(2 of 2)
Last Friday morning, rumors that Lloyd's had won the trial swirled through the corridors of England's Royal Courts of Justice long before the dissident Names trooped in to learn their fate. Despite Lloyd's legal army, the Names believed their side had clearly demonstrated fraud at Lloyd's the institution, as opposed to the syndicates. In court it also emerged that many Names had been ill-served by negligent syndicates. But they failed to prove to the satisfaction of the judge that Lloyd's itself had committed fraud. More specifically the judge rejected the allegation that Lloyd's Council was aware that exposure to asbestos-related claims required reserves "far in excess" of those reported in Lloyd's accounts.
Although disappointed, few Names were stunned by the result. Some saw the decision as a typical example of the Establishment protecting itself. Others, including Sir William Jaffray, who lent his name to the trial, will seek to battle on. They are emboldened by the recent entry into force of the European Convention on Human Rights, which they claim allows Lloyd's to be sued for negligence in lieu of fraud. "It's a severe setback for the Names," Jaffray said after the trial, "but it in no way exonerates Lloyd's. Nobody reading the judgment will be able to trust or do business with Lloyd's again."
The judge indeed handed down some harsh words. Despite all the Lloyd's reforms in the past, he said, "the catalog of failings and incompetence in the 1980s by underwriters, managing agents, members' agents and others...is staggering (and brought disgrace on one of the City's great markets)." Assessing the tactics employed to recruit Names to syndicates in the mid- to late '80s, he said it was "strongly arguable" that the advice they received was "at best grossly negligent."
Names with no stomach for further court action may take comfort from the judge's assertion that it was "high time" litigation in Britain and elsewhere ceased and exhorted Lloyd's itself to seek a "fair, overall settlement" with the dissidents--hammered out perhaps by an independent panel. Lloyd's, still wallowing in red ink (according to market estimates, losses could total as much as $4.5 billion for 1998-2000), has yet to respond. The refuseniks for their part are hoping for a deus ex machina in the form of criminal proceedings launched by U.S. government prosecutors who have been investigating possible mail fraud involving Lloyd's. But Lloyd's remains confident that the arguments that won the case last week will triumph in the future.
--With reporting by Helen Gibson/London