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142670-1 - Attorney General v BC/BS & Ofc of Fin & Ins Regulation

Attorney General,
Michael E. Moody
(Appeal from Ct of Appeals
(Ingham – Manderfield, P.)
Blue Cross Blue Shield of Michigan,
Jeffery V. Stuckey
Joseph A. Fink
Attorney General,
Blue Cross Blue Shield of Michigan,
Office of Financial and Insurance Regulation and Commissioner of the Office of Financial and Insurance Regulation,
Suzan M. Sanford


​In 1994, the Michigan Legislature authorized the non-profit health insurance carrier Blue Cross Blue Shield of Michigan to acquire the State Accident Fund, the state’s largest worker’s compensation carrier, and operate it as a wholly-owned for-profit stock insurance subsidiary. In 2005, the Accident Fund bought United Wisconsin Insurance Company, a worker’s compensation carrier. In the summer of 2007, the Fund acquired CWI Holdings, Inc., a Delaware company that owns 100 percent of CompWest Insurance Company, a California property and casualty insurance company that writes workers’ compensation insurance primarily in California. Also in the summer of 2007, the Accident Fund acquired the Third Coast Insurance Company, an inactive property and casualty insurance company located in Illinois. In November 2007, Blue Cross made a capital contribution of $125 million to the Accident Fund for the stated purpose of allowing the workers’ compensation companies to be able to maintain an “A” insurance rating. According to the Michigan Attorney General, the contribution was made in order for the Accident Fund to acquire CWI Holdings, which had a purchase price of $127.4 million.

In 2008, the Michigan Attorney General challenged the purchases. The Attorney General claimed that the purchases were prohibited by MCL 550.1207(1)(o), a statute governing Blue Cross’s operations. That statute regulates the actions that may be taken by “[a] health care corporation,” and it sets forth a general prohibition against the acquisition of any “domestic, foreign, or alien insurers . . . .” The statute does provide a limited exception to the general prohibition, but the Attorney General argued that the exception did not apply to the transactions at issue.

Both the trial court and the Court of Appeals, in a published opinion, rejected the Attorney General’s argument. Both concluded that, because the Accident Fund was not a health care corporation, it was not barred by MCL 550.1207(1)(o) from making the challenged purchases. Indeed, said both courts, another provision of the statute, MCL 550.1207(1)(x)(i), specifically authorized the Fund to indirectly transact certain types of insurance, and supported the legitimacy of the Accident Fund acquisitions. The Attorney General appeals.