Lloyd’s wins major fraud case

Justice Peter Cresswell said the main consideration was whether Lloyd’s made misrepresentations to the investors which it knew to be untrue and whether these were communicated to the Names. He found that this was not the case but was highly critical of the Lloyd’s market in the 1980s.

“I find for Lloyd’s and against the Names…,†he said in his written judgment. The investors faced financial ruin after US courts began awarding massive compensation to workers suffering from asbestos-related diseases. By becoming Names, the investors had taken on unlimited liability, allowing them to lose even more than their assets at the time. However, Cresswell was critical of Lloyd’s, saying that despite all of its reforms, “the catalogue of failings and incompetence in the 1980s by underwriters, managing agents, members’ agents and others, is staggeringâ€.

MANY NAMES SUFFERED ENORMOUSLY – JUDGE: External Names, whether or not they accepted Lloyd’s restructuring plans implemented in the 1990s, were the innocent victims of the failings and incompetence, he added. “Many Names have suffered enormously in financial and personal terms,†he said.

He said there were examples presented by some Names recruited in the mid-to late-1980s which showed strong arguments that the advice they were given “was at best grossly negligentâ€.

He listed other considerations and said that given the fact that the Names had suffered so much, Lloyd’s should set up an independent panel to consider individual cases of those who had not accepted its reconstruction and renewal plan.

From fewer than 8,000 in 1975, the number of Names peaked at over 32,000 in 1988. Total losses at Lloyd’s during the 1980s ran to around eight billion pounds ($11.5 billion). Asbestos claims amounted to about half of that sum. The period also included losses from Britain’s 1987 hurricane and the Piper Alpha oil rig disaster in the North Sea in 1998, in which 167 people were killed. The Names, headed by William Jaffray, form part of the United Names Organisation (UNO) group, which refused to join the Equitas re-insurance vehicle, set up by Lloyd’s after the losses, as a key part of its reconstruction and renewal programme.

Around 95 per cent of the 34,000 Names at the time of the 1980s losses transferred to Equitas. Of the 1,700 who refused to transfer, some 600 were successfully sued by Lloyd’s.