Names lose court fight against Lloyd's 'fraud'

Click to follow
The Independent Online

A High Court judge yesterday accused underwriters and agents at Lloyd's of "staggering" incompetence as he threw out a multi-million pound lawsuit brought by more than 200 "Names".

A High Court judge yesterday accused underwriters and agents at Lloyd's of "staggering" incompetence as he threw out a multi-million pound lawsuit brought by more than 200 "Names".

The judgment by Mr Justice Cresswell brought to an end years of anxiety and recrimination arising from the famous London insurance market's disastrous losses during the Eighties and Nineties.

A rebel group of 216 Names, individuals who pledged their assets to Lloyd's, had spent five months arguing at the High Court in London that they were the victims of a sustained fraud.

The group, who called their battle against Lloyd's "the war", claimed they were therefore not liable for their share of Lloyd's huge losses over compensation pay outs for asbestosis.

While the vast majority of the 36,000 Names accepted a £3.2 billion financial settlement put forward by Lloyd's in 1996, the remaining rump continued their claim for full reimbursement.

Mr Justice Cresswell found there had been no systematic dishonesty against the Names but, in a damning 600-page judgment, accused key figures of bringing disgrace on Lloyd's.

He said: "The catalogue of failings and incompetence in the Eighties by underwriters, managing agents, members' agents and others is staggering."

The Names who brought the case, led by Sir William Jaffray, had argued they lost an average of £469,000 over asbestosis compared to £120,000 for working Names and £263,400 for external Names.

The litigants had said during their case they blamed Lloyd's for 15 suicides among Names and their family members, as well as a catalogue of divorces, evictions and repossessions.

Under historic regulations that govern the Lloyd's market, investors have a larger share of premiums, but also bear an unlimited risk to cover any claims. For this reason Lloyd's was able to pursue the Names, most of whom are private investors with some personal wealth, for the entire amount they owed, even if this meant seizing personal assets like a family house.

Sir William said after the hearing: "We are amazed by the terms of the judgment. There were so many findings of gross incompetence on the part of Lloyd's.

"How many findings of gross negligence are needed before that becomes fraud? This judgment shows the inadequacy of the protection for investors."

He also wasted no time to raise the possibility of an appeal, saying: "It may end up that the Lloyd's litigation will end up settled in Europe under the Human Rights Act." The Names who brought the case will now face renewed attempts by Lloyd's to recover outstanding debts of around £50 million as well as meeting the legal bills for a case estimated to have cost £25 million.

One man, who refused to reveal his name, said: "They have already got all my money, and I have lost my house. But they are still suing me for £200,000."

Lloyd's reacted jubilantly. Nick Prettejohn, chief executive, said: "It was a very positive judgment."

In an attempt to reconcile the two sides, the judge called for Lloyd's to set up a panel of independent legal and financial advisers to consider whether all Names had been treated equally.

Mr Prettejohn delivered a lukewarm response, saying such a panel would be "considered carefully" but gave no firm guarantees that it would be set up.

Comments