Royal & SunAlliance dealt fresh blow in asbestos court battle

Asbestosis sufferers who worked at the now defunct manufacturer Turner & Newall won a court victory yesterday over Royal & SunAlliance and a Lloyds syndicate, which paves the way for million pound compensation awards.

Asbestosis sufferers who worked at the now defunct manufacturer Turner & Newall won a court victory yesterday over Royal & SunAlliance and a Lloyds syndicate, which paves the way for million pound compensation awards.

A High Court ruling on the claims of 250 employees of Turner & Newall ruled that the company's insurers were not able to exclude asbestos-related illnesses from the policies they provided from 1972 to 1995. All employees from their period can now seek compensation. Claims range from £10,000 to six-figure sums.

The ruling is, however, only the first hurdle towards compensation for the sufferers. A second legal battle must be won before the insurers are likely to pay out.

Kroll, the administrators, must now defend claims from the insurers that Turner & Newall withheld information from its insurers about the extent of its asbestosis problems.

The company was the UK's largest asbestos manufacturer and went into administration in 2001. It has 1,000 employees that have asbestos-related claims in the UK and hundreds of thousands of claimants in the US.

The news came as a blow to RSA, which is already struggling to fill a £650m black hole in its finances. Mounting asbestos claims and losses on the World Trade Centre have hit RSA and the company is dependent on raising up to £744m from floating its Australian businesses on Monday. It is likely the company will, alongside the Lloyds syndicate Brian Smith, have to pay the costs of the trial so far. These are understood to have reached well over £1m.

Fears that RSA has inadequate reserves to cover its exposure to asbestosis-related claims have dogged the company, and the insurer was forced to increase reserves at the end of last year.

It has provisions of £513m across the group, and says that based on its current claims levels, those reserves would be adequate to cover payments for 24 years. It paid out £40m in asbestos-related claims in 2001.

A spokesman for RSA said: "Royal & SunAlliance takes its responsibilities as an insurer extremely seriously and has a great deal of sympathy for any affected employee or former employee of Turner & Newall and their families." He said RSA would now consider the 150-page judgment.

Even in light of the ruling, he said the insurer's current reserving levels were appropriate.

Ian McFall, a solicitor at Thompsons, which represents hundreds of Turner & Newall employees, said he hoped the insurers would drop the second legal phase and settle with the claimants.

The case is the first of its kind in the UK and may open the doors to new asbestos claims. Asbestos litigation is high in the US, where workers are allowed to make claims before displaying any symptoms of the illness.

Reserving for the claims is extremely difficult for insurers as asbestosis-related diseases can take up to 40 years to take hold. Employees of Turner & Newall could still be making claims against the insurers up to 2012. According to the Association of British Insurers, up to £300m has been paid out by insurers for asbestos-related claims in the past 20 years. A review of employers' liability insurance is under way in light of growing asbestosis claims.

It is compulsory for employers to have liability insurance to cover staff for injuries and illness at work, and premiums have quadrupled in the past year as claims increased.