Lloyd's to seek deal on cases in pipeline: Ruling on negligence welcomed by names planning new lawsuits

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The Independent Online
LLOYD'S of London is expected to bring forward new proposals for an out-of-court settlement of all outstanding litigation following yesterday's landmark ruling that investors hit by the losses of the Gooda Walker syndicates were victims of negligence.

Michael Deeny, chairman of the Gooda Walker action group, said: 'It's a great day for Gooda Walker names. This judgment represents salvation for many.' Ian McClelland, another Gooda Walker name, said: 'There is no euphoria today. This has been about survival.'

Solicitors for the group estimated the names could be awarded more than pounds 500m when the damages are finally settled. The 3,096 names bringing the case had claimed pounds 629m, and the cumulative losses of the Gooda Walker syndicates had reached pounds 998m by the end of 1993.

Clyde & Co, solicitors acting for the insurers which will foot the bill, said their clients had not yet decided whether to appeal.

Mr Justice Phillips said the underwriters of the Gooda Walker syndicates had not carried out their duties competently. The names were entitled to losses they had suffered because the syndicates had inadequate reinsurance cover against big disasters such as the Piper Alpha oil-rig explosion.

The result was welcomed by other groups of Lloyd's names. The scale of the award, however, raised fears that the money available to compensate other names would be exhausted early.

Mr Deeny said: 'Other names should be encouraged because nobody has gone all the way to a judgment before.'

Lloyd's said it welcomed anything that clarified the situation for members.

The award of damages will be claimed from insurers providing 'errors and omissions', or professional liability, cover for the Lloyd's agencies defending the Gooda Walker action. Mr Deeny said details of the cover were confidential but he thought there would be enough available to meet most of the award. But Clyde & Co, for the liability insurers, said many agencies had 'no or insufficient insurance cover to respond to the awards now likely'.

The total amount of errors and omissions cover is estimated to be pounds 1bn. A second adverse judgment might absorb all that and more. A case brought by Feltrim names against their agents is due to begin on 17 October. If they win too, there would be little money left.

Many participants in the market believe the judgment will prompt another attempt by other aggrieved names to reach settlement with their insurers. A pounds 900m settlement offer put forward by Lloyd's last year was rejected as inadequate by names, but a clear judgment could allow the insurers to make a bigger offer.

Val Powell, chief executive of the Association of Lloyd's members, said the judgment made it clear there was no advantage to the E&O insurers in fighting more cases through the courts. 'The judgment gives enough leeway for everyone to negotiate,' he said.

John Alexander of accountants Pannell Kerr Forster, acting as liquidator for a number of members' agents, said he would have to consider settling with litigating names.

Charles Sturge, editor of Chatset, an independent Lloyd's analyst, thought a settlement would be in the interest of other names. He said: 'Names further down the queue should take a settlement as soon as possible.' Mr Deeny said the Gooda Walker action group intended to sue Littlejohn Frazer, the auditors of the syndicates, for more than pounds 100m. Any award in this suit would come from the auditors' separate professional liability insurers.

Christopher Messer, chairman of the Jansen Green names' action group, said he was not concerned about there being no money left for names in later cases. 'We will make a substantial claim against our auditors,' he said.

Another dispute is expected with Lloyd's when the names know the amount they will recover. Lloyd's is likely to claim that the money must be used to pay the Gooda Walker losses.

Names say they have already paid since Lloyd's has drawn down their deposits. Tom Benyon, chairman of the Society of Names, said: 'Why should the architects of the disaster have first snort at the trough?'

(Photograph omitted)

View From City Road, page 25

The judgment in detail, page 26

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