Lloyd's Agrees to Let U.S. Investors Sue for Fraud
Aug. 20, 1996
RICHMOND, Va. (AP) _ In a victory for investors in Lloyd's of London, the insurance market agreed Tuesday that the investors can sue for fraud if they find Lloyd's lied to them in its $4.7 billion settlement proposal.
Bonnie Steingart, a Lloyd's attorney, told U.S. District Judge Robert Payne that Lloyd's was prepared to make a legal stipulation giving investors the right to sue if Lloyd's settlement documents prove to be fraudulent.
Payne ordered Lloyd's attorneys to submit the agreement in writing. One attorney for investors, while saying he wanted to see the final details, said he was pleased with the agreement.
The development is significant, since there's been considerable confusion over what legal rights, if any, investors would still have if they agreed to sign the controversial restructuring. About 34,000 Lloyd's investors worldwide, known as ``names,'' have until Aug. 28 to vote on the plan.
The development came as Lloyd's made closing arguments in the second day of a hearing on a lawsuit challenging the settlement.
Lloyd's reconstruction and renewal plan is crucial to survival of the 308-year-old insurance market, which plays a major role in providing insurance for U.S. business.
Investors fear they may be shut out of court if they signed up for the settlement, which is aimed at handling money losing insurance policies that threaten to submit some to financial ruin.
In exchange for reducing their large debts to Lloyd's, investors in turn have to agree not to sue the insurance market for the insurance policies covered in the plan.
The settlement documents contain broad legal disclaimers in which Lloyd's and various committees that prepared the report deny responsibility for ``any loss occasioned by any person'' who relies on financial information or statements within the thick, densely worded plan.
Under questioning by Payne, Lloyd's chief executive officer Ronald Sandler admitted Monday that investors could sue if information in their personal settlement proposal was found to be false.
``My understanding is that names still retain rights in the event of fraudulent misrepresentation,'' Sandler told the judge.
Later, Payne observed with light sarcasm: ``You recognize that the document may not suggest that quite as clearly as you just did. But you were unequivocal ... to your credit.''
Since Monday, Payne has been holding a hearing on a lawsuit filed by Lloyd's dissident American investors seeking to delay Lloyd's restructuring plan until more financial information is disclosed.
Earlier in the day, Payne asked if Sandler and a senior British diplomat lobbied the Securities and Exchange Commission last week concerning Lloyd's rescue plan.
Payne also criticized the SEC for failing to appear during the hearing or take an position on whether Lloyd's dealings violate securities laws.
Payne said the SEC, by trying to remain on the sidelines, was engaging in activity ``tantamount to administrative malfeasance on a matter of great significance.''
The SEC responded late Friday informed the court it wouldn't take sides in the lawsuit, but supported the right of American investors to have their lawsuit heard in U.S. courts.
Sandler told Payne that he didn't discuss what the SEC should say in response to the judge's order. Sandler said he didn't encourage the agency's neutrality in the case.