Scandals in the 1970s. catastrophic losses in the '80s. The ruin of thousand of investors in the '90s, leaving a swath of bankruptcies, lost homes, ruptured lives and suicides. Endless litigation by angry investors in English, American, Australian and Canadian courts. All told, the recent history of Lloyd's of London, the institution synonymous with insurance for the past 300 years, does not make pretty reading.
Could this sorry saga — recounted in a TIME special report in February — soon be over? After a 20-week trial in which some 220 loss-making investors accused Lloyd's of fraudulently recruiting them to absorb losses it knew were about to swamp the market, the judge has now retired to consider his decision, which he will deliver toward the end of October. As Mr. Justice Cresswell sifts the evidence he must decide whether Lloyd's investors — the so-called Names who accepted unlimited liability for risks underwritten by Lloyd's syndicates — were indeed the victims of fraud or simply bad losers in a business that went seriously wrong.
The stakes in the case are high. If they win, the Names — Lloyd's says they still owe a collective $78 million — stand to recoup their losses, collect damages and rebuild their shattered lives. Such a verdict would also encourage David West, a burned American Name, who is bringing a similar fraud case against Lloyd's in a California state court next year. For Lloyd's, still struggling to restore its battered reputation and finances, losing the case would be a serious setback. If the Names lose, most of the 220 will be ruined. Even then, American-born Dona Evans, who claims she lost her home and husband as a result of her Lloyd's losses, says she would not regret joining the suit. "Believing what I do, if I had sold myself out, I would have hated myself," Evans said after the courtroom battle.
The Names involved in the London trial are among a stubborn 5% who refused to sign a settlement with Lloyd's in l996, which would have seen their debts reduced and capped in exchange for an undertaking to end all litigation. In the trial these hold-outs sought to show that senior Lloyd's insiders knew as early as the 1970s that mounting claims from American asbestosis victims could bankrupt Lloyd's, but concealed the truth even as they recruited new, unsuspecting Names to help pay for the looming liability. As the Names' counsel Simon Goldblatt explained in his summing up, "Underneath it all is that Lloyd's didn't want the truth to be told to Names. They didn't want Names to be aware that the market was either at the time, or potentially, far less healthy than the globals [accounts] suggested."
At the trial Lloyd's rejected any such fraudulent scenario, claiming information about asbestos was freely available in the market throughout the 1980s, and noting that senior Lloyd's figures also had lost heavily as a result of the market's exposure to asbestos. Said Charles Aldous, counsel for Lloyd's, "There is no sense in a fraud if it is the fraudsters who lose money."
In a modern, functional room devoid of the neo-Gothic splendor that typically serves as the backdrop for English court battles, the attorneys argued their way through the dense, jargon-filled evidence. If the Names hoped that a witness might provide some shattering revelation to prove the alleged fraud, they were disappointed. Lapses of memory on both sides of the case did not help. Former Lloyd's chairman Murray Lawrence frequently had difficulty in remembering events while in the witness box. But a couple of the Names' witnesses also proved to have unreliable memories, changing details of their evidence under cross-examination.
Charles Sturge, a respected insurance industry analyst, predicts the judge will have harsh things to say about how Lloyd's ran its business in the 1980s, but will stop short of finding it guilty of fraud. He claims he had no evidence of a "recruit to dilute" policy but agrees, "There is no doubt a lot of people knew a lot more about asbestos than they are letting on."
For their part, the Names remain upbeat about their chances of winning the case. But if they lose, the hope expressed by Aldous last week that "some of the Names at least will come to accept that there was no fraud" seems a vain one. The next few months will undoubtedly be tense for both sides.