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Heritage Healthcare Services8/29/2005
DECISION
Before the Court for decision is the Defendants' (collectively Beacon) motion to dismiss Count III of Plaintiff's (Heritage) Fifth Amended Complaint for lack of subject matter jurisdiction. Heritage has timely filed an objection thereto. The motion is before the Court pursuant to G. L. 1956 § 8-2-14, § 8-2-13 and Super. R. Civ. P. Rule 12(b)(1).
Facts and Travel
Beacon is a non-profit, independent, public corporation created by the state to be a worker's compensation insurance carrier of last resort. P. L. 2003, ch. 410 § 3 (a) (formerly G. L. § 27-7.2-2 (a)). Beacon also is known as the Workers' Compensation Insurance Fund or simply, the Fund. Beacon, for the most part, is organized and operated as a domestic mutual insurance company. Id. at § 3 (b). Joseph Arthur Solomon, Jeffrey Carleton Johnson, and Michael Dennis Lynch were officers of Beacon during the time pertinent to this case.
Heritage is a Rhode Island corporation and was a policyholder of Beacon from 1992 through 1995 and 1999 through 2001. In Count III of its Fifth Amended Complaint, Heritage claims that Beacon breached its contract with Heritage by "failing to provide a policy of workers' compensation insurance at the lowest possible price." In support of its claim, Heritage recites a litany of alleged facts that imply that Beacon had the financial wherewithal to lower its prices but did not do so. Specifically, Heritage alleges that:
1. A 5 million dollar note was alternately recorded in Beacon's financial statements as a policyholders' surplus in 1992/1993, then as a liability in 1993/1994 and then as a policyholders' surplus in 1994/1995.
2. In its fifth year of existence, Beacon's net profit was 23 million dollars. 3. In its ninth year of existence, Beacon bought property and built a building valued at 15 million dollars.
4. Beacon purchased investment property in Warwick. 5. In 2001, Beacon announced that it would not pay dividends due to market uncertainty resulting from the September 11th attacks, yet two years later, invested 20 million dollars in a for-profit insurance company, Castle Hill.
6. In less than two years after Beacon announced that it would not pay dividends, it had a 110 million dollar surplus.
7. Beacon's financial statements do not reflect Beacon's majority interest in for-profit insurance companies.
8. Beacon does not pay taxes, nor does it contribute to the Rhode Island Insurance Insolvency Fund.
9. In December 2004, the National Council on Compensation Insurance recommended that workers' compensation rates in Rhode Island be reduced by 20 percent. Although other workers' compensation insurance companies followed the Council's recommendation, Beacon did not.
10. Beacon created and invested in subsidiary for-profit insurance companies and the officers and directors of Beacon are also the officers and directors of the subsidiary companies.
11. In 2003, the direct premiums written by Beacon was over 106 million dollars while its closest competitor only wrote approximately 3 million dollars.
Heritage's prayer for relief includes ordering Beacon to refund all premiums in excess of "the lowest possible price" in accordance with P.L. 2003, ch. 410, § 3 (a), attorneys' fees, expenses and any other equitable remedy that the Court may find appropriate.
The travel of this case includes a written decision, found at 2004 R.I. Super. LEXIS 29 (January 21, 2004), in which this Court dismissed certain of Heritage's claims contained in its Third Amended Complaint. There, it held that § 27-9-51, governing the return of excess
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