Pa. Pro. Liability Joint Underwriting Ass’n v. Governor of Pennsylvania, 2024 U.S Dist. LEXIS 31801 (U.S. Dist. Ct. of App., 3d. Cir., December 16, 2024) (Jordan, J.)
JORDAN, Circuit Judge.
Nearly fifty years ago, in response to a medical malpractice [*2] insurance crisis in the state, the General Assembly of the Commonwealth of Pennsylvania established the Joint Underwriting Association (“JUA”). The JUA’s primary function is to act as a professional liability insurer of last resort for high-risk medical providers, who pay the JUA directly for the policies it issues. The JUA has never received funding from the Commonwealth. Since its inception, it has amassed through investments a surplus of about $300 million. Every year from 2016 to 2019, the Commonwealth took legislative action trying either to transfer the JUA’s surplus to the Commonwealth’s General Fund or to assume control of the JUA. 1) The 2017, 2018, and 2019 statutes — Acts 44, 41, and 15, respectively — are the focus of the appeals before us now. After each of those enactments, the JUA sued various combinations of defendants, including the Commonwealth’s Governor, General Assembly, Insurance Commissioner, and four state representatives (together, the Defendants), asserting multiple federal claims. According to the JUA, the Defendants have violated the Takings Clause, the Contract Clause, the First Amendment, and the JUA’s rights to procedural and substantive due process. 2) In response to the JUA’s challenges, the Defendants asserted, among other things, that the JUA was created by the Commonwealth and cannot assert constitutional claims against its creator. The District Court disagreed and entered an injunction, preventing the enforcement of most of the legislative changes to the JUA. 3) The primary issue before us in these appeals is whether the JUA is indeed a creature of the Commonwealth beholden only to the Commonwealth; in other words, whether it is a public entity rather than a private one. We hold that it is, because the Commonwealth delegated power to the JUA to support a public purpose within the state insurance market, and because only the Commonwealth has a legally protectable interest in the JUA. As a public entity, the JUA lacks the ability to maintain the constitutional claims it has asserted against the Commonwealth, its creator. Accordingly, and for the reasons explained herein, we will reverse in part, affirm in part, and remand.
The crux of this protracted litigation is the status of the JUA: whether it is a public entity akin to a state agency or is instead a private entity with the ability to sue the Commonwealth for the violation of constitutional rights. To make that determination, we first must identify the proper analytical approach.
We take the cited conditions to be four guiding questions in the identification of a public entity subject to the control of the legislature. The first two questions, about the act of incorporation, ask whether the entity was granted political power or was created to be employed in the administration of government. The third asks whether the funds of the entity are public property, and the fourth and final question examines whether only the state has an interest in the entity. In short, the ends and means of the institution, as of the time it was established, are strong indicators of whether it is public or private.
First, we ask whether the JUA’s organic act granted it political power.
Second, we consider whether the JUA was created as a civil institution to be employed in the administration of government.
Third, we ask whether the JUA’s funds are drawn from public property.
Finally, fourth, we consider whether anyone but the Commonwealth has an interest in the JUA.
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. Pursuant to the principles of federalism, the Commonwealth can amend and repeal its JUA-related legislation as it sees fit, free from interference by federal courts.
For the foregoing reasons, we will reverse in part, affirm in part, and remand for further proceedings consistent with this opinion.
