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THE GREAT NURSING HOME INSURANCE DECEPTION

  • Writer: Brett Leitner
    Brett Leitner
  • 9 hours ago
  • 9 min read


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How New York’s Nursing Homes Use Captive Insurance Companies to Avoid Paying for Harm


As injuries mount and deaths rise, nursing home owners are shielding their profits behind hollow insurance companies they secretly control—leaving taxpayers, families, and the courts with the fallout.


THE PAPER SHIELD


When families place a loved one in a nursing home, they are often reassured by a simple promise: if the facility fails in its duty of care—through neglect, understaffing, or outright abuse—there will be accountability. New York, like most states, requires nursing homes to carry liability insurance precisely for that reason. Insurance is the system’s safety valve. It is the tool that ensures victims of catastrophic harm are compensated when the unimaginable happens.

But a months-long investigation reveals a much darker reality.


Across New York, many nursing homes carry insurance in name only—policies issued by “captive” insurance companies secretly controlled by the nursing home owners themselves. These captives are often underfunded, sometimes insolvent, and in some cases never receive the premiums they are owed. Yet on paper, they satisfy the state's requirement that facilities carry insurance.


When residents suffer preventable injuries—untreated bedsores, fatal infections, falls, medication errors—families often discover the truth at the worst possible moment : the insurance coverage the facility claimed to have is financially worthless.


This is not merely a bureaucratic failure. It is a structural design.


The Illusion of Coverage


A captive insurer is not inherently illegal. Many large corporations use captives to mitigate risk. But in the nursing home industry, captives have taken on a radically different—and far more dangerous—role.


What Is a Captive Insurer? A 60-Second Explainer

A captive insurer is an insurance company created and owned by the same people or businesses it insures. Instead of buying coverage from an outside insurer, a company forms its own insurance entity and issues policies to itself or its affiliates.


Here’s the problem:

In theory, captives can be legitimate risk-management tools. Large corporations often use them to tailor coverage, reduce premiums, and control claims more efficiently.


In the nursing home industry, however, captives have taken on a very different—and far more troubling—role.


Here’s the problem:


1. The nursing home owns the insurance company.

That means the same people responsible for providing safe care also control the pool of money meant to compensate victims when they fail.


2. The captive is often severely underfunded.

Many nursing home captives hold little real money. Some never receive the premiums they’re supposedly owed. On paper, they look like insurers; in practice, they resemble empty shells.


3. Regulators rarely verify solvency.

State health departments check whether a facility has a policy, but not whether the insurer has the assets to pay claims. Captives also often sit out of state—or offshore—beyond meaningful oversight.


4. When residents are injured, the captive collapses.

Families win lawsuits only to learn the insurer is bankrupt, underfunded, or simply refusing to pay. The nursing home points to the captive. The captive points to insolvency. And victims receive nothing.


5. The parent company stays protected.

Because the captive is a separate legal entity, owners shield their assets while residents and families bear the financial and emotional cost of neglect.

Bottom line:A captive insurer in the nursing home world often functions less like real insurance and more like a financial firewall—one designed to make liability disappear long before justice can be served.



Here is how the system works:


A nursing home operator creates its own insurance company, often in a favorable state like Vermont, Delaware, or an offshore jurisdiction. This insurer issues a policy to the nursing home. Regulators see a certificate of insurance, and the facility passes inspection.


What regulators do not evaluate is whether the captive has meaningful assets. There is no requirement that the insurer be financially solvent, properly capitalized, or independently audited. In many cases, there is no meaningful determination of whether premiums are paid at all.


One former state insurance official, speaking anonymously, described the structure bluntly:

“It’s an insurance company in paperwork only. In practice, it is a financial firewall designed to prevent victims from ever collecting.”

Underfunding by Design


The most troubling feature of these captive structures is the pattern of deliberate underfunding.


Case in Point: The Sherbrooke Collapse


In 2024, filings revealed that nursing home operator Samuel Goldner allegedly failed to pay more than $5.8 million in premiums to his captive insurer, Sherbrooke Corporate. Without those premiums, Sherbrooke could not meet even the most modest claims. It collapsed under the weight of outstanding negligence cases, leaving residents and their families without recourse.


Captured Money—Then Captured Again


In another case, a captive insurer collected over $35 million in credited benefits but paid out less than $10 million to workers and injured claimants. The remaining funds were treated as “surplus” and diverted back to the parent companies.


"Asset stripping"—a technical term for siphoning funds through loans, management fees, or related-party contracts—is rampant across many of these structures.


The result is predictable: captives hold insufficient reserves, then collapse when real claims arise.


Legal, But Not Legitimate


How does a system this fragile pass regulatory muster?


The answer lies in the fragmentation between agencies.


  • The Department of Health (DOH) verifies that a nursing home has an insurance certificate. It does not examine the insurer’s solvency.

  • The Department of Financial Services (DFS) oversees insurers but has limited authority over out-of-state or offshore captives.

  • Bankruptcy courts frequently allow insurers or management entities to discharge liability while the nursing home itself continues operations under a new shell.

  • Corporate law protects parent companies from liability unless courts “pierce the corporate veil”—a legal action extremely difficult to accomplish.


This creates a perfect storm: a facility can comply with the letter of the law while betraying the spirit of it entirely.


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Families Discover the Truth Too Late


Consider the story of a Queens family whose mother died after developing severe, untreated bedsores. They sued the facility, won a judgment, and learned afterward that the nursing home’s “insurer” was a captive with no assets and no capacity to pay.


The shock is always the same:

“You think the court’s decision means something. Then you learn the insurer is a shell. You’ve won nothing.”

One plaintiff’s attorney summarized the experience:

“It’s like winning a lawsuit against a ghost.”

A Business Model Built Around Risk-Shifting


Behind the moral outrage lies a cold financial logic.


Staffing is a nursing home’s greatest expense. Higher staffing reduces injuries. But higher staffing also reduces profits. Captive insurance structures flip the incentives: if liability exposure is functionally eliminated, reducing staff becomes financially rational—even when it puts residents at risk.


This is why investigative reports consistently show that facilities using captives are often the same facilities with:


  • chronic understaffing

  • high levels of preventable injuries

  • persistent regulatory violations

  • large volumes of wrongful death and negligence suits


The less likely an operator is to pay for harm, the more profitable it becomes to cut corners.


Regulatory Silence, Systemic Harm


To date, New York has no statutory minimum liability coverage requirement for nursing homes. A facility can legally carry a $1 policy as long as a certificate exists. Regulators do not require captives to undergo actuarial review.


And when a captive insurer collapses?


There is no guaranty fund. No public replacement. No emergency mechanism for victims.


The system simply absorbs the loss—and the families are left devastated.


A Crisis Hidden in Plain Sight


This is not an obscure legal issue. It is a public crisis touching thousands of residents across New York and millions nationwide.


The continued use of underfunded captive insurers in nursing homes has created a shadow system—one where the appearance of accountability masks a structure that ensures no meaningful accountability at all.


Until regulators confront the financial mechanisms enabling this harm, the cycle will continue: staffing cuts, preventable injuries, corporate profits, and families left without justice.


The insurance policies that should protect them exist only on paper.


Behind them is nothing.



About Leitner Warywoda


If your loved one suffered neglect in a New York nursing home—and you’ve been told the facility’s insurance “can’t pay” or “won’t pay”—you are not alone. These cases require attorneys who understand the shell companies, captives, and financial structures designed to block recovery.


Contact Leitner Warywoda today for a free, confidential consultation. We will investigate the corporate maze, uncover the truth, and fight to secure the justice your family deserves.


Call 212-671-1110, visit nylawinjury.com, or reach out through our secure intake portal.







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