Lloyd's members win court victory: Judge says agencies have a 'duty of care'

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THOUSANDS of underwriting members of the Lloyd's of London insurance market won a crucial victory in the High Court yesterday in their bid to gain financial compensation for the pounds 5.5bn of losses they have suffered.

In the Commercial Court, Mr Justice Saville ruled that agencies that look after members' affairs have a 'duty of care' in the conduct of their business. His decision was made following the numerous legal actions that have been mounted by 17,000 underwriting members over their losses.

Michael Deeny, chairman of an action group of underwriting members who are facing losses of pounds 925m after their affairs were looked after by the Gooda Walker agency, said: 'It is the last major hurdle before our case is heard next April, when we demonstrate to the court the extent of the negligence.'

Mr Justice Saville made his decision after hearing submissions from legal counsel representing members whose affairs had been looked after by the Merrett underwriting agency group, the Feltrim agency and Gooda Walker.

Two internal loss review reports prepared by the Lloyd's authorities have been highly critical of the quality of management at the Gooda Walker and Feltrim agencies. The Serious Fraud Office is carrying out a wide-ranging investigation of the affairs of Gooda Walker, its first formal investigation into Lloyd's affairs since the office was formed.

In their action the underwriting members have said that managing agents were under a legal duty to them to exercise reasonable care and skill in performing functions to the standard of reasonably competent, diligent and efficient professional underwriters.

The agents denied the existence of a duty of care and argued that at most they were only obliged not to act in bad faith or in a wholly irrational way.

Mr Justice Saville told the court: 'The law does, as a matter of common sense it should, impose a duty of reasonable care and skill upon the underwriting agents of the kind alleged by the names, which could only be modified or excluded by clear agreement between the parties.'

Lloyd's has been trying to organise an out-of-court settlement between the members and the companies they are suing by the year-end.

Yesterday's judgment is widely expected among Lloyd's professionals to delay an out-of-court settlement as the members grow more confident.

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