Pension ruling leaves insurers facing flood of claims

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The Independent Online

Britain's insurers were yesterday facing the prospect of an avalanche of compensation claims for more than pounds 100m from pension transfer victims, after losing a High Court bid to block legal action against them.

Thousands of people considering whether to take legal action against insurers were given the green light to do so in a landmark judgment at Bristol Mercantile Court yesterday.

Judge Raymond Jack QC rejected a claim by some of Britain's biggest companies, including Prudential and TSB Life, for a stay on the proceedings brought against them by a Bristol law firm, Ringrose Wharton.

Bill Day, national pensions officer for the GMB general union, whose members formed the bulk of the initial cases before the court, said: "I am delighted that the argument has gone our way and decisively so.

"We are expecting an expedited hearing in February on behalf of our members. The speed with which their cases are being dealt with is far superior to the review by the Securities and Investments Board [the leading City watchdog], touted by insurers as an alternative.

"There is now a much greater likelihood that people will receive full and proper compensation than would have been the case had we lost. Many thousands of individuals who would otherwise have been blocked from taking the legal route have had that obstacle removed."

Unions will press ahead with compensation claims on behalf of workers advised to leave public sector pension schemes in the 1980s and start private ones instead.

Law firms around the country are already dealing with about 1,200 cases, including teachers, miners, nurses and local government staff. Thousands more are expected to join in the action. Should their claims succeed, insurers could face a total bill of pounds 100m or more. The 50 GMB members whose cases are to be heard in February are claiming more than pounds 1m in compensation.

The legal action by Ringrose Wharton follows a study by the SIB some 15 months ago, showing that about 1.5 million people may have been mis- sold a personal pension.

A review started last year was supposed to ensure that the 350,000 most urgent pension cases would be dealt with by last Christmas. In fact, the industry's regulator has admitted that only a tiny minority of cases have been reviewed so far.

Ringrose Wharton argued that, in addition to any delays, the SIB review could not guarantee their clients as much compensation as the legal action might obtain.

Insurers counter-claimed that unless the action were halted, courts all over the country would be unable to cope with the resulting flood of cases.

They also said the Royal College of Nursing, another organisation involved, and the GMB were engaged in "improper" activities for a trade union.

However, Judge Jack dismissed this argument. In a 39-page ruling, he said courts were perfectly able to deal with cases coming before them.

Rejecting the insurers' application for leave to appeal to the High Court, he awarded the unions' costs - estimated to be at least pounds 100,000, against the insurers.

David Linnell, regulation and compliance director at Prudential, said: "We are disappointed. What worries us is the possibility that if we are forced to deal with a large number of legal claims, the effect might be to take away resources from the reviews we are carrying out for our other policyholders."

He added that the Pru and other insurers would study the ruling carefully before deciding whether to challenge it at the Appeal Court.