Names will have to pay out £100m
A test case court ruling has set the precedent for hundreds of Lloyd's Names to pay cash calls worth approximately £100m.
In 1998, Margaret Woolley from Stratford-upon-Avon was asked to pay around £15,000 to the company managing the affairs of Lloyd's syndicate 103, P&B (run-off).
The request for additional money related to personal accident claims on the 1993 underwriting year of account. But she argued she was not liable for the cash call as there was no enforceable contract between the syndicate and her managing agent. It is thought around 700 other people, on the same and two other syndicates, were also asked for money at that time.
In February last year, the High Court ruled that an agreement and syndicate list signed by P&B had existed, but had been subsequently lost. Mr Justice Andrew Smith said there was, therefore, a valid and enforceable contract between the managing agent and Woolley.
Last week, the Court of Appeal threw out Woolley's attempt to avoid paying her Lloyd's syndicate extra money.
It also rejected her argument that all her underwriting agreements were void. She said the Agents Agreements Byelaw (No 8 of 1988) prescribes a set of three contractual documents ,which must be completed in order to become a valid Name on a syndicate. Only one of the documents could be presented.
But the court ruled that, although the remaining two documents were incomplete, it was a disciplinary matter which did not undermine the validity of the contract to underwrite. Woolley is now liable to pay the cash calls.
The ruling is seen as a test case since similar contracts for approximately 700 Names cannot be produced. It is estimated the total for all the cash calls is more than £100m.
Defence barrister Catherine Mackenzie-Smith said: "Had Mrs Woolley won the case, the policyholders would have been paid nonetheless and the loss would have fallen on Lloyd's Central Fund."
United Names Organisation adviser Christopher Stockwell, said: "There were about 100 Names on the same syndicate in the position of Mrs Woolley, having no contract. Over half are already bust."
Lloyd's spokesman Adrian Beeby said: "This is a significant victory for the managing agency involved and sets a very important precedent for the market."