RTY sues Lloyd's
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Your support makes all the difference.THE SORRY tale of Lloyd's of London takes its latest tortuous twist on Tuesday when members of the Rose Thomson Young syndicate sue the market over losses of up to pounds 428m on Piper Alpha, Exxon Valdez and other huge catastrophes.
New Trade and Industry Secretary Ian Lang is the highest profile of the 1,092 names on the RTY action group, which also includes three other Tory MPs, one MEP and the Earl of Arran.
The case is the sixth in a wave of litigation alleging negligence by Lloyd's underwriters, managing agents and members agents who introduced thousands to the market in the 1980s.
The suits threaten a pounds 2.8bn settlement plan put forward as part of a pounds 5.9bn financial rescue in May following pounds 8bn of losses between 1987 and 1992.
Names were due to have received interim statements of payments due under the plan by the end of October, but Lloyd's was forced to scrap the deadline after squabbling in the market.
Members will now only receive a "final statement" in the spring, before the rescue is voted on, and many leading members believe the plan will fail as names balk at payment.
Courts have granted awards of up to pounds 1.34bn so far over negligence by Lloyd's agents, most of which will fall on "Errors and Omissions" underwriters, a shrinking pot of professional indemnity insurance that falls on other names within Lloyd's itself.
E&O underwriters are now retreating from their planned pounds 800m contribution to the rescue, offering pounds 550m at most, sources say.
In a landmark case two weeks ago, names on the Merrett syndicate also won up to pounds 300m in compensation for negligence by auditors Ernst & Young.
The Rose Thomson Young action group also expects to sue its accountants, while auditors, expected to contribute pounds 200m to the settlement, threaten to scupper the plan unless they are indemnified against further lawsuits.
So far UK litigation has centred on two areas of negligence:
q "excess of loss" or LMX catastrophe re-insurance such as RTY, the so- called "spiral" where greedy underwriters laid off their own bets ultimately on themselves, picking up the whole tab for Piper Alpha, for example;
q "long tail" insurance such as Merrett, where syndicates closed off years of account when there were further huge liabilities from asbestosis and US pollution claims still to come.
Friday's writ from former underwriter John Donner broadens actions further, alleging deliberate concealment by Lloyd's officials of the asbestos problem from the early 1980s.
Names in the US have so far been unsuccessful in bringing charges, but Lloyd's still has to appeal one fraud judgment in a Texas court. Chairman David Rowland has also been subpoenaed in a California action against Lloyd's US lawyers.
Lloyd's as a body is also in the firing line, with a case alleging breaches of European law due to be heard next February.
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