ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Wednesday, August 21, 1996 TAG: 9608210075
SECTION: BUSINESS PAGE: B-8 EDITION: METRO
DATELINE: RICHMOND, VA.
SOURCE: Associated Press
In a victory for investors in Lloyd's of London, the insurance market agreed Tuesday that 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 because there's been considerable confusion over what legal rights, if any, investors would have if they accepted 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. The hearing concluded about 9 p.m., with Payne telling attorneys he would rule by Thursday.
Lloyd's restructuring plan is crucial to the survival of the 308-year-old insurance company, which plays a major role in providing insurance for U.S. businesses.
Investors fear they may be shut out of court if they signed up for the settlement, which is aimed at handling insurance policies that threaten to ruin the company. Anyone who invests in Lloyd's pledges his entire net worth to make good on the insurance polices underwritten by Lloyd's.
Gigantic loses from pollution and asbestos lawsuits, as well as natural disasters between 1988 and 1992, left thousands of investors in desperate shape.
The restructuring plan proposes to put the money-losing policies into a new insurance company, thereby allowing investors to exit Lloyd's. But the investors have to pay a premium to get into the new insurance venture and agree not to sue Lloyd's or its agents for policies covered in the settlement.
The settlement documents contain broad disclaimers in which Lloyd's denies 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 sarcasm: ``You recognize that the document may not suggest that quite as clearly as you just did. But you were unequivocal
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 unlawful activity.
The SEC, responding late Friday, informed the court it wouldn't take sides in the lawsuit, but supported the right of American investors to sue 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 either.
LENGTH: Medium: 74 linesby CNB