The Common Law Power of the Legislature: Insurer Conversions and Charitable Funds

June 2005 | Jill R. Horwitz, Marion R. Fremont-Smith

New York’s Empire Blue Cross and Blue Shield conversion from nonprofit to for-profit form has considerable legal significance. Three aspects of the conversion make the case unique: the role of the state legislature in directing the disposition of the conversion assets, the fact that it made itself the primary beneficiary of those assets, and the actions of the state attorney general defending the state rather than the public interest in the charitable assets. Drawing on several centuries of common law rejecting the legislative power to direct the disposition of charitable funds, this article argues that the legislature lacked power to control the conversion and direct the disposition of its proceeds and that its actions not only undermined the nonprofit form but also raised constitutional concerns.

Author(s): Jill R. Horwitz; Marion R. Fremont-Smith

Keywords: organizations; nonprofit; Blue-Cross plans; legal aspects; for-profit conversions

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Volume 83, Issue 2 (pages 225–246)
DOI: 10.1111/j.1468-0009.2005.00345.x
Published in 2005