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A $1.66 billion settlement was supposed to close the book on this chapter. Instead, a fight over $211 million in interest payments has kept it open, and a Delaware bankruptcy judge just ordered the two sides into mediation to work it out.

The Judge's Order

U.S. Bankruptcy Judge Laurie Selber Silverstein directed U.S. Bankruptcy Judge Barbara J. Houser, who oversees the Boy Scouts of America Settlement Trust, into mediation with a group of insurers referred to in Thursday's order as the Settling Insurers. In the same ruling, Silverstein denied Houser's request to force four insurers to release $211 million in escrowed funds, effectively punting the substance of the dispute into the mediation process instead.

"The motion is denied without prejudice to the trustee seeking the relief which she sought in the motion subsequent to the mediation," Judge Silverstein said, leaving the door open for Houser to renew her request once mediation concludes.

Additional Parties Join the Process

The judge also ruled that two reorganized debtors, along with a bank that had joined the settling insurers in opposing the motion, could participate in the mediation as well — broadening the group of stakeholders working toward a resolution.

The Dispute Over Withheld Interest

Houser filed a motion in June alleging the insurers had refused to release $211 million in interest earned on the underlying settlement's principal payments. According to the trustee, withholding those funds violated a court order that had approved the Boy Scouts' Chapter 11 reorganization plan.

"Such refusal is in violation of the insurance settlement agreements and escrow agreements, both of which state that the release of those funds was to occur four months ago, on the date the confirmation order became final," Houser said at the time. "Such refusal is also in violation of the plan."

How the Original Settlement Came Together

The Boy Scouts had settled the four insurers' liability under their abuse policies for a combined $1.66 billion, with those agreements folded into a Chapter 11 plan approved back in April 2023, according to the motion. Under the terms, settlement proceeds were to remain in escrow until the Chapter 11 plan received final approval and any appeals were resolved.

A Long-Awaited Final Appeal Clears the Way

That resolution finally arrived in January, when the U.S. Supreme Court denied certiorari on what Houser described as the last remaining appeal facing the Boy Scouts. The following month, the order confirming the debtor's bankruptcy plan officially became final — the trigger point that was supposed to unlock the full escrowed amount.

A Partial Release, But Not the Whole Sum

In response, the insurers allowed an escrow agent to release $1.47 billion in principal payments, according to Houser — but they held back the millions of dollars in accrued interest. The insurers involved in the dispute are The Hartford, Chubb, Zurich and Clarendon.

"Absent an order directing the settling insurers to execute disbursement instruction providing for the release of the remaining balances, the trust will be deprived of the income earned on the settlement payments and will be unable to use such funds to pay survivors of abuse consistent with the plan," the trustee said, framing the withheld interest as directly delaying payments owed to abuse survivors.

The Insurers Push Back

The settling insurers filed responses opposing Houser's enforcement motion, arguing instead that the dispute should be resolved through mediation, per the provisions laid out in their original agreements. The escrow agent, Bank of New York Mellon, similarly opposed the motion and requested that the matter be routed to mediation.

The Judge Sides With Mediation

Judge Silverstein ultimately agreed that the dispute should proceed through mediation, in line with the agreements' own dispute-resolution language. She ruled that BNY could take part in that process, alongside reorganized debtors Scouting America and Delaware BSA LLC.

The Bankruptcy Case's Broader Timeline

The Boy Scouts of America's main bankruptcy case formally closed in March, six years after the organization first filed for Chapter 11 protection, though one subsidiary case remains open to handle remaining miscellaneous issues. The debtor's bankruptcy plan established a $2.5 billion settlement trust, designed to pay out claims from more than 82,000 individuals alleging sexual abuse.

A Separate Ruling on an Individual Claim

In a related development Tuesday, the judge also approved a request from an individual identified as J.G.B. to reinstate a direct abuse claim, after he argued his former attorney had repeatedly missed claims deadlines and failed to properly navigate the trust's distribution process.

Limited Comment From the Parties

A representative for Clarendon declined to comment Thursday. Representatives for the trustee and the other opposing parties did not immediately provide comment.

The Legal Teams Involved

Houser is represented by Kami E. Quinn, Emily P. Grim, Craig J. Litherland and Michael B. Rush of Gilbert LLP, along with David J. Molton and Michael S. Winograd of Brown Rudnick LLP.

Hartford Accident and Indemnity Company is represented by Daniel N. Brogan of Bayard, P.A., Philip D. Anker and Joel Millar of Wilmer Cutler Pickering Hale and Dorr LLP, and James P. Ruggeri and Joshua D. Weinberg of Ruggeri Parks Weinberg LLP.

Century and Chubb are represented by Stamatios Stamoulis of Stamoulis & Weinblatt LLC and Steve Warren, Tancred Schiavoni and Emma L. Jones of O'Melveny & Myers LLP.

American Zurich Insurance Company is represented by Mark D. Plevin and Tacie H. Yoon of Plevin & Turner LLP and Robert M. Greenberg of Tybout, Redfearn & Pell.

Clarendon National Insurance Company is represented by Matthew G. Summers and Margaret A. Vesper of Ballard Spahr LLP and John F. O'Connor of Steptoe LLP.

The Bank of New York Mellon is represented by Jason C. Powell of The Powell Firm, LLC and Paul S. Jasper of Ashurst Perkins Coie US LLP.