Engineering group sues Royal & Sun over asbestos

Turner & Newall to make "substantial" claims on behalf of former employees.

Royal & Sun Alliance is facing an asbestos liability lawsuit being brought by Turner & Newall, the UK engineering group, and former asbestos producers on behalf of its former employees.

Details of the case have emerged at an awkward time for RSA, the UK's second biggest general insurer, which has promised to give investors details of its capital needs when publishing its third-quarter results next Thursday. This year RSA more than doubled its reserves for asbestos claims, raising them by £371m.

In preliminary High Court proceedings this week, Mr Justice Lloyd said the underlying employee claims could be "very numerous and very substantial". He noted that because of the nature of asbestos-related diseases, they could rise in future.

RSA ousted Robert Mendelsohn, its chief executive, in September after a series of disappointing results, and has been considering disposals and a heavily discounted rights issue of up to £1b to provide capital for its general insurance business.

But a wave of capital raising by other insurers, such as Legal & General and Zurich Financial Services, has raised doubts over whether an RSA cash-call will be supported - and whether the insurer will be able to announce a successor to Mr Mendelsohn next week. Bob Gunn, group operating officer, is acting as temporary chief executive.

Before backing any rights issue, investors will want more information on the group's exposure to asbestos and environmental pollution liabilities.

T & N, acquired by Federal-Mogul of the US five years ago, is in administration. It claims that RSA is liable because of an employer liability policy it provided to the company between October 1969 and March 1977.

The claim is also being brought against a Lloyd's of London syndicate that then provided similar cover up until 1995.

Both RSA and the syndicate deny that they were on risk for asbestos. The matter is set to come to trial in January. Much of the case is expected to centre on what policy exclusions were in force and the extent to which these covered any or all asbestos-related diseases.

The T & N administrator said that while the number of asbestos-related claims against Federal-Mogul was in excess of 300,000, the bulk were from non-employee claimants and arose in the US. He put the number of employee claims at about 1,000.

RSA said: "We take our responsibilities as an insurer extremely seriously and have a great deal of sympathy for any affected ex-employee of Turner & Newall. There are a number of complex issues relating to the liability in this case."

"As these matters are subject to legal proceedings, it is not appropriate for us to comment at this stage."

"Financial Times" 4th November 2002