffs agreed when they hired the law firm that if it took the risk of taking on a popular sitting governor on a contingency fee basis, they would accept a 25 percent fee. Fitzgerald said a hearing is scheduled Thursday in Merrimack County Superior Court on whether the settlement should receive preliminary approval.

"I don't know what conclusion the court is going to reach on the fee," he said.

Fitzgerald said the settlement affects about 6,000 policyholders.

The Joint Underwriting Association fund was created by the Insurance Department in 1975 to provide affordable medical malpractice insurance to high-risk health care providers. It has been at the center of a dispute since Lynch tried to use money from the surplus to balance the state budget.

The state Insurance Department said the JUA faces a potential tax liability if it loses its tax-exempt status as a result of the dispute.

Delaney said the Legislature passed a law setting a $25 million reserve to satisfy any potential unresolved federal tax liabilities and included a provision to recapture a pro-rated share of any distribution to policyholders that exceeded that amount.