Queen's Bench Division Commercial Court (Cresswell J) 3 November 2000
This trial of an action formed part of the Lloyd's Names litigation, which concerned three sample Lloyd's Names who had not accepted the reconstruction and renewal settlement.
The issue was whether Lloyd's had made misrepresentations that it knew to be untrue and/or was reckless whether they were true or false; whether such misrepresentations were communicated to the Lloyd's Names and if so, when ("the threshold fraud point"). The trial was confined to allegations of fraud during the "relevant period" (1978 to 1988) in respect of asbestos-related losses.
The Names said that certain alleged representations, derived from the brochures and from the Lloyd's Aggregate Results/ Global Reports and Accounts as at 31 December 1981 to 31 December 1987 made by Lloyd's to external Names when they were applying to join Lloyd's or considering whether to continue as underwriting members of Lloyd's, were false and fraudulent to the knowledge of Lloyd's.
The Names said that Lloyd's knew or was reckless as to the fact that: (a) the Lloyd's market's exposure to asbestos-related claims required reserves and reinsurance to close to be set at figures far in excess of those that were set out in the results; and (b) to the extent that there was under-reserving, the burden would be borne by Names underwriting in future years.
Lloyd's denied that it had made the alleged representations. Lloyd's said that none of the elements of the tort of deceit were made out and in particular all allegations of fraud were emphatically denied.
In an extensive judgment, the judge considered the way that the Lloyd's market worked in the relevant period and the regulatory background. He also considered the history of asbestos-related claims in the US.
HELD: Lloyd's Names had not proved fraudulent misrepresentation by Lloyd's, as the brochures and reports produced by Lloyd's did not contain the alleged representations.