Northeast Insurance Company files for bankruptcy after New York CVA lawsuits

An insurance company, which has insured several New York hospitals and charities, has filed for bankruptcy and is closing its practice after being overwhelmed by lawsuits related to that state’s Child Victims Act (CVA).

Bermuda-based Northeast Insurance Company filed for Chapter 15 bankruptcy protection in New York on Oct. 15, seeking U.S. recognition of its ongoing liquidation process in Bermuda.

Chapter 15 is often used when a foreign company needs U.S. courts to legally manage its U.S. assets and debts.

Northeast Insurance historically provided coverage for medical malpractice and general liability to its shareholder hospitals and affiliated institutions. such as the UJA/Federation of Jewish Philanthropies of New York, including its associated camps and nursing homes, court records show.

The company was financially sound and stopped selling new policies in 2017 to begin a structured “run-off” process of “winding down” existing liabilities, meaning that it will no longer continue its business.

The company was meeting all of its financial obligations until 2019 when New York passed the CVA, court filings confirm.

The CVA gives survivors who faced childhood sexual abuse a new window to file civil lawsuits that were previously blocked by old statutes of limitations.

This resulted in Northeast facing 55 lawsuits filed under the CVA as of August, the documents read. Many of the related incidents happened 30 or 40 years ago.

Due to this unanticipated exposure, the insurance company says its total losses and loss expense reserves have nearly doubled, increasing $15.7 million to $29.1 million, an amount Northeast is unable to pay.

The Bermuda Supreme Court formally placed the company into provisional liquidation on Oct. 9 days before the U.S. filing, which aims to halt all claims and legal actions in the U.S., so that the remaining funds can be managed fairly for all creditors through the Bermuda court process.

The primary owners of Northeast Insurance are known to include several large New York health institutions such as Mount Sinai Medical Center, Montefiore Medical Center and Maimonides Medical Center.