4 December 2025
US Healthcare
The impact of Northeast Bankruptcy
The recent developments out of New York are rippling into London’s view of Medmal coverage for sexual abuse/molestation (SAM). Northeast Insurance Company (NIC), a Bermuda-registered captive for major NY hospitals, filed for Chapter 15 bankruptcy on 21 October 2025, citing a surge of SAM claims arising from New York’s “revival” statutes.
NIC was incorporated in 1975 to insure and reinsure medical malpractice, along with other liabilities. It is owned by five nonprofits affiliated with the UJA/Federation of Jewish Philanthropies of New York. In August 2025, the captive faced 53 child abuse lawsuits with losses of USD 29.1 million and ultimately decided that it didn’t have sufficient funds to settle these claims and had to file for bankruptcy.
The resulting noise from the insurance market underscores that Medmal policies were never intended to include criminal acts within the scope of coverage; the NIC story is cited as evidence that SAM liabilities, unlocked by revival windows, can overwhelm traditional Medmal programs.
New York’s Child Victims Act opened a lookback extending the statute of limitations for criminal and civil cases in New York, enabling any victim of sexual abuse to bring a lawsuit that was otherwise time-barred. This created a “lookback window” allowing action to be brought from August 2020 to August 2021. For any civil claims that had not expired, a survivor now has until they turn 55 to file. The Adult Survivors Act created a separate one-year window (November 2022– November 2023) that also permitted suits against institutions/employers. Closing the adult window doesn’t eliminate tail risk, because filings during the window will work their way through the courts for years.
What this means for London carriers
1) Clearer separation of “professional negligence” vs “criminal acts”
Expect a firmer stance that intentional/sexual misconduct by a clinician is outside Medmal’s core grant, with cover (if any) limited to institutional/vicarious negligence and typically sub-limited. Wordings are likely to tighten to make this explicit.
2) Tightening around SAM exposure in US-exposed healthcare risks
Given NIC’s Bermuda domicile and NY exposure, London insurers will scrutinise US hospital systems, teaching hospitals, and long-tail NY risks. Anticipated moves:
- SAM exclusions or carve-back sub-limits (defence-only or very low indemnity limits).
- Higher retentions/deductibles and more stringent claims-trigger/notice conditions for allegations of misconduct.
- Retrodate discipline and restrictions on “prior acts” where allegations are systemic.
3) Growth of stand-alone Sexual Misconduct Liability (SML)
With General Liability (GL)/Medmal forms increasingly excluding or sub-limiting SAM, brokers will steer insureds to dedicated SML cover (often handled from London) to address institutional negligence, crisis response and safeguarding obligations. Recent market launches and broker materials point to rising availability but on tight terms.
4) Reinsurance and capital effects
Reinsurers are likely to add SAM exclusions or require explicit aggregation language (per perpetrator, per victim, per institution) to avoid open-ended catastrophe-like accumulation from revival-window filings. Expect attachment points to rise and event definitions to be sharpened to prevent multi-year, multi-claim erosion of treaties.
5) Pricing signals
Even where limited institutional negligence remains insurable, rate increases are likely, especially for NY exposure and for institutions lacking robust safeguarding. Social-inflation dynamics and revived claims increase severity expectations and IBNR loadings in actuarial picks.
Immediate wording and placement implications (London)
- Criminal/intentional acts: Align definitions and exclusions so that criminal sexual acts by individuals are outside cover; if offering any carve-back, make it solely for the entity’s negligence (e.g., negligent hiring/supervision) with clearly stated sub-limits and no duty to defend for perpetrators.
- Aggregation & limits: Define occurrences/claims arising from “related acts” to control stacking across multiple victims or long-time spans. Tie aggregates to per perpetrator/per location as appropriate.
- Jurisdictional controls: Consider NY-specific endorsements (or rating uplifts) acknowledging CVA/ASA tail and similar revival environments in other states.
- Notice & cooperation: Hardwire early-allegation notice obligations (even pre-suit), mandatory incident logging, and cooperation on access to personnel records.
- Risk-management subjectivities: Require safeguarding protocols (chaperone policies, background checks, hotline/reporting procedures, training, separation/monitoring of at-risk settings) as binding conditions precedent for any SAM carve-back.
Broker takeaways for clients
- Map your coverage: Identify where SAM sits across Medmal, GL, D&O/Employment Practices, and any SML stand-alone; remove reliance on “silent” wording.
- Prepare for capacity constraints: For US health systems (esp. NY), plan for reduced London capacity on SAM-touched Medmal layers and higher SML take-up.
- Expect reinsurer-driven wording updates: Renewals will feature SAM endorsements, aggregation clarifications and tighter definitions — build timelines for legal review.
- Data, data, data: Underwriters will demand historic allegation data, HR/safeguarding audits, and evidence of post-ASA/CVA remediation to preserve any carve-backs or sub-limits.
The NIC bankruptcy and the continued litigation tail from New York’s revival statutes reinforce a London market pivot away from insuring SAM under traditional Medmal. Coverage (where offered) will be narrow, sub-limited, and institution-focused, with stand-alone SML becoming the expected solution. Reinsurers will harden terms, driving pricing up and capacity down for US-exposed healthcare risks, particularly with a New York nexus.
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Angus Thomson Account Executive, PI
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