Lloyd's of London has won its £20m legal defence of the Jaffray case brought by 216 former Names who alleged they had been hoodwinked into sustaining heavy losses in the insurance market.
In his judgment, Mr Justice Cresswell, said there had been no fraud or misrepresentation by Lloyd's. Moreover, he said that Lloyd's committee members had at all times acted honestly in the affair.
However, Cresswell reserved some harsh criticism for Lloyd's, accusing the market of a “staggering” catalogue of failings and incompetence.
He said that the Jaffray case had revealed some serious fault lines in the insurance market, notably the difficulty of writing long-tail business into an annual venture, and said competence in certain areas was lacking.
Also, he said some people were encouraged to become Names who did not have the resources to do so.
In his ruling released Friday, Cresswell robustly rejected claims made by Sir William Jaffray and other former Names that senior members of Lloyd's had concealed the true scale of £4bn of asbestos-related losses from the market between 1978 and 1988.
Cresswell said the rise in asbestos-related claims from around 10,000 between 1973 and 1981 to 24,000 a year by 1990 was a “startling and unforeseen development”.
But he rejected suggestions that Lloyd's had restricted access to information about the size of these asbestos losses, specifically the so-called Murray Lawrence letter of March 18, 1982, written by the former deputy chairman of Lloyd's.
He said: “I find that the Murray Lawrence letter was sent to all underwriting agents, [including members' agents] and all active underwriters, as stated in the [letter's] final paragraph. I find that he did not take any steps to restrict circulation of the letter.”
He also dismissed the Jaffray Names' allegation that the London market Asbestos Working Party, formed from underwriters and claims managers to distribute information on asbestos-related claims, had failed in its duty.
Cresswell further rejected the suggestion that Lloyd's had pursued a policy of “recruit to dilute” – of taking on additional capacity to pay for past losses.
The Jaffray Names are refusing to concede defeat. They plan to introduce a new argument into the case – alleging Lloyd's was negligent – when they appeal Cresswell's ruling later this month.
Catherine Mackenzie Smith, co-chairman of the United Names' Organisation, said: “The war goes on.”
And, Lloyd's appears to have rejected Cresswell's suggestion that it should agree to an independent panel to avoid future litigation over those Names who owe it £51m and refuse to accept Lloyd's reconstruction and renewal package.
A spokesman for Lloyd's said it would continue to seek payment from the Jaffray Names for their debts.
The Jaffray case has been one of the largest cases in English legal history, involving 60,000 documents and the judgment runs to 400 pages.