Equitable wants a settlement in case against former directors |
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Thu, 29 Sep 2005 11:05
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LONDON: Insurer Equitable Life is seeking a deal with its 15 former directors to withdraw the 1.7-billion-pound law suit it had filed against them. The company, whose 2-billion-pound suit against Ernst & Young too was withdrawn under similar circumstances a few days ago, wants an assurance from the former directors that it will not be required to pay their legal fees.
The company had charged the 15 former directors that they were negligent in running of the company and their negligence brought the insurer to the brink of collapse in 2000. All of the former directors deny the charges.
In its suit against former auditors Ernst & Young, the company reached a similar agreement. It had dropped even the 700 million-pound claim of its original 2 billion pound suit.
The insurer had charged that the auditors had failed to tell its board about the financial mess it was in.
The company had almost collapsed five years ago, when it was realised that it could not honour its life insurance policies. It also lost in the House of Lords over the rights of its guaranteed annuity rate policyholders in 2000, leaving it with a 1.5 billion pound liability and forcing it to close its books to new business.
The company had filed the law suits at the instance of its lawyers, who advised the board saying it had a fiduciary duty to file the claim as otherwise, its policy holders could seek legal action.
It is not clear whether the former directors would accept the deal as the legal fees for each of them would be in the range of 20 million pounds. The company itself has a bill of 30 million pounds for the two suits and even if it wins the case, it is not likely to get any substantial damages.
Equitable may have something to cheer about in this dreary scenario. Analysts predict that the company would have a surplus of 700 million pounds as per its latest financial results, which are to be announced Thursday.
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