Royal & SunAlliance sued over asbestos liabilities

Royal & SunAlliance, which is only a week away from revealing the true extent of its precarious finances, was dealt a fresh blow yesterday when it emerged the insurer is now facing a legal battle over asbestos-related claims that could run in to tens of millions of pounds.

Employees of Turner & Newall, an asbestos manufacturer that was put in administration in October last year, are taking RSA to court over the employer liability insurance RSA provided to the company. The matter hinges around the exclusion clauses of the policy, and whether asbestos-illnesses were covered by the contract.

The news sent shares in RSA plummeting nearly 15 per cent before closing down more than 10 per cent at 104p.

Mr Justice Lloyd, in a preliminary hearing in the High Court this week, said the employee claims could be "very numerous and very substantial". Proceedings are expected to commence in mid-January. Up to 1,000 claimants are involved.

RSA will reveal on 7 November how it intends to secure its finances for future growth. Claims arising from asbestos are only one of the potential black holes in RSA's finances and its management team, which is still without a permanent chief executive, will have to assure shareholders its liabilities can be contained. RSA has doubled its asbestos reserves to more than £600m.

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