Policyholders for the Joint Underwriting Association's medical malpractice fund sued the JUA's board of directors in Merrimack County Superior Court this week. The policyholders want the JUA board to determine how much surplus is in the fund - a necessary step before any extra money can be distributed to policyholders. Kevin Fitzgerald, attorney for the policyholders, said the lawsuit was necessary because state officials are trying to prevent the JUA board from distributing money to policyholders - in violation of a state Supreme Court ruling.

"The commissioner of insurance and attorney ordered (the board) not to, in what we believe is unlawful interference with their function," Fitzgerald said.

Gov. John Lynch's office referred calls to the attorney general's office, which has been representing the JUA board. A message left with Associate Attorney General Anne Edwards was not returned yesterday.

In the current budget, Lynch and the Legislature approved taking $110 million in surplus money from the state-created medical malpractice fund. The state Supreme Court in January rejected the state's claim to the money.

Since then, the insurance department has launched a financial examination to determine the tax status of the JUA and how much surplus remains. The department claims the JUA's tax status may be affected by the lawsuit, since it could affect whether the JUA is considered part of the state.

The governor has continued to insist that the money belongs to taxpayers.

The insurance commissioner and the JUA board have not officially declared a surplus, or approved any distribution of extra money to policyholders. The insurance commissioner instructed the board not to take any action regarding any surplus money until the state's financial examination is completed.

But the policyholders say the Supreme Court ruling gives them a clear constitutional right to the money. The petition filed with the court accuses state officials, including Lynch, of not accepting the Supreme Court's ruling. It also says the JUA board of directors has refused to provide the policyholders with information required to determine the amount of money considered surplus.

The petition lays out the argument that the policyholders "had the reasonable expectation - indeed an unmistakable promise" that any surplus money from premiums would be paid out to policyholders. The Supreme Court found that the only options for the JUA, if there were a surplus, would be to distribute it to policyholders or use the money to lower rates in the future.

The petition quotes media accounts of state officials, including Lynch and Insurance Commissioner Roger Sevigny, stating that the money belongs to taxpayers. (Some statements were made to the Monitor.) It points out that in a report before the Legislature decided to take the money, the Insurance Department stated that the JUA had a surplus, in 2008, of about $140 million. A year ago, the policyholders demanded that the JUA board declare a surplus and pay it out to policyholders, but the JUA did not respond, according to the petition.

The petition states the JUA board has a fiduciary duty to declare a surplus and return money to policyholders. It asks the court to force the JUA to provide financial statements and financial information relating to claims, premiums and surplus funds from 1986 to 2010.

"We believe the insurance department, attorney general and governor are trying to take another run at this money," Fitzgerald said. "We're trying to get the JUA to do its duty, declare a surplus, or at minimum provide information that allows that amount of money that policyholders have a vested right in."

Fitzgerald warned that the latest filing was only "the first step in a series of actions" directed at state officials, to try to get the money distributed.