Could Maryland's Insurance Guaranty Association hire its own private lawyers, or did it have to use the Attorney General's office like a state agency?

Plain-English summary

The Maryland Insurance Guaranty Association (MIGA), a nonprofit entity funded entirely by member insurers to cover claims when an insurer becomes insolvent, had been represented by privately retained lawyers since it was created in 1971. That practice came into question after a 1983 Court of Appeals decision, A. S. Abell Publishing Co. v. Mezzanote, held that MIGA counted as "a unit or instrumentality of the State government" for purposes of Maryland's Public Information Act, raising the question of whether a separate statute requiring state units to use only the Attorney General's office as legal counsel also applied to MIGA.

The Attorney General concluded that MIGA was not a "unit of the State government" for purposes of that separate representation statute, even though it had been treated as a state instrumentality for the different purpose of public records access. The opinion reasoned that MIGA operated much like a private insurance pool in its day-to-day handling of claims, used no public funds, and had been represented by private counsel without objection from the Insurance Commissioner or the Attorney General's own office since its founding. While acknowledging the answer was not free from doubt, the opinion let MIGA continue using private counsel and recommended that MIGA seek legislative clarification to remove any uncertainty.

Currency note

This opinion was issued in 1985. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Did a Maryland court ruling that MIGA was a "state instrumentality" for public records purposes automatically mean MIGA had to use the Attorney General as its lawyer?
No, according to this opinion. The Attorney General concluded that being characterized as a state instrumentality under the Public Information Act did not settle whether MIGA was a "unit of the State government" under the separate statute governing legal representation, since Maryland law recognized that an entity could be a state agency for one purpose but not another.

Why did the opinion let MIGA keep using private lawyers instead of the Attorney General's office?
The opinion pointed to MIGA's structure and history: it used no public funds, operated much like a private insurance pool in paying claims and assessing member insurers, and had been continuously represented by privately retained counsel since 1971 without the Insurance Commissioner or the Attorney General's office ever objecting or being asked to provide representation.

Was the Attorney General fully confident in this conclusion?
No. The opinion described the question as "not altogether free from doubt" and an "ad hoc" determination specific to MIGA's particular structure and purposes, and it recommended that MIGA seek legislative clarification so the General Assembly's intent on the point would be unambiguous.

Background and statutory framework

The Maryland Insurance Guaranty Association was created in 1971 by Chapter 703, Laws of Maryland 1971, and codified at Article 48A, §§504 through 519, to protect policyholders from losses caused by insurer insolvencies and to help detect and prevent such insolvencies. All insurers writing non-life, non-health, non-annuity business in Maryland were required to be members, MIGA was designated a "non-profit unincorporated legal entity" funded solely by member assessments rather than public funds, and it was authorized to hire employees, borrow funds, sue and be sued, and enter into contracts to carry out its statutory duties.

Section 6-106(c) of the State Government Article barred any "officer or unit of the State government" from being represented by counsel other than the Attorney General. The opinion applied the flexible, purpose-specific test the Court of Appeals used in A. S. Abell Publishing Co. v. Mezzanote, 297 Md. 26 (1983), which had found MIGA to be a state instrumentality under the Public Information Act, but stressed that Maryland courts had "repeatedly recognized that there is no single test" for that kind of classification and that the same entity could be a state agency for one statute but not another, drawing an analogy to the Ninth Circuit's decision in Irwin Memorial Blood Bank v. American Nat'l Red Cross, 640 F.2d 1051 (9th Cir. 1981), which found the Red Cross was not a federal agency under the federal Freedom of Information Act despite being an instrumentality of the United States for other purposes such as tax immunity under Department of Employment v. United States, 385 U.S. 355, 358 (1966). The opinion also relied on MIGA's long, unchallenged practice of using private counsel since 1971 as evidence of the General Assembly's likely intent, citing Jackson Marine Sales v. State Dep't of Assessments & Taxation, 32 Md. App. 213, 217, cert. denied, 278 Md. 725 (1976), for the principle that legislative inaction in the face of a long-standing administrative practice suggests that practice reflects legislative intent. An editor's note appended to the opinion recorded that Chapter 161, Laws of Maryland 1986 later redesignated MIGA as the Property and Casualty Insurance Guaranty Corporation and expressly declared it not to be a department, unit, agency, or instrumentality of the State for any purpose.

Citations

Statutes:

• Article 48A, §§504 through 519 of the Maryland Code (MIGA's enabling statute)
• Article 48A, §504(a) (MIGA's statutory purpose)
• Article 48A, §506 (MIGA designated a "non-profit unincorporated legal entity")
• Article 48A, §508(a)(3) (MIGA funded by member assessments, not public funds)
• Article 48A, §515 (MIGA's tax exemption)
• Article 48A, §517 (MIGA's exemption from liability for official acts)
• §6-106(c) of the State Government Article (bar on state units using counsel other than the Attorney General)
• Chapter 703, Laws of Maryland 1971 (MIGA's creation)
• Chapter 161, Laws of Maryland 1986 (redesignating MIGA as the Property and Casualty Insurance Guaranty Corporation)

Cases:

• A. S. Abell Publishing Co. v. Mezzanote, 297 Md. 26 (1983)
• Irwin Memorial Blood Bank v. American Nat'l Red Cross, 640 F.2d 1051 (9th Cir. 1981)
• Department of Employment v. United States, 385 U.S. 355, 358 (1966)
• Jackson Marine Sales v. State Dep't of Assessments & Taxation, 32 Md. App. 213, 217, cert. denied, 278 Md. 725 (1976)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1985/Volume70_1985.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

ATTORNEY GENERAL

Maryland Insurance Guaranty Association—"Agency, Unit, or Instrumentality of State Government"—Counsel—MIGA is not Precluded From Employing Private Counsel.

June 14, 1985

Mr. Stephen J. Bernhardt, Chairman
Maryland Insurance Guaranty Association

The Maryland Insurance Guaranty Association ("MIGA") has requested our opinion on whether it has the authority to retain private counsel to advise and represent it.

For the reasons given below, we have concluded that MIGA may continue to employ private counsel, although legislative clarification is warranted.

I
Background

The Maryland Insurance Guaranty Association was established in 1971 by Chapter 703, Laws of Maryland 1971. The law governing MIGA is codified in Article 48A, §§504 through 519 of the Maryland Code.

MIGA's purpose is to protect the public by (i) providing a mechanism to avoid financial loss to policyholders and claimants resulting from the insolvency of insurers and (ii) assisting in the detection and prevention of insurer insolvencies [§504(a)]. To that end, all insurers providing insurance other than life insurance, health insurance, and annuities must be members of MIGA as a condition of their authority to transact business in Maryland [§§504(b) and 506]. MIGA is designated a "non-profit unincorporated legal entity" [§506]; to perform its statutory duties, it is authorized to hire or retain employees to handle claims [§508(b)(l)].

MIGA is also authorized to borrow funds [§508(b)(2)]; to sue or be sued [§508(b)(3)]; to enter into contracts [§508(b)(4)]; and to perform other acts necessary to effectuate its purposes [§508(b)(5)]. MIGA uses no public funds, but is funded from assessments paid by its members [§508(a)(3)]. It is exempt from all State and local taxes, except property taxes [§515], and it is exempt from liability for any action taken in the performance of its powers and duties [§517].

II
Analysis

MIGA's concern over its representation by private counsel has been brought about by the decision in A. S. Abell Publishing Co. v. Mezzanote, 297 Md. 26 (1983). In that case, the Court of Appeals held that MIGA is "a unit or instrumentality of the State government" within the meaning of the State's Public Information Act.1

That conclusion raises the question of whether MIGA is similarly covered by the provisions of §6-106(c) of the State Government Article ("SG" Article). SG §6-106(c) states:

"Except as provided in... any other law, an officer or unit of the State government may not employ or be represented by a legal adviser or counsel other than the Attorney General or a designee of the Attorney General."

The controlling issue, therefore, is whether MIGA is a "unit of the State government" within the meaning of SG §6-106(c).

As the Court of Appeals noted in A. S. Abell, the Court "has repeatedly recognized that there is no single test for determining whether a statutorily-established entity is an agency or instrumentality of the State for a particular purpose. All aspects of the interrelationship between the State and the statutorily-established entity must be examined in order to determine its status." 297 Md. at 35. We believe the same flexible standard should be applied in determining whether an entity is a "unit of the State government" for purposes of SG §6-106(c).2

Given the wide variety of public and quasi-public entities in modern State government, serving an equally wide variety of needs and purposes, a purely mechanistic approach to the application of SG §6-106(c) is unwise and unwarranted. Moreover, it is well established that an entity may be considered an agency, unit, or instrumentality of government for one purpose, but not for another. For example, in an earlier opinion concluding that the Maryland Legal Services Corporation is not a State entity for the purposes of the Maryland Public Ethics Law, we noted that our conclusion had no bearing on whether the Corporation might be considered a State entity for other purposes. 67 Opinions of the Attorney General 244, 247 n. 1 (1982). Cf. 65 Opinions of the Attorney General 356, 363 n. 3 (1980) (county boards of education are designated as State agencies for some purposes, local agencies for others).

Thus, MIGA's characterization as a "unit or instrumentality of the State government" for purposes of the Public Information Act is not determinative of whether it is a "unit of the State government" for purposes of the statutory ban against retaining private counsel. Similarly, for example, the United States Court of Appeals for the Ninth Circuit concluded that the American Red Cross is not a federal agency for purposes of the federal Freedom of Information Act (the "FOIA"), notwithstanding its characterization as a federal instrumentality for other purposes. Irwin Memorial Blood Bank v. American Nat'l Red Cross, 640 F.2d 1051 (9th Cir. 1981). Cf. Department of Employment v. United States, 385 U.S. 355, 358 (1966) (Red Cross is instrumentality of United States for purposes of immunity from state taxation). The Ninth Circuit found it "significant that none of the [earlier] characterizations were made within the context of the FOIA", concluding that characterizations made in other contexts are of little relevance in construing the FOIA. 640 F.2d at 1052.

It has been suggested that Article 48A, §508(b)(l), which permits MIGA to "employ or retain such persons as are necessary to handle claims and perform [its] duties", authorizes the employment of private counsel and, as such, overrides SG §6-106(c). However, we do not read Article 48A, §508(b) as conclusive that the provisions of SG §6-106(c) do not apply to MIGA. In our view, the statutory authorization for MIGA to employ "persons... necessary to handle claims and perform [its] duties" does not necessarily encompass the authority to procure legal representation in matters arising from the performance of those duties.

Nonetheless, we seriously doubt that the General Assembly ever intended to constitute MIGA as the type of public body covered by SG §6-106(c). MIGA is a "non-profit unincorporated legal entity", and its primary duties require it to operate much as a private insurance pool would in connection with paying the claims of insolvent members. Thus, it is statutorily required to pay claimants on covered claims against an insolvent insurer; to allocate claims paid and expenses incurred subsequent to an insolvency and assess its member insurers accordingly; and to designate member insurers as "servicing facilities" for the handling of claims, subject to the approval and right of removal of the Insurance Commissioner [§§508(a) and 510(b)(3)].

These requirements that MIGA act as a surrogate for private insurers and take actions that are virtually the same as those of a typical private insurance pool suggest that the General Assembly intended it to operate in most respects as a private entity in the day-to-day handling and service of its claims and cases. Its needs for legal counsel and advice would thus be the same as those of any private insurance pool and, presumably, could best be met by attorneys who specialize in insurance practice and are retained in the same fashion as a private insurance pool retains its counsel. These factors suggest that the Office of the Attorney General was not intended to provide legal services to MIGA.

We are, however, most persuaded by the long-standing, albeit informal, construction of the statute by MIGA, the Insurance Commissioner, and this Office. Since the inception of MIGA in 1971, MIGA has consistently and continually been represented by privately retained counsel. This fact has been well known to the Insurance Commissioner, to this Office, and, we can assume, the General Assembly. Cf. Jackson Marine Sales v. State Dep't of Assessments & Taxation, 32 Md. App. 213, 217, cert. denied, 278 Md. 725 (1976) (legislature's inaction in face of long-standing administrative practice is indicative that its intent is being carried out). MIGA has never asked for representation by the Office of the Attorney General, nor, to our knowledge, has its authority to seek private representation been questioned during that time. In light of this history, we are very hesitant to disturb a well-settled practice in the absence of an unequivocal legislative or judicial pronouncement that this practice is inappropriate.

III
Conclusion

In summary, although the matter is not altogether free from doubt, it is our opinion that SG §6-106(c) does not apply to MIGA and, consequently, MIGA need not be represented by the Office of the Attorney General.

We emphasize, however, that a determination of this sort is essentially an ad hoc one, considering the particular agency involved and the particular purposes that the statutory provision in question serves. Cf. A. S. Abell, 297 Md. at 32 (purpose of Public Information Act required that MIGA's language be broadly construed). Given this, it is difficult to predict with certainty how a court might rule should the present practice be challenged.

We therefore suggest that MIGA seek legislative clarification of the General Assembly's intent regarding its mode of representation. This would not be at all unprecedented: Several acts creating various quasi-governmental agencies have specifically authorized those entities to retain private counsel. See, e.g., Article 48A, §243F(a) (Maryland Automobile Insurance Fund).3 A similar provision regarding MIGA would conclusively demonstrate the General Assembly's intent to authorize MIGA's representation other than through the Office of the Attorney General.

Stephen H. Sachs, Attorney General
Dennis M. Sweeney, Deputy Attorney General

Avery Aisenstark
Chief Counsel
Opinions and Advice

Editor's Note: Chapter 161, Laws of Maryland 1986, redesignated MIGA as the Property and Casualty Insurance Guaranty Corporation. The Guaranty Corporation "is not and may not be deemed a department, unit, agency, or instrumentality of the State for any purpose." Article 48A, §506(f).

1 At the time A.S. Abell was decided, the Public Information Act was codified in Article 76A of the Code and used the phrase "agency or instrumentality of the State" [former Article 76A, §1(b)]. The Act has since been recodified a Title 10, Subtitle 6, Part III of the State Government Article and now uses the substantively similar phrase "unit or instrumentality of the State government" [SG §10-611(f)].

2 See note 1 above.

3 For a discussion of the constitutionality of such statutes, see 67 Opinions of the Attorney General 3 (1982).