Nodak Mutual Insurance Co. isn’t required to hold contested elections for its board of directors, nor is Insurance Commissioner Jim Poolman obliged to force the company to do so, the North Dakota state Supreme Court decided.
The Ward County Farm Bureau and Max farmer Jim Lee have asked Poolman to require the Fargo insurer to allow challengers to run against incumbent members of Nodak Mutual’s board.
They sued Poolman in October 2004, asking a judge to force him to order changes in the company’s bylaws. South Central District Judge Bruce Romanick dismissed the case, and Lee and the Farm Bureau appealed to the North Dakota Supreme Court.
The high court upheld Romanick’s ruling. The Ward County Farm Bureau “has no clear legal right to the relief it seeks,” Justice Mary Muehlen Maring wrote in the court’s unanimous opinion.
North Dakota law does not require Nodak Mutual to allow a challenger to an incumbent board member’s re-election bid, Maring said.
Nodak Mutual is one of North Dakota’s largest insurance companies, with about 27,000 policyholders. It has a 12-member board of directors. Candidates for board slots are reviewed and approved by a nominating committee.
Nodak has not allowed challengers to oppose incumbent directors in the company’s last two board elections, Minot attorney Lynn Boughey said. He represents Lee and the Ward County Farm Bureau.
Lee himself was nominated for a board spot two years ago as a potential opponent for incumbent director Frank Keogh, who is a Williston banker. However, the nominating committee declined to put Lee’s name on the ballot, and Keogh ran unopposed.
Nodak Mutual has refused to allow a vote on proposed changes to its bylaws, Boughey said. Now that the lawsuit against Poolman has failed, the Ward County Farm Bureau and Lee are considering litigation against Nodak Mutual, Boughey said Thursday.
Poolman was brought into the dispute because of his recent role in supervising Nodak’s top management. He assumed administrative control of Nodak Mutual in September 2002 because of infighting among the company’s top managers and its board of directors.
A subsequent review of the company’s management practices suggested that Nodak allow prospective directors to run for the board if they rounded up enough petition signatures from policyholders. However, the newly reorganized board did not adopt the recommendation.
Poolman praised the Supreme Court’s ruling saying that what we’ve done with Nodak Mutual is a positive and the changes that we implemented … have been successful.
Insurance company board elections are different from normal political elections, because board members have a financial responsibility to assure that candidates for directorships are qualified, Poolman explained.
Doug Goehring, a Menoken farmer who is chairman of Nodak’s board, said the company’s methods of choosing directors are not unusual for a mutual insurance company. Mutuals are owned by their policyholders.
“We have a fiduciary obligation to choose the right people to send forward,” Goehring said. “We are held accountable and responsible. It’s a very serious matter.”
Coincidentally, Goehring and Lee are competing for the Republican endorsement to run for state agriculture commissioner. GOP activists will pick their favored candidate at the party’s state convention in Minot in five weeks.
Boughey called the board’s actions “inappropriate to a mutual company that is supposed to be based on the principles of democracy.”
Copyright 2006 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed
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Topics Carriers Legislation Agribusiness
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