His Perspective on Scottish Lion
HB held a seminar in January in New York titled “Solvent Schemes of Arrangement: Latest Developments in the U.K. and U.S.,” which included substantial discussion on the decision by a Scottish court favorable to policyholders Goodrich Corp., ExxonMobil Corp., Textron, Inc., ITT Corp. and Zapata Corp., a collection of creditors who opposed the solvent scheme proposed by The Scottish Lion Insurance Company. The policyholders said the plan would terminate important and irreplaceable insurance coverage issued by Scottish Lion that would respond to long-term risks such as those stemming from U.S. asbestos, toxic torts and environmental litigation. Scottish Lion had argued that these companies had no right to challenge the insurer’s scheme of arrangement because it had achieved sufficient votes by its creditors. The Scottish Court agreed with objections raised by the policyholders to the Scottish Lion scheme, writing that “in a situation where the Company is sound financially, why should one group of creditors who might wish to enter into a commutation agreement with the Company be entitled to force other creditors to participate against their will?”
Here is what Philip Hertz of Clifford Chance LLP in London had to say on the decision.