A scheme of arrangement is a UK term that applies to a variety of legal proceedings, including proceedings in which a solvent insurer seeks to end its operations – for its convenience – and to put an end to the life of insurance policies that pay claims based on an “occurrence.” Occurrence policies have cost insurers billions of dollars paying for underlying asbestos claims.
Insurers like such schemes because they can shut down operations and seek to end their life without waiting for all claims to mature/occur/manifest. In general, schemes are disfavored by insureds that sold products that may produce long-tail injuries. Why ? Because they paid for long term coverage but the scheme ends the coverage before all claims may have manifested themselves.
In a recent scheme in Scotland, the trial court had to consider these issues in a scheme proposed by Scottish Lion. Here is a summary of the Red Lion opposition from the law firm – Covington & Burling – that opposed the scheme for its insured clients. Is that a winning rationale ? Stay tuned for the answer.