Scottish Re (US), Inc. (SRUS) is a licensed health and life insurance provider that offers only insurance and coinsurance. SRUS ceased to engage in new business in 2008, but retained its existing financial agreements with cedants and reinsurers. Many years before this, SRUS began to experience financial problems related to its renewable annual insurance. To fulfill its mandate, SRUS, as a financial unit, has previously relied on financial support from parent companies. When their parent companies filed for bankruptcy in 2018, SRUS’s financial picture grew.
By early 2019, the Insurance Commissioner of the State of Delaware (Commissioner) determined that SRUS was in serious financial trouble and had entered into bankruptcy proceedings. The Court of Chancery subsequently placed the company in receivership and appointed the Commissioner as the official receiver of the company. On June 30, 2020, the Commissioner issued a revised plan, although no final plan has yet to be submitted to the court.
After SRUS’s opponents reviewed the proposed plan, many arguments arose about the nature and types of information the Commissioner intends to provide to the plaintiffs. A summary of these issues revealed a deeper issue that divided the parties: the parties disagreed on whether the waiver standard should be applied to the rehabilitation plan. A group of 57 cedants and five returnees argued that the court could not accept any order that did not provide, at least in part, the cost of removal to the plaintiffs. The commissioner and another panel of seven recusants disagreed.
The Human Rights Court recognized that this was a prima facie case. After considering Delaware statutes, case law, secondary sources, and public policy, the court determined that, for violations of Delaware law, neither statute nor common law requires the Commissioner to meet the barring standard of obtaining court approval. reform process. In particular, the court noted that Delaware’s statutory framework for reviewing proposed revisions did not address whether the prohibition standard applied, unlike other statutes cited by the dissent. The court also noted that the balance of policy was advised to take action on the issue from the General Assembly instead of the court.
Reviewing decisions from other jurisdictions to consider this issue, the court emphasized that each of these majors came from two Depression-era decisions from the US Supreme Court and the California Supreme Court, both stemming from the Pacific Mutual Life reform. Insurance Company of California. See Carpenter v. Pac. Mut. Moyo Ins. Co. (Carpenter I), 74 P.2d 761 (Cal. 1937), aff’d subnoun. Neblett v. Carpenter (Carpenter II), 305 US 297 (1938). After a careful reading of the rulings, the court found that the rulings were “standing.” The rulings did not state that a reformation plan must meet the standard of dismissal or that the court would not approve a reformation plan that did not meet that standard. Instead, a Pacific Mutual Decisions stated that a restructuring plan that met the standard of exclusion would not raise legal challenges.
Therefore, the court said that the plaintiff can object if it can be shown that the plan fails to provide the cost of removal, while the court can consider the objection on its own grounds. Therefore, the court wanted the Commissioner to provide sufficient information about the rehabilitation process to determine if they can object.