News - Equitable ‘ready to drop lawsuit’
Posted on October 31, 2007 in the Financial loss insurance category
Read source on News - Equitable ‘ready to drop lawsuit’
Equitable Life is widely expected to drop its court action against 15 former directors next week.
The mutual insurer has reportedly offered the directors a deal under which it will drop the case if each side pays its own costs.
Equitable is suing the former directors for 1.7bn ($3bn), claiming their negligence brought the insurer to the brink of collapse in 2000.
A similar action was dropped against auditors Ernst & Young (E&Y) last week.
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 They [Equitable Life] realise they are not going to get anything out of the directors and the case has cost at least 30m  Liz Kwantas, Equitable Members Help Group
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Settlement wanted
At the time, a spokesman for the insurer insisted that they would continue with their claim against the former directors.
However, it is now widely believed that the insurer wants a settlement.
“The Equitable have been looking for a way out of this for a long time,” Liz Kwantas, director of the Equitable Members Help Group, told BBC News.
“They realise they are not going to get anything out of the directors and the case has cost at least 30m.”
A number of directors are thought to have agreed to settle with Equitable, but others are rumoured to be unwilling to pay their own costs.
The case has been adjourned until Monday, when there is likely to be an announcement about whether an agreement has been reached.
An Equitable spokesperson said: “It is inappropriate to comment whilst the action against the directors continues.”
Pressure grows
Any settlement may intensify the pressure on Equitable’s chairman Vanni Treves.
After the E&Y case was settled, on the basis that both sides would meet their costs, groups representing Equitable Life members called for Mr Treve’s head.
But Mr Treves said the board had a duty to its policyholders to pursue the claim against E&Y.
Equitable’s case against E&Y was that the auditors had failed to tell the Equitable board of directors about the financial mess the mutual was in.
Promises
Equitable nearly collapsed five years ago, when it emerged that it could not honour its life insurance policies.
The mutual society got into trouble when it miscalculated how much it would have to pay out for its Guaranteed Annuity Rate (GAR) life insurances policies.
The society tried to renege on promised payouts, but a ruling by the House of Lords in 2000 forced it to honour its obligations.
Equitable savers have seen their life savings cut as a consequence of the society’s troubles. The mutual had hoped to recoup some of the losses through taking legal action.
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