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Pennsylvania's budget package is hit by $200 million lawsuit

| Monday, Nov. 13, 2017, 8:12 p.m.
The Pennsylvania Capitol building in Harrisburg.
AP Photo / Matt Rourke
The Pennsylvania Capitol building in Harrisburg.

HARRISBURG — A state-created medical malpractice insurer of last resort is asking a federal judge to block the Pennsylvania government's demand for $200 million from its reserves and a threat to shut it down if it does not hand over the cash.

The Pennsylvania Professional Liability Joint Underwriting Association sued last week and said the state's attempt to take most of its reserves is an unconstitutional nationalization of a nonprofit organization. It said in court papers that losing that amount of money would “seriously imperil” its ability to make good on its coverage obligations to its policy holders.

Budget-related legislation signed by Democratic Gov. Tom Wolf last month would shut down the association Dec. 1 if it doesn't hand over the $200 million, which the state has sought to help stabilize its deficit-ridden finances.

U.S. District Judge Christopher C. Conner in Harrisburg scheduled a hearing Tuesday on the association's request for an injunction.

Blocking the state's demand would presumably blow a $200 million hole in a $32 billion state budget that already relies heavily on borrowing and other one-time cash infusions, a package driven by the Legislature's huge bloc of anti-tax Republicans.

In a response filed Monday, the Pennsylvania attorney general's office said the state created the association and can dissolve it. The association's reserves are excessive and do not belong to it, state lawyers said.

The association, created by the state in 1975 amid a medical malpractice crisis, provides coverage to more than 600 health care providers, and it said in court papers that its reserves were generated from premiums. The state has no right to the money, it said, and no regulator, such as the state Department of Insurance, has deemed the association's reserves to be excessive.

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