Former clinicians who worked for Steward Health Care continue to face significant legal and financial challenges stemming from the collapse of TRACo, Steward’s captive malpractice insurer. TRACo, which once covered approximately 1,400 medical practitioners nationwide, has become effectively insolvent amid Steward’s bankruptcy proceedings, leaving many former doctors, nurses, and other healthcare workers exposed to personal liability for malpractice claims.
Steward, a for-profit hospital chain that rapidly expanded through debt before declaring bankruptcy in 2024, had used TRACo as an in-house insurer to cover malpractice claims instead of purchasing coverage from commercial carriers. This arrangement promised legal defense and settlement payments up to set limits. However, the insurer was relocated from the Cayman Islands to Panama in 2019, a move which critics say was designed to exploit Panama’s lax regulatory environment. Because TRACo operates from Panama and is unlicensed in Massachusetts, state regulators have stated they lacked the authority to oversee its financial health or require transparency.
Malpractice claims filed against former Steward clinicians now risk going unpaid as TRACo holds only about $3.5 million in cash despite facing over 500 claims totaling hundreds of millions. Steward executives reportedly treated TRACo’s funds as a financial resource, withdrawing cash and leaving IOUs, leaving the insurer depleted at a critical moment. Former executives, including Ralph de la Torre, Steward’s former CEO, remain on TRACo’s board and have not responded to requests for comment.
The fallout from TRACo's insolvency has been severe for many clinicians. Some, like 82-year-old primary care physician Peter Rees, face the prospect of personal financial ruin due to costly lawsuits, legal fees, and potential settlements. Others, such as Dr. Paresh Mane, a thoracic surgeon, have described feeling abandoned after working under difficult conditions in under-resourced hospitals during Steward’s decline. Many former medical staffers have formed a coalition demanding state intervention, including the creation of a relief fund, stronger regulation of malpractice insurers, and a criminal probe into Steward executives for alleged misconduct.
Massachusetts health officials have acknowledged the problem and indicated they are reviewing proposals from this coalition, but no concrete measures have been implemented. The governor’s office criticized Steward’s management for ignoring repeated demands to maintain adequate malpractice coverage and is seeking judicial intervention in TRACo’s bankruptcy case. Meanwhile, new owners of many ex-Steward hospitals have largely declined to assume responsibility for past malpractice claims, with the exception of Brown University Health, which agreed to cover claims at two hospitals. Others, like Boston Medical Center Health System and Merrimack Health, have limited or refused coverage, directing responsibility back to TRACo and bankruptcy courts.
The lack of coverage has caused malpractice insurance premiums for these clinicians to soar, with some tail coverage quotes increasing from $7,000 to over $50,000 annually, and even higher in specialties considered higher risk. This financial pressure has prompted some physicians, such as Dr. Zachary Kramer, to leave clinical practice altogether. Attorneys for former patients are increasingly suing individual clinicians rather than Steward itself, banking on the defendants’ personal assets amid the company’s bankruptcy.
Patients harmed by alleged negligence during Steward’s operation also face significant hurdles. Without a solvent insurer or a hospital willing to assume liability, many claims remain stalled, leaving some families without meaningful recourse years after filing lawsuits.
Health and legal experts warn this crisis highlights a regulatory gap in Massachusetts oversight of foreign-based captive insurers like TRACo. Legal scholars caution that compensation for malpractice victims may be unlikely given the insurer’s lack of assets. Meanwhile, former Steward clinicians continue to pressure state officials for relief, with some contemplating public demonstrations if their concerns go unresolved. The enduring challenges underscore the broader consequences of Steward’s collapse on both healthcare providers and patients.