ANNAPOLIS – Former Maryland Insurance Commissioner, Steven B. Larsen, cannot be sued for defamation and invasion of privacy by the former principal owner of Lanham-based PrimeHealth Corp., Maryland’s Court of Appeals ruled Wednesday.
Maryland’s highest court ruled the commissioner was acting within his scope of duties and, therefore, was entitled to immunity under the Maryland Tort Claims Act, when he disclosed the contents of letters and spoke to the media about an ongoing investigation into the financial solvency of PrimeHealth Corp.
The health maintenance organization was subsequently put into receivership, where it remains today, following the investigation by the Maryland Insurance Administration.
“Obviously I am very pleased, and I agree with the reasoning of the Court of Appeals,” Larsen said.
According to court documents, Dr. Christian Chinwuba, the former primary owner of PrimeHealth, alleged that the former commissioner violated the Maryland Insurance Code when he released three letters to the press and made statements about the investigation in March 1998.
An attorney for Chinwuba did not return phone calls for comment.
PrimeHealth came under state scrutiny after its name was connected to the investigation of former state Sen. Larry Young, D-Baltimore. Young was expelled from the state Senate in 1998 after charges of accepting money and goods from companies that do business with the state.
One charge alleged that he accepted money from health care companies, including PrimeHealth, to include them in a state program to enroll Medicaid members in managed health plans. PrimeHealth admitted to giving Young money but said it was not a bribe.
Young was later acquitted of the criminal charges.
However, the inquiry into PrimeHealth found that Chinwuba understated debts to creditors when he applied for a license to operate the HMO and that he transferred assets from his previous company, Diagnostic Health Imaging Systems Inc., to provide PrimeHealth with enough capital for an HMO license.
When PrimeHealth received the license, Diagnostic Health Imaging Systems owed millions of dollars to a number of creditors, including back taxes.
The Maryland Insurance Administration requires a company to have a minimum surplus of $1.5 million to meet solvency standards. PrimeHealth was ultimately placed into receivership due to mismanagement and missing company funds.
Current commissioner Alfred W. Redmer Jr. said in a statement, “I am pleased that the Court of Appeals has recognized that communication with the public is an important part of the duties of the insurance commissioner.”
“As a general matter,” the court wrote in its opinion, “the head of a major agency in the executive branch of government is authorized to disclose to the public matters concerning the agency’s operations . . . The insurance commissioner’s disclosures were made during the regular course of business and related entirely to the operations of the Insurance Administration.”