Bermuda-based captive insurer Northeastern Insurance Co. Ltd. has filed for Chapter 15 bankruptcy protection in the US District Court for the Southern District of New York, citing financial strain caused by the state's extension of the statute of limitations on sex abuse cases.
According to court filings, Northeastern decided, in 2017, to stop underwriting new business and enter a runoff process. At the time, the company said it maintained adequate reserves. However, following New York’s passage of the Child Victims Act (CVA) in 2019, which extended the limitations period for filing civil claims, Northeastern said it faced 55 unexpected claims related to incidents that occurred as far back as four decades ago.
In the filing, Northeastern said the CVA-related claims were unforeseeable when it ceased writing new policies and that no reserves were allocated for such exposures. The company determined that the liabilities arising from these claims are likely to exceed its available assets.
Joint provisional liquidators Michael Morrison and Mark Allitt of Teneo (Bermuda) Ltd. have asked the New York court to recognize Northeastern’s earlier petition filed with the Supreme Court of Bermuda as a foreign main proceeding. The Bermuda case was intended to trigger a stay of proceedings under Bermuda law and to preserve the insurer’s assets for the benefit of all creditors.
Northeastern was established to provide insurance and reinsurance coverage for medical professional liability, professional liability, automobile liability, property deductible, directors’ and officers’ liability, and workers’ compensation risks. Its insureds include shareholder hospitals, the UJA/Federation of Jewish Philanthropies of New York, and related not-for-profit institutions such as nursing homes, camps, and charitable organizations.
In a related development, the Diocese of Trenton in New Jersey filed a suit earlier this year against several insurers, alleging they delayed cost-sharing and allocation agreements tied to the surge of claims under the New Jersey Child Victims Act. The diocese said claims dating back to the 1960s have led to disputes with insurers over coverage triggers and exhaustion of self-insured retentions.
