Many of the Lloyd's members, or names, cannot afford to pay the amounts demanded of them. The agents had contended that the names were legally obliged to pay all their losses before they could sue. The unanimous Court of Appeal decision will allow those who cannot afford to pay to sue now and pay later.
Michael Deeny, chairman of the Gooda Walker action group, said: 'If we had lost it would have been a disaster for us.' Many of the 4,700 Gooda Walker and Feltrim names represented by the action groups would have been forced to abandon the case.
Mr Deeny said about 80 per cent of the Gooda Walker members had not paid all their cash calls, though this includes those who are refusing to pay up. The average loss on Gooda Walker is more than pounds 200,000. 'Half of our total membership, if not more, could not pay,' Mr Deeny estimated.
He said the construction the agents had sought to place on the Lloyd's contracts was 'from a moral point of view . . . appalling'.
Giving judgment, Lord Justice Hoffman said: 'The construction for which the agents contend means that, if they are going to be negligent, they should rather ruin their names entirely than leave them with enough resources to pay their calls.'
Lord Bingham, Master of the Rolls, said such an interpretation would cause severe hardship to names without corresponding benefit to the market, and would give rise to offensive anomalies. Lloyd's welcomed the verdict, and the names' recognition of their outstanding liabilities.
The judges awarded costs, which Mr Deeny estimated at around pounds 500,000, against the agents, whose action is funded by the errors and omissions insurers who would ultimately meet the cost of a successful claim.Reuse content