Delaware Chancery Court Approves Orderly Trust Termination in Insurance Company Liquidation

In re Scottish Re (U.S.), Inc., 2026 WL 596409 (Del. Ch. Mar. 2, 2026)

Court: Delaware Court of Chancery
Date: March 2, 2026 — In re Scottish Re (U.S.), Inc., 2026 WL 596409

Summary of Relevant Facts

Scottish Re (U.S.), Inc. was an insurance company in receivership under the supervision of the Delaware Insurance Commissioner acting as Receiver. The company maintained two insurance trust accounts at The Bank of New York Mellon: Treaty Account 1098 and Treaty Account 1099. The counterparties to these trust accounts were Nationwide Life Insurance Company (NLIC) and Nationwide Life and Annuity Insurance Company (NLAIC), respectively. As part of the liquidation proceedings, the Receiver and the Nationwide entities reached an agreement regarding the final disposition of assets in the trust accounts.

Procedural Background

The Delaware Insurance Commissioner, acting as Receiver for Scottish Re, filed the matter in the Court of Chancery as part of the ongoing liquidation proceeding. The Receiver and the Nationwide entities negotiated a stipulated order governing the final distributions from the two trust accounts and the subsequent closure of the accounts and termination of the trust agreements. The parties presented the stipulated order to Vice Chancellor for approval. A 30-day objection period was included in the proposed order.

Main Controversies

The principal issue was whether the court should approve the stipulated distribution and termination order. Because the parties had reached agreement, there was no adversarial dispute over the allocation. The court's role was to ensure the proposed distributions were reasonable, the wind-down procedure was orderly, and adequate protections existed for any parties who might have objections.

Position of the Parties

Receiver (Delaware Insurance Commissioner): Sought court approval of the stipulated order to distribute specific amounts to the Nationwide entities, retain the remaining balances for the receivership estate, and close the trust accounts.

Nationwide Life Insurance Company and Nationwide Life and Annuity Insurance Company: Agreed to the proposed distribution amounts ($500,000 from Treaty Account 1098 to NLIC and $1,250,000 from Treaty Account 1099 to NLAIC) and the subsequent account closures.

Holding

Approved. The Court of Chancery sanctioned the stipulated order authorizing the final distributions, the transfer of remaining balances to the Receiver, the closure of both trust accounts, and the termination of the underlying trust agreements.

Reasons for the Decision

The court approved the stipulated order because the parties had reached a negotiated agreement that provided for an orderly disposition of the trust assets. The specific dollar allocations — $500,000 to NLIC from Account 1098 and $1,250,000 to NLAIC from Account 1099 — with residual balances going to the Receiver, created a clean and administrable framework for concluding the trust relationships. The inclusion of a 30-day objection period safeguarded the rights of any potentially affected parties who were not signatories to the stipulation. The court found this approach consistent with the goals of the receivership proceeding: efficient resolution of the company's affairs and equitable treatment of stakeholders.

This case summary is provided for educational and informational purposes only. It should not be construed as legal advice.

Background

Scottish Re (U.S.), Inc. is an insurance company in receivership. The Delaware Insurance Commissioner, acting as Receiver, and Nationwide Life Insurance Company (NLIC) and Nationwide Life and Annuity Insurance Company (NLAIC) reached a stipulated agreement regarding the final disposition of assets held in two trust accounts at The Bank of New York Mellon: Treaty Account 1098 and Treaty Account 1099.

The Stipulated Distribution

Under the approved order, the following distributions were authorized: $500,000 from Trust Account 1098 to NLIC; $1,250,000 from Trust Account 1099 to NLAIC; all remaining balances in both accounts to the Receiver; and upon completion of these distributions, both trust accounts would be closed and the related trust agreements terminated. Vice Chancellor Laster approved the proposed order with a 30-day objection period.

Practical Implications

While this case arises in the specialized context of insurance company liquidation, it offers several lessons for trust practitioners generally. First, the case demonstrates that stipulated trust termination orders can be an efficient mechanism for winding down trust arrangements when all interested parties agree on the distribution. Second, the 30-day objection period built into the order provides a safeguard for any parties who might contest the proposed distributions. Third, the structured approach of specifying exact dollar amounts to identified beneficiaries, with the residual going to the receiver, provides a clean template for trust termination orders. Finally, the involvement of a major institutional trustee (Bank of New York Mellon) illustrates how corporate trustees can facilitate orderly trust wind-downs through cooperation with court-supervised proceedings.

For practitioners administering trusts that may be approaching termination, whether in the insurance context or otherwise, this case provides a useful model for structuring stipulated final distributions that minimize litigation risk and ensure orderly closure of trust accounts.