CITY lawyers are supporting calls for an independent inquiry into alleged misconduct at Lloyd's, following the first successful action involving the troublesome 'long tail' claims.
Lloyd's Names' victory in Merrett is the first-ever successful claim against auditors and means other Names' action groups could now have a stronger claim against other syndicate auditors.
Memery Crystal partner Harvey Rands welcomed Lloyd's decision to hold an internal investigation into matters raised by the judgment.
But he said: “I would expect Lloyd's to conduct an independent inquiry and it should appoint a lawyer and accountant to investigate under the Lloyd's 'inquiries and investigations' bylaw.”
SJ Berwin & Co partner Richard Slowe said of Mr Justice Cresswell's judgment: “It has set a benchmark, established auditors' liabilities, and strengthens the position for Names.”
Dorothy Cory-Wright of DJ Freeman, who is handling the Wellington, Poland and Pulbrook 90 long tail cases which includes suing the auditors, said Merrett raised “extremely important points”.
These include the wrongful and negligent closing of account years because of the uncertainty over future claims, and auditors' proven duties in these matters.
Eversheds partner Charles Lambrick, acting for Names against Sturge underwriters and auditors Neville Russell, agreed, saying Merrett was “another piece in the jigsaw.”
Slowe, Cory-Wright and Lambrick all backed Rands' call for an independent inquiry.
Rands acts for John Donner, the retired Lloyd's underwriter, and the Names Defence Association (NDA). Both allege that negligence at Lloyd's in the 1980s led to misleading of Names in relation to US asbestos-related insurance claims.
Rands said Donner alleged that the Lloyd's Audit Committee had failed to heed warnings over the size and number of asbestos claims, with the result that the 1979 year of account was closed by many syndicates with grossly inadequate reserves.
Barlow Lyde & Gilbert, acting for Lloyd's London Market Claims Service, which handles claims centrally, threatened to injunct the NDA because it used US attorney's reports in research into alleged negligence, Rands said.