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)

The Delaware Court of Chancery approved a stipulated order for final distribution from two insurance trust accounts and the subsequent termination of those trusts as part of an ongoing insurance company liquidation proceeding. The order in In re Scottish Re (U.S.), Inc. illustrates the orderly trust termination process available in the insurance liquidation context.

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.