IN THE SUPREME COURT OF THE STATE OF DELAWARE
PROTECTIVE LIFE INSURANCE §
COMPANY, PROTECTIVE LIFE §
AND ANNUITY INSURANCE § No. 217, 2020
COMPANY, WEST COAST LIFE §
INSURANCE COMPANY, and § Court Below—Court of Chancery
MONY LIFE INSURANCE § of the State of Delaware
COMPANY, §
§ C.A. No. 2019-0175-AGB
§
Interested Parties Below,
§
Appellants,
§
§
v.
§
§
THE HONORABLE TRINIDAD §
NAVARRO, Insurance §
Commissioner of the State of §
Delaware, in his capacity as Receiver §
for SCOTTISH RE (U.S.), INC., §
§
Petitioner Below, §
§
Appellee.
§
§
PROTECTIVE LIFE INSURANCE §
COMPANY, PROTECTIVE LIFE §
AND ANNUITY INSURANCE § No. 218, 2020
COMPANY, WEST COAST LIFE §
INSURANCE COMPANY, and § Court Below—Court of Chancery
MONY LIFE INSURANCE § of the State of Delaware
COMPANY, §
§ C.A. No. 2019-0175-AGB
§
Interested Parties Below,
§
Appellants,
§
§
v. §
§
THE HONORABLE TRINIDAD §
NAVARRO, Insurance §
Commissioner of the State of §
Delaware, in his capacity as Receiver §
for SCOTTISH RE (U.S.), INC., §
§
§
Petitioner Below, §
Appellee. §
§
Submitted: July 27, 2020
Decided: September 4, 2020
Before SEITZ, Chief Justice; TRAYNOR and MONTGOMERY-REEVES,
Justices.
ORDER
After consideration of the notices to show cause, the responses, the notice of
interlocutory appeal, and the supplemental notice of interlocutory appeal, it appears
to the Court that:
(1) The appellants, Protective Life Insurance Company, Protective Life and
Annuity Insurance Company, West Coast Life Insurance Company, and MONY Life
Insurance Company (collectively, “the Protective Entities”), filed these appeals from
a Court of Chancery order (“the Order”) dismissing their petition in the rehabilitation
2
proceeding of Scottish Re (U.S.), Inc.1 The events leading to these appeals are
described below.
(2) Beginning in the 1970s, the Protective Entities entered into or assumed
reinsurance agreements under which Scottish Re reinsured a portion of their life
insurance policies. The Protective Entities also entered into agreements with third-
party life insurers under which the Protective Entities coinsured and administered
third-party business reinsured with Scottish Re. In January 2018, Scottish Re and
each of the Protective Entities entered into a global settlement resolving rate disputes
and other issues that had arisen between the parties (“Settlement Agreement”). The
Settlement Agreement included an offset provision, which the Protective Entities
argue authorizes a group offsetting methodology to calculate offsets.2
(3) On March 6, 2019, the Court of Chancery entered a Rehabilitation and
Injunction Order (“the Rehabilitation Order”) pursuant to the Delaware Uniform
Insurers Liquidation Act (“DUILA”), 18 Del. C. § 5901 et seq. The Rehabilitation
Order placed Scottish Re in rehabilitation, appointed the Honorable Trinidad
Navarro, Insurance Commissioner of the State of Delaware as Receiver for Scottish
1
In re Scottish Re (U.S.), Inc., 2020 WL 2549288 (Del. Ch. May 19, 2020).
2
Under the group offsetting methodology, premium amounts owed by one Protective
Entity are offset against reimbursed claims owed to a different Protective Entity. Id. at *1.
3
Re (“the Receiver”), and enjoined the ability of cedents like the Protective Entities
to offset obligations owed to Scottish Re.
(4) On June 20, 2019, the Court of Chancery approved the Receiver’s plan
for addressing contractual offset rights during the rehabilitation proceeding (“the
Offset Plan”). The Offset Plan provided that, in the event of a dispute concerning
offsets, the Receiver or offset claimant could file a petition with the Court of
Chancery for a determination of the offset amount or other appropriate relief. On
July 10, 2019, the Court of Chancery approved a stipulation between the Receiver
and Protective Entities under which the Receiver agreed to certain offsets, but
objected to others.
(5) On August 5, 2019, the Protective Entities filed a petition, which they
amended on October 28, 2019 (“the Petition”), under the Offset Plan. In the Petition,
the Protective Entities sought an order directing the Receiver to honor Scottish Re’s
obligations under the Settlement Agreement by allowing the Protective Entities to
use a group offsetting methodology for calculating offsets. On December 13, 2019,
the Receiver filed a motion to dismiss the Petition for failure to state a claim under
Court of Chancery Rule 12(b)(6).
(6) On May 19, 2020, the Court of Chancery dismissed the petition. First,
the Court of Chancery held that the Settlement Agreement did not create the
mutuality required by 18 Del. C. § 5927 for offsets during rehabilitation or
4
liquidation proceedings.3 Second, the Court of Chancery concluded that the
Settlement Agreement did not satisfy the single integrated transaction requirement
for recoupment.4 Third, the Court of Chancery held that the Receiver was not
obligated to accept or reject an executory contract before providing a final
rehabilitation plan for approval.5
(7) On June 30, 2020,6 the Protective Entities filed an application for
certification of an interlocutory appeal. The Receiver took no position on the
application. On July 20, 2020, the Court of Chancery denied the application for
certification.7
(8) In denying the application for certification, the Court of Chancery
found that the Order decided three issues (described in ¶ 6) of material importance.8
As to the Rule 42(b)(iii) criteria, the Court of Chancery concluded that the three
issues were a matter of first impression in Delaware (Rule 42(b)(iii)(A)). In addition,
3
Id. at *3-4.
4
Id. at *5.
5
Id. at *5-6.
6
Under Supreme Court Rule 42, an application for certification of an interlocutory appeal
must be filed within ten days of the entry of the interlocutory order and the notice of appeal
must be filed in this Court within thirty days of the entry of the interlocutory order. Supr.
Ct. 42(c)(i), (d)(i). Rule deadlines were extended under the judicial emergency declared
by the Chief Justice in response to the COVID-19 pandemic. Administrative Order No. 7
¶ 7 (Del. June 5, 2020) (extending deadlines that expired between March 23, 2020 and June
30, 2020 through July 1, 2020), available at https://courts.delaware.gov/rules/pdf/COVID-
19AdminOrderNo7.pdf.
7
In re Scottish Re (U.S.), Inc., 2020 WL 4048289 (Del. Ch. July 7, 2020).
8
Id. at *4.
5
the first issue—the mutuality required by § 5927 for offsets—related to the
construction or application of a statute that has not been settled by this Court (Rule
42(b)(iii)(C)).9 Considering the most efficient and just schedule for resolving the
case, the Court of Chancery noted that it would soon be considering the Receiver’s
proposed plan of rehabilitation.10 The Court of Chancery recognized the possibility
that the plan confirmation process could result in the parties settling their disputes
(making appellate review unnecessary) as well as the possibility the Protective
Entities or other objectors might wish to appeal different aspects of the final
rehabilitation plan.11 Given the possibility of piecemeal appeals in a complex
insurance receivership proceeding, the Court of Chancery concluded that the balance
of the likely benefits and probable costs of an interlocutory appeal was uncertain and
required denial of the application for certification.12
(9) The Protective Entities filed two appeals from the Order in this Court—
interlocutory Appeal No. 217, 2020 and Appeal No. 218, 2020. According to the
Protective Entities, they filed two appeals from the same Order because there is
limited guidance concerning whether the Order is interlocutory or final. The Senior
9
Id.
10
Id.
11
Id.
12
Id. at *5.
6
Court Clerk issued a notice directing the Protective Entities to show cause why
Appeal No. 218, 2020 should not be dismissed as interlocutory.
(10) In response to the notice to show cause, the Protective Entities argue
that the Order is final because the dismissal of the petition for failure to state a claim
under Rule 12(b)(6) was similar to the dismissal of a complaint, which is generally
appealable as a final judgment. The Protective Entities acknowledge the conflicting
case law in other jurisdictions regarding what constitutes an appealable final order
under statutes similar to DUILA, but rely on language in the U.S. Supreme Court’s
recent decision in Ritzen Group, Inc. v. Jackson Masonry, LLC13 to argue that the
Order is final and appealable. In Ritzen, the U.S. Supreme Court recognized that
“[o]rders in bankruptcy cases qualify as ‘final’ when they definitively dispose of
discrete disputes within the overarching bankruptcy case” and concluded that a
bankruptcy court order conclusively denying a motion for relief from the automatic
stay constitutes a final, appealable order.14
(11) At the Court’s request, the Receiver filed a reply to the Protective
Entities’ response to the notice to show cause. The Receiver argues that the Order
does not have the characteristics of a final order because it does not finally determine
the Protective Entities’ right to recover. The Receiver distinguishes the cases
13
140 S.Ct. 582 (2020)
14
Id. at 586-92.
7
discussing statutory provisions similar to § 5902(e) that the Protective Entities relies
upon.
(12) We first address whether the Order is final. If the Order is final, then it
is unnecessary to address interlocutory Appeal No. 217, 2020 and that appeal will
be dismissed. Under the DUILA, “[a]n appeal shall lie to the Supreme Court from
an order granting or refusing rehabilitation, liquidation or conservation and from
every order in delinquency proceedings having the character of a final order as to
the particular portion of the proceedings embraced therein.”15
(13) This Court has not addressed the meaning of an “order in delinquency
proceedings having the character of a final order” under § 5902(e).16 In other
contexts, we have held that an order constitutes a final judgment when “it leaves
nothing for future determination or consideration.”17 As the Protective Entities note,
the dismissal of a complaint is generally appealable as a final order.18
(14) “Cases from other jurisdictions provide persuasive guidance about how
to interpret the Insurers Liquidation Act.”19 The case law from other jurisdictions
15
18 Del. C. § 5902(e).
16
In Cohen v. State ex rel. Stewart, we concluded that it was unnecessary to address
whether three orders, which imposed sanctions for violation of an injunction, were
appealable under § 5902(e) because we found those orders appealable under the collateral
order doctrine. No. 545, 2013, Order ¶ 4 (Del. Nov. 12, 2013).
17
Showell Poultry, Inc. v. Delmarva Poultry Corp., 146 A.2d 794, 796 (Del. 1958).
18
Braddock v. Zimmerman, 906 A.2d 776, 784 (Del. 2006).
19
Cohen v. State ex rel. Stewart, 89 A.3d 65, 93 (Del. 2014).
8
addressing what constitutes a final order under statutes like § 5902(e) is limited and
somewhat conflicting.20 After considering those cases and the nature of the Order,
we conclude that the Order does not have the characteristics of a final, appealable
order under § 5902(e).
(15) The process leading to a court-approved rehabilitation plan remains
ongoing. As the Court of Chancery noted in denying the application for certification
of an interlocutory appeal, it is possible that the Protective Entities could recover on
their unpaid claims as part of this process. The Protective Entities may also raise the
issues decided in the Order (as well as other issues) in an appeal of the Court of
Chancery’s approval of a final rehabilitation plan. The Protective Entities’
suggestion that the Order is analogous to the denial of a motion for relief from the
automatic stay under the federal Bankruptcy Code is unpersuasive. The Order,
which involved the application of state law and determined offset rights that would
also be addressed in the final rehabilitation plan, is not analogous to a bankruptcy
20
Compare In re Pac. Marine Ins. Co. of Alaska in Liquidation, 877 P.2d 264, 268 (Alaska
1994) (holding that no orders in a liquidation or receivership have the character of a final
order until the receivership action is terminated or the trial court certifies the order under
Rule 54(b)) and PrimeHealth Corp. v. Ins. Comm’r of State, 758 A.2d 539, 547-48 (Md.
Ct. Spec. App. 2000) (describing process that leads to approved rehabilitation plan as one
proceeding and finding that order authorizing the Insurance Commissioner as rehabilitator
to withdraw HMO’s demand for an administrative hearing was not a final, appealable
order) with Fewell v. Pickens, 57 S.W.3d 144, 150-52 (Ark. 2001) (holding that trial court
was not divested of subject matter jurisdiction to hear liquidation petition while an appeal
was pending on the order appointing a receiver because the appeal provision of the
Arkansas Uniform Insurers Liquidation Act contemplated that appeals would arise
piecemeal).
9
court’s ruling on a stay-relief motion, which the U.S. Supreme Court has described
as occurring apart from proceedings on the merits of creditors’ claims and apart from
the adversary claims-adjudication process that is typically governed by state law.21
We therefore conclude that the Order is interlocutory and that Appeal No. 218, 2020
must be dismissed.
(16) Finally, we address whether interlocutory Appeal No. 217, 2020 should
be accepted. Applications for interlocutory review are addressed to the sound
discretion of the Court.22 In the exercise of our discretion and giving great weight
to the Court of Chancery’s thoughtful analysis in denying the application for
certification, this Court has concluded that the application for interlocutory review
does not meet the strict standards for certification under Supreme Court Rule 42(b).
The case is not exceptional,23 and the potential benefits of interlocutory review do
not outweigh the inefficiency, disruption, and probable costs caused by an
interlocutory appeal.24 We therefore refuse interlocutory Appeal No. 217, 2020.
NOW, THEREFORE, IT IS ORDERED that Appeal No. 218, 2020 is
DISMISSED and interlocutory Appeal No. 217, 2020 is REFUSED. The filing fee
paid by the appellants shall be applied to any future appeal they file from an
21
Ritzen, 140 S. Ct. at 589.
22
Supr. Ct. R. 42(d)(v).
23
Supr. Ct. R. 42(b)(ii).
24
Supr. Ct. R. 42(b)(iii).
10
interlocutory appeal that is certified by the Court of Chancery or a final order entered
in the case.
BY THE COURT:
/s/ Tamika R. Montgomery-Reeves
Justice
11
Protective Life Insurance v. Navarro
Combined Opinion